The recent market activity has been dominated by volatility. We had 11 out of 14 days where we have had more than a 150 point move in the Dow Jones Industrial average. In spite of all of this volatility, and the wild day we saw last Thursday, we have stayed within the technical ranges of the market. On the downside we bounced off the 200 day moving average and on the upside we bounced off the previous 52 week high. As stomach churning as this has been we do not yet see a significant change in the domestic economic situation. What we do see is a fundamental currency relationship that has been adding to the volatility. The euro has been moving steadily downward as the European Union reacts to the Greek debt crisis. The weakness in the euro causes relative strength in the dollar. A strong dollar leads to lower oil and commodity prices and that has been moving the market lower. Even though the EU has put in a very large backstop to the pan European debt problems it will likely continue to weaken the European currency. Longer term we feel that US economic recovery will drive earnings and that is still a positive trend. In the meantime we expect this currency/commodity volatility to prevail.
