Market Comment

Capital One Financial (COF) ($77.70, down $8.47)
First Data Corp. (FDC) ($42.76, down $2.09)

When two financials with credit cards in the mix gap down on the same day, I pay attention. I don't do fundamentals, but if I did I would be looking up credit default statistics. Consumer credit expansion is one of the important factors contributing to healthy North American economic growth. If this borrowing engine is sputtering, it may help to explain ongoing general investment market weakness.

Market Comment (DJII 10799)

Many of the stocks that I follow are now tangled up one way or another with the 100-Day Moving Average or the 200-Day Moving Average on the daily chart. They appear to be losing their fight. Stocks that got into this same struggle earlier (two months ago), have tumbled since then.

The message? The short term market outlook still looks ugly to me.

Market Comment - Indexes

In a Market Comment (entitled "Milestones") on May 4th of this year, I said that I was concerned because too many important market indicators were at resistance, suggesting a possible market top. That was the day of the recent market peak as it turned out. In a more recent Market Comment, published on June 20th, I said that I thought we were in the midst of a healthy intermediate term correction in a longer term uptrend.

As I look ahead to the end of 2006, I'm now concerned that something more than a friendly intermediate term correction could possibly lie ahead. It is often the case that everything initially takes a tumble in an overall market correction. Among the things I follow, it would appear that Gold, Silver, Copper and Oil might still be in longer term uptrends after correcting along with the rest of the broader market, should such a downside market adjustment occur.

DJII 11,090
S & P 1265
Nasdaq 2130
Nikkei 15,346
Hang Seng 16,459

Natural Gas U.S. Futures ($5.52)

It's not easy to surprise me at my age, but I have to say I'm impressed by the continuing weakness in the price of natural gas. I had recently described the trading pattern as base building with a downside bias. Now it's beginning to look more like a repeat of the 2001 debacle that saw gas plunge from $10 to $2 over a twelve-month time span.

I cannot fathom the fundamental reason why the pattern looks so ugly, but for now I have to move to a bearish stance in a big way. As I have said many times before, I don't deal in fundamentals.

Natural Gas U.S. Futures ($6.10)

I have not commented on Natural Gas since March 28th because nothing much needed saying. I had suggested short term base building in the $6.50 area, and we're doing that with a modest negative bias as the weeks stretch into the summer months.

I can see technical support below at $4.50, but I don't necessarily think we'll get there on the near term. I am watching for a switch from downside on-balance-volume to upside, and expecting fast action once the upside volume shows up. In the meantime, I foresee continued drifting lower - summer doldrums.

U.S. Dollar Index (85.19)

I was looking for more base building in a recovery, but instead the short term (daily) chart is again trying to hemorrhage on the downside. I am no longer able to see the light at the end of this tunnel. We may be back in a downtrend that goes out well beyond the near term.