Monday began with heavy volume trading on all the major indexes and most of it was of the selling kind.  Monday's news primarily focused on two facts; the sudden strength in the dollar from previous weeks coupled with a weakening of commodities prices (i.e. Oil) as compared to previous signs of higher prices.  This shook the market and carried over into Tuesday.

Tuesday began with the dollar reversing Monday's moves and headed lower.  A report on the Producer Price Index (PPI) showing better than expected housing starts data did nothing to offset other news showing lower sales numbers from chain stores like Best Buy.  Nevertheless the news that housing starts moved from 454K to this month's report of 532K new starts bodes well for this recovering economy.  Unfortunately, it did not bode well for the Market on Tuesday.  In other industrial production data, the numbers showed a decline in May of 13.4% which was greater than the decline of 12.7% reported for April.  And so, the Market went down for a second day taking the DOW into negative territory for the year.

Wednesday was a mixed day for the market, and it's good that it was because it put a halt to heavy volume selling.  On the economic news front, CPI numbers came in showing that the Consumer Price Index was down 1.3% on a year over year basis.  Yet, gas at the pump had risen by over 60% during this past year.  If I were to tell my wife that the cost of goods went down over the past year she would think I was losing my mind.  It certainly doesn't seem so when she goes shopping for food. 

If we realize that CPI figures are printed by the Government, then that might put a different spin on things.  It is clear that the Federal Reserve Bank has been purposefully trying to lower the value of the dollar so as to "inflate us" out of this recession. 

The downside to the Fed's strategy has been higher prices for oil, which is denominated in the US dollar.  As the value of the dollar decreases, products denominated in the dollar rise.  Despite the recent strengthening of the dollar, as currency markets gyrate and central banks intervene, ultimately the dollar is headed much lower against major currencies. 

Despite the CPI reports, it is more than obvious that discretionary spending has been curtailed.  Recent Bankruptcy filings for Six Flags, Eddie Bauer and Extended Stay America are testaments to decreased spending by consumers. 

Thursday brought a needed respite to the week's declines as stocks that had lost much in previous sessions recovered.  The overall volume of buying on Thursday was low in comparison to the volume selling during the early part of the week.  Part of the bounce may have been jobless claims reports that showed a drop in continuing unemployment, falling by 148,000 to 6.687 million.  It is interesting to note that the market would react positively to this type of spin on a fundamentally bad number.  If the unemployed exhaust their unemployment benefits then obviously those claims will expire.  However, those people may still be unemployed.

On Friday the market closed with generally an up session that began strong, moving stocks higher across most sectors.  However, it appears that profit taking took place just shortly before the close moving the indexes lower.  Likely, many who saw their holdings decline during the week decided to exit having recovered some losses.

The primary issue going forward into Monday is, where are we in this recovery process?   We have seen the market rebound from the March 9 bottom, take what appeared to be a rest beginning two weeks ago, and now giving us volume selling this week with low volume buying towards the end of the week.  Are buyers ready to continue buying, or are the low volume buying figures indicative of something more drastic?

One thing is for sure, when there is volume buying you get higher stock prices, and when there is volume selling you get lower prices.  We just went through the latter this week. 

The general consensus is that the economy is improving ever so gradually.  Many estimate a full recovery and the start of economic expansion sometime in the third quarter.  However, a basic fact of the Market is that generally stocks begin to rise well before the reports come out declaring the economy is officially expanding.  The rest of this summer should be very interesting as we follow the Market.