Last week the Dow broke below the key 9924 support level, re-tested it as resistance, and continued its downward slide - currently consolidating into a range between 8487 and 9376.

The effects of the market turmoil are reflecting in fundamental economic reports. US retail sales dropped by 1.2% and the Philly Fed Manufacturing Index came in at -37.5, a decline nearly 4 times greater than analyst estimates. This confirms an earlier figure from the Empire State Manufacturing Index, which came in at -24.6, also a drop more than double what analysts had been expecting Overall US industrial production declined by 2.8% this month.

What's next for the Dow?

It is difficult to say with any degree of certainty. Very likely more volatility. If 9376 holds as resistance, then we could well see another move down to test 8487. A break below that level could well send us as low as 7050, a drop of over 50% since last summer's high. If instead we can get above 9376, and find some support there, then the worst might be over - at least for now. The next looming threat is one of credit card and auto loan defaults, if the economy continues to lose jobs. More money is tied up here than was in the mortgage markets.

The US Dollar, meanwhile, has remained strong against other currencies - due in large part to the ongoing liquidity crisis. The rules of supply and demand still apply, and the LIBOR and Fed Funds rates are indicators of the current demand for cash. The on-going commodity sell-offs are another.