Since May, Dow Jones Industrial Average futures have skidded from 13,064 to 11,211 and appear headed to lows set in July 2006.
“There are a lot of variables,” says Daniel M. Gramza, president of Gramza Capital Management Inc., including historically low interest rates, a weak U.S. dollar and high energy prices. “Plus, we have an uncertain political climate with the election ahead.” However, with recent dips in crude prices, buyers are returning, temporarily buoying stocks. “The market does want to give us a bounce,” he says and there is a possibility for follow through. In August, he sees support at the July ’06 low of 10,722 and resistance at 11,400 to 11,500. “Longer term, the key is to get above 13,000 and to get back to an up trend. That’s the pivot point,” he says. “That’s a ways away; and there are challenges ahead.”
The market is grossly oversold, says Michael J. Hinman, senior market strategist for Lind-Waldock, adding that near term, he expects the market to shrug off bearish news and for relatively cheaper crude to stabilize consumer confidence. Support is 11,100 and resistance is between 11,600 and 11,900. However, in the second half of August, he says stocks are in trouble and headed lower. “We are due for a lot more selling in the second half of the year.”