It wasn’t a good week for the market as all three major indicies finished in the red. Before we get to the numbers, the biggest concern remains the FOG (food, oil and gas). We are beginning to see the impact of higher commodity prices spread to other areas that are causing many businesses to come up with ways of cutting back or passing it off to the consumer.

For instance, AMR Corp. (AMR, $6.32, down $0.24) is reducing its capacity 10+% and tacking on a $15 fee charge for your first checked bag on your next flight. Some police departments have stopped allowing their officers to take their patrol cars home because of the cost of gasoline. Speaking of which, have you noticed the big declines in the stock prices of Ford (F, $6.87, down $0.29) and General Motors (GM, $17.60, down $0.83)? GM hasn’t traded this low in 25 years. Wow. These are just a few examples to combat higher oil prices and it doesn’t stop there but you get the picture.

The Dow suffered the biggest decline falling 500 points, or 3.9%, to close at 12,479. The S&P 500 was next with a 3.5% drop, or 50 points and finished at 1,375. The Nasdaq, which had been strong up until late, suffered an 84 point drubbing, or 3.3%, to wind up at 2,444.

I keep mentioning the key resistance levels for the market (1,450 for the S&P 500, 2,600 for the Nasdaq and 13,500 for the Dow) and I might as well outline some support in case we are headed even lower. For the Dow, a break below 12,000 could lead to 11,750. If this level is broken look out below. The S&P 500 would need to fall to 1,325 then 1,275 for the bears to start coming out in force. The Nasdaq has lower level support at 2,375 followed by 2,275. A break below 2,200 could spell trouble.

It looks like that old adage “sell in May and go away”, which was missing earlier in the month, was back in vogue ahead of the long holiday weekend. I have mentioned the lack of catalysts to carry the market higher and although I’m not totally convinced we are setting up for a correction of some sorts it wouldn’t surprise me one bit if we get a small one.

Rick Rouse