Monday June 24th, 2013: A Look at the US 10 Year Bond

Monday June 24th, 2013: A Look at the US 10 Year Bond

A Look at the Market Since Our Last Update: The overall market moved slightly higher on Friday in what can be best described as a slight bounce from the sell off that occurred on Wednesday and Thursday of last week. It should be noted that interest rates continued to move higher last week, as a investors are clearly pulling money out of the bond market. In the commodities markets, Oil was lower by $1.49 to $95.18 per barrel, and Gold was higher by $5.80 to $1,292.00 per ounce. In the grain markets, Wheat was lower by $0.024 to $6.980 per bushel, while Corn was lower by $0.114 to $6.6616 per bushel, and Soybeans were lower by $0.042 to $14.932 per bushel.

A Few Thoughts on the Upcoming Market: As I stated in Friday’s edition of the Sterling Market Commentary, I am expecting the overall market to continue to move lower; and nothing that occurred on Friday has changed my expectations. I thought today would be a good day to take a look at interest rates. I have inserted a chart of the US 10 Year Bond below for your review.

Chart of the US 10 Year Bond Yield through June 21st, 2013

US 10 Year Bond Yield through June 21st, 2013

As you can see the Yield of the US Government 10 Year Bond is clearly headed higher.? The question is how much higher will the yield of the 10 Year Bond go? And conversely, how much lower will the price of the 10 Year Bond drop? I think that due to the nature of the recent move higher a look at a longer term chart is required. I took a look at the weekly chart of the US 10 Year Bond Yield and have inserted one below for your review.

US 10 Year Bond Yield Weekly Chart through June 21st, 2013

US 10 Year Bond Yield Weekly Chart through June 21st, 2013

It looks like the US 10 Year Bond Yield broke above upside resistance at 2.381%, which has now become downside support, with new upside resistance now at 3.888% on a longer term basis.? What I see is interest rates continuing to move higher and test 3.888% on a closing basis. It is important to know that as interest rates rise, the value of bonds, and dividend paying stocks will decline. In the March 5th, 2012 edition of the Sterling Weekly I took a look at how the price of Bonds could decline with rising interest rates. The following is a link to that article: http://sterlinginvestments.com/sterling-weekly-for-the-week-of-march-5th-2012-a-look-at-bond-prices-and-higher-rates/

Dow Jones Industrial Average: The Dow Jones Industrial Average closed yesterday at 14,799.40. I see upside resistance on the Dow Jones Industrial Average at 14,865.14 and downside support at 14,421.49 and then at 14,035.67? Current Expectations: I see the Dow Jones Industrial Average continuing to move lower and testing 14,421.49 on a closing basis.

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Friday June 21st, 2013: A Look at the Dow Jones Industrial Average

A Look at the Dow Jones Industrial Average: 
Sterling Market Commentary for Friday June 21st, 2013

A Look at the Market Since Our Last Update: The overall market moved sharply lower on Wednesday and Thursday of this week, with the Dow Jones Industrial Average dropping almost 550 points in 2 days. The other major market indices have shared similar fates with all of them moving lower as well. In the commodities markets, Oil was lower by $3.34 to $95.14 per barrel, and Gold was lower by a whopping $87.80 to $1,286.20 per ounce. In the grain markets, Wheat was lower by $0.064 to $7.004 per bushel, and Corn was lower by $0.090 to $6.732 per bushel, while Soybeans were lower by $0.254 to $14.974 per bushel.

A Few Thoughts on the Upcoming Market: I should point out that despite the massive move lower over the course of the last couple of trading days, the market has not reached is not significantly over sold, in other words it could easily move a lot lower. I have written countless times about my belief that the Fed has created a bubble in the bond market of such size that when it bursts, it will make the bursting of the housing bubble look like child’s play.  I have also commented many times that I believe the Fed’s easy money policies has over inflated commodity prices. With the primary driver of the markets recent move lower being concerns over the ending of its Quantitative Easing programs, we got a taste of how the Fed has over inflated the markets and commodity prices as we have seen a sharp sell off in both stocks and commodities in the last few days.

Dow Jones Industrial Average: The Dow Jones Industrial Average closed yesterday at 14,760.32.  I see upside resistance on the Dow Jones Industrial Average at 14,865.14 and downside support at 14,421.49 and then at 14,035.67  Current Expectation: I see the Dow Jones Industrial Average continuing to move lower and testing 14,421.49 on a closing basis.  I have inserted a chart of the Dow Jones Industrial Average below for your review.

Dow Jones Industrial Average through June 20th, 2013

Dow Jones Industrial Average through June 20th, 2013

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Monday June 17th, 2013: A Look at Corn Futures

Monday June 17th, 2013: A Look at Corn Futures

A Look at the Market Since Our Last Update: The overall market with few exceptions finished last week lower, down approximately 1% across the board. Interest rates moved slightly lower in what appeared to be a round of late week Fed intervention to halt the advance of interest rates towards higher levels. In the commodities markets, Oil finished the week at $98.07 up $1.15 on the day, and Gold finished the week at $1,387.60 up $9.8 for Friday. In the grain markets, Wheat finished the week at $6.806, down $0.046 for Friday, and Corn finished the week at $6.550 up $0.114 on Friday, while Soybeans finished the week at $15.164, up $0.062 on the day.

A Few Thoughts on the Upcoming Market: I think the increase in interest rates was only halted last week due to late week intervention in the bond market by the Fed. Frequent readers of my postings will know that I feel the bond market, and subsequently the stock market, are subject to the manipulative effects of the Fed. I will save further commentary on the bond market for another day. Frequent readers of my postings will know that while I provide almost daily updates on price of various commodities, including corn; I am generally not one to make a lot of comments on the grain markets.

However in the June 5th edition of the Sterling Market Commentary I did comment on the fact that the heavy rains had kept the farmers out of the field and it looks like a significant amount of the acreage that had been planned for corn production was not able to be planted by the deadline to produce of a crop that would be properly mature by harvest season. This is important, because this portion of northern Iowa contains some of the best farmland in the world; it almost never sees any significant form of a crop failure. This year is shaping up to be different.

It looks like approximately 1/3 of the acreage that was to be planted with corn did not get planted as planned. As I previously written in my June 5th posting, that acreage was to be switched to Soybeans; however now it looks like there is trouble in the efforts to get the soybean acreage planted. It has been raining frequently and heavily since I returned to Atlanta from Iowa, and the reports I am getting is that the farmers have not been able to get in the field to plant their Soybeans. This could very well be one of the lowest crop production years in a very long time for the upper Midwest. What this means for the markets is very simple, the harvest for corn and soybeans will fall far short of estimates and we will see dramatically higher prices for corn and soybeans.

So remember that on Friday June 14th, corn closed at $6.55 per bushel, and soybeans closed at $15.164 per bushel. Time will tell if I am correct, as come October the futures markets will be either higher or lower for corn and soybeans.

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Sterling Stock Market Commentary for Monday June 10th, 2013

Sterling Stock Market Commentary for Monday June 10th, 2013

A Look at the Market Since Our Last Update: The overall market moved sharply higher on Thursday and Friday of last week. It might be tempting to think that with the moves on Thursday and Friday a new move higher has started. However, I would like to point out that despite the strong moves on Thursday and Friday, the Dow Jones Industrial Average basically moved back to its 9-day moving average; in other words it basically just recovered from an “over-sold” position. The same can be said for the S&P 500 and the NASDAQ 100 index. Meanwhile, yields on the 5, 10, and 30 year bonds set new short term highs. In the commodities markets, Oil closed Friday at $96.03, up $1.27 on the day; and basically at its highest level in over a week. Gold closed Friday at $13,383.00 down $32.80 on the day; basically it looks like Gold is in the process of retesting its yearly lows. In the grain markets, Wheat was lower by $0.014 at $6.962 per bushel, and Corn was higher by $0.030 to $6.662 per bushel, while Soybeans were higher by $0.010 to $15.282 per bushel.

A Few Thoughts on the Upcoming Market: In looking at the charts from Friday’s trading a couple of charts stood out. The 1st and most interesting is the rise in interest rates, as typically interest rates and equities do not move in the same direction. The 2nd point of interest is the Amex Broker/Dealers Index ‘XBD’, which set a new multi-year high on Friday. I found this interesting because it has been a long time since the ‘XBD’ has been a market leader of any sort. However, it looks like it is close to trading at its highest level since the “bear market” resulting from the Financial Crisis of 2008. I will try to take a closer look at the Broker/Dealer index tonight and see what I can find out. Hopefully I will have an update in tomorrow’s edition of the Sterling Market Commentary.

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Thursday June 6th, 2013 – Comments on the NASDAQ 100

Thursday June 6th, 2013 – Comments on the NASDAQ 100

A Look at the Market Since Our Last Update: The overall market moved sharply lower yesterday in a broad based move that affected the entire stock market. The Dow Jones Industrial Average was lower by over 200 points, while the S&P 500 was down by over 22 points and the NASDAQ 100 was lower by over 36 points. In the commodities markets Oil was higher by $0.43 to $93.74 per barrel, and Gold was higher by $1.30 to $1,398.80 per ounce. In the grain markets, Wheat was lower by $0.074 to $7.014 per bushel, and Corn was higher by $0.002 to $6.606 per bushel, and Soybeans were higher by $0.032 to $15.322 per bushel.

A Few Thoughts on the Upcoming Market: In looking at the charts from yesterday’s trading activity, it appears that the market has entered a pullback phase, with at least a short term top being formed in mid-May. It should be noted that with yesterday’s close of 2,937.14 the NASDAQ 100 Index ‘NDX’ broke through a previous level of support at 2,944.59 We see the next level of support on the NASDAQ 100 at 2,911.14 on a closing basis, and feel that there is a good shot it will continue lower and test 2,859.07 on a closing basis. With respects to the overall stock market we would not be surprised if it moved back to its February levels.

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Sterling Market Commentary for Wednesday June 5th, 2013

Sterling Market Commentary for Wednesday June 5th, 2013

A Look at the Market Since Our Last Update: The overall market pulled back moderately on Tuesday in a relatively broad based move that saw the majority of the sector indices I follow move lower on the day. Interest rates continued to move higher as well. In the commodities markets, Oil was lower by $0.14 to $93.31 per barrel, and Gold was lower by $14.70 to $1,397.20 per ounce. In the grain markets, Wheat was higher by $0.002 to $7.092 per bushel, and Corn was higher by $0.046 to $6.604 per bushel, while Soybeans were lower by $0.036 to $15.286 per bushel.

A Few Thoughts on the Upcoming Market: In looking at the charts from yesterday’s market, what I found interesting was that it looks like the Dow Jones Transportation Average with its close yesterday of 6,257.29 it appears to have broken support at 6,281.24 This raises the possibility that the Dow Jones Transportation Average could continue to move lower and test its April lows of 5,909.86 on a closing basis.

A few thoughts on corn in the commodities markets. I recently returned from a trip to Iowa,where I grew up. My family farms in north Iowa and as a result, I get a pretty good early look at how the crop production is starting out. This year it has been raining far more than normal,? to the point where it has severely delayed the planting season. As a result, the farmers in northern Iowa where unable to finish planting corn before it became too late for it to properly mature by harvest. In short, not as many acres have been planted with corn as were planned. As a result of this, the farmers in north Iowa are going to be forced to plant soybeans on that acreage. So basically we are looking at a situation where there is a very good possibility that there will be more soybeans hitting the market in the fall, and less corn than originally expected. Something to think about.

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