Fund managers and market makers tried hard to finish the month in the green and create a record quarter for the Dow.

The volatility was huge intraday and the total volume came close to 11 billion shares but there was just not enough fuel to push the major indexes back into the green. After being down nearly -130 points at the open the Dow did manage to push back into the green at 1:PM and again at 2:45 but despite the valiant effort the sellers won the day. However, the indexes still had the best quarter in the last 11 years with a 15% gain.

The economics surprised in both directions as the GDP improved significantly to only a drop of -0.74% for Q2 when the forecast was for a -1.40% decline. Meanwhile the ISM Chicago imploded with a drop to 46.1 from the consensus estimates of 52.5 and prior reading of 50.0. The culprit was the end to the cash for clunkers program and new orders dropping sharply.

I am really glad we were not in any plays the last several days. The volatility and the unpredictable performance would more than likely produced some more stop loss exits. For instance the price of oil rallied +$3.60 to $70.30 but only 2 of the 200 oil stocks I followed were up more than a buck. Only 46 of my 200+ energy stocks posted gains on Wednesday.

This was definitely a quarter end with a lot of restructuring going on behind the scenes. Nearly 11 billion shares traded and the indexes closed basically flat with the Dow -29, Nasdaq -1.62 and S&P -3. That was a lot of shares changing hands not to have a bigger change in the indexes. I would say the window dressing was a success. However, the Russell 2000 dropped more than twice as much as the other indexes suggesting there may be trouble in our immediate future.

As important as the last day of the month was to the record books the next two weeks are going to be even more critical. We are now into the last month of the mutual fund year and managers have to restructure their portfolios and get ready for Q4 and 2010. I am hoping the volatility will be over by expiration Friday and a new uptrend established. For that to happen the next couple weeks could be exciting. I am still hoping for a decent decline so all the bulls can mark it off their checklist and feel comfortable about moving back into the market.

For Thursday, no change, no new plays.

Jim Brown