Market Commentary

It was a volatile week for the Dow which closed the week 12 points above 10,000. During the week the Dow climbed as high as 10,300 then fell below 9,900. The charts below illustrate things to look out for.

The Dow has gotten support (green arrow) from the 150 days moving average back in July 2009. Another two supports came at the 50 days moving average. Currently, the market showed some strength in being able to rebound off the moving average and closed well above it.

The Transportation index shows a entirely different story. After a strong run up to 4,200 level, the index appears to be getting weaker and weaker. The index was supported back in July but Thursday closed below the 150 day moving average which is bearish. Moreover, the index tried to break above the 150 day moving average but couldn't managed to get through (red arrow).

The two charts above suggest some kind of divergence between the two indexes. I'm not implying that this is a Dow Theory sell signal but that possibility isn't far out given the way the market is behaving. In addition, even if a sell signal is to occurred, it doesn't mean sell all your holdings and go into cash. Similar to a buy signal which investors shouldn't interpret as "all in." Investors should instead focus on seeking fair profits which isn't hard to understand but rather hard to implement.

Short-term rally could come within a week or two as the bottoming in several technical indicators (RSI & MACD) indicated.

I suggest everyone to revisit our article 3 Steps to Investment Success for a better understanding of our investing strategy.

- Art