This week has been a brutal decline for the major stock indexes such as the S&P 500, NASDAQ, and the Dow Jones Industrial Average. Yesterday the market indexes followed through to the downside declining even further closing at a new low for the week. However, today is Friday and rarely do we see the markets collapse ahead of a weekend when the market is closed. Please realize there have been some Friday’s when the market indexes have tanked and closed down sharply although it is not often. If you check the number of Friday’s over the past two years there have only been about a dozen that have been down by more than 100.00 points on the Dow Jones Industrial Average. Most Friday’s end in a slightly positive or negative trading session usually near the unchanged level.
Why does this type of action occur on a Friday? First of all many traders especially in the summertime will usually leave after the morning trading session in the market on a Friday. Often traders and investors will get a head start on their weekend just trading for a half of the day. That is one of the reasons why the volume usually drops off sharply on a Friday. The second reason is that the institutions that can and do move markets rarely want to cause a panic over the weekend in the U.S. consumer. The weekend is when the U.S. consumer shops and spends money. Please understand that consumer spending accounts for 70.0 percent of the U.S. gross domestic product. Lastly, the institutional money does not want to put fear into the Asian markets over the weekend. At this time in history it is Asia and mainly China that many are betting on to lead the economic recovery. Remember China and Japan are the major exporters to the United States. If the Chinese markets begin to retract the U.S. and European markets will come under pressure.
Today the markets are trading slightly lower during the first 15 minutes of the trading session. It will be interesting to see where this market closes. Often a Friday is somewhat quiet and the close is usually around the unchanged level. Keep an eye on Exxon Mobil Corp (NYSE:XOM) as this stock is one of the best barometers for the overall market. If Exxon Mobil closes positive the market will usually finish in the green. If this stock closes down sharply usually the market will be down as well. Exxon Mobil Corp is trading flat today around the $60.20 area. J.P. Morgan Chase & Co (NYSE:JPM) is another important stock to follow as well. J.P. Morgan Chase is a leading financial stock that has been under a ton of pressure lately. The stock is now into some minor support on the daily chart and due for a short term bounce. If this stock catches a bid it will help lift the market indexes.
Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com
