Sterling Market Commentary for Monday February 11th, 2013

Sterling Market Commentary for Monday February 11th, 2013

A Look at Friday’s Market:  The overall market moved moderately higher in a relatively broad based move on Friday that saw the vast majority of the various sector indices I follow move higher as well. The Dow Jones Industrial Average is just shy of its short term closing high set earlier this month, and the S&P 500 managed to close at a new high.  It should also be noted that the NASDAQ 100 Index ‘NDX’ also set a new yearly closing high, and in the process completed the cup pattern that I discussed in the January 30th edition of the Sterling Market Commentary.  As a result, I am now looking for the NASDAQ 100 Index ‘NDX’ to move towards the 3,514 level on a closing basis over the course of the next 6 to 9 months.

In the commodities markets, Oil was lower by $0.13 to $95.59 per barrel, and Gold was lower by $8.30 to $1.658.60 per ounce.  In the grain markets,  Wheat was lower by $0.030 to $7.532 per bushel, and Corn was lower by $0.014 to $7.074 per bushel, while Soybeans were lower by $0.140 to $14.384 per bushel.

A Few Thoughts on Monday’s Market:  In looking at the charts from last week’s trading activity, I continue to see an upward bias to the overall market.  I think we will most likely see a continued  gradual movement higher.  However,  I do think there are significant headwinds that are going to come into play at some.  It is just difficult to know exactly when.

The Bottom Line:  I am continuing to expect the overall market to move sideways with an upward bias.

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Sterling Market Commentary for Tuesday February 5th, 2013

Sterling Market Commentary for Tuesday February 5th, 2013

A Look at Monday’s Market: The overall market moved sharply higher on Monday in a broad based move that erased the majority of Friday’s gains.  I would like to point out that the Dow Jones Industrial Average has essentially reached an area of upside resistance that I wrote about in the January 22nd and January 18th editions of the Sterling Market Commentary.  For a variety of reasons, I am not surprised to see a pause, a little profit taking, just a down day, or however you would like to describe Monday’s market.

In the commodities markets, Oil was sharply lower by $1.60 to $96.17 per barrel, and Gold was higher by $5.80 to $1,676.40 per ounce.  In the grain markets, Wheat was lower by $0.020 to $7.630 per bushel, and Corn was lower by $0.016 to $7.342 per bushel, while Soybeans were higher by $0.144 to $14.886 per bushel.

A Few Thoughts on Tuesday’s Market: In looking at the charts from yesterday’s market I still see an upward trend being in place.  However, I think there is a very good chance that the overall market may decide to track sideways for the next several trading sessions.

The Bottom Line:  I am continuing to expect the overall market to move sideways with an upward bias.

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Sterling Market Commentary for Friday February 1st, 2013

Sterling Market Commentary for Friday February 1st, 2013

A Look at Thursday’s Market: The overall market moved moderately lower on Thursday in a relatively broad based move that saw the majority of the sector indices I track move lower on the day as well.  In the commodities markets,  Oil was lower by $0.45 to $97.49 per barrel, and Gold was lower by $19.30 to $1,660.60 per ounce.  In the grain markets,  Wheat was lower by $0.074 to $7.779 per bushel, and Corn was higher by $0.020 to $7.404 per bushel, while Soybeans were lower by $0.102 to $14.684 per bushel.

A Few Thoughts on Friday’s Market:  The overall trend of the market remains to the upside, and my Number 1 Rule of Trends is that a trend remains in place until it is broken.  However my Number 2 Rule of Trends is that the longer a trend has been in place, the greater the chances of it being broken.  I would like to point out that we have seen three (3) negative economic reports this week.  The 1st being the negative Gross Domestic Product (GDP) report showing a contraction of 0.1% in the 4th Quarter of2012, the 2nd being a significant increase in weekly jobless claims, and the 3rd being the increase in the unemployment rate.  I just do not believe that all of this can be blamed on Tropical Storm Sandy.

My take on things is that we saw a bump in economic activity in the 3rd quarter of 2012 and consumers and business decision makers attempted to speed up activity prior to the end of 2012 due to the uncertainty over the election and the fiscal cliff issues.  If I am correct, then this explains the weakness in the 4th Quarter of 2012.  The concern is that there will be further contraction in 2013, partially caused by the speed up in 2012, and the continued uncertainty over the mess in Washington D.C.  This combined with adjustments that people make in reaction to the  perception that the economy may begin to slow in 2013; and we could see a real downturn in the 1st Quarter of 2013 with the U.S. economy dipping back into a recession.

Granted, I realize that the pre-market futures are sharply higher as a write this, I believe this is basically a result of the belief that with weak economic data the Federal Reserve will keep short term interest rates low for an even longer period of time.  For those who believe that this will provide a long term boost to the U.S. economy, I suggest that they take a look at the Op-Ed article by John Taylor titled “Fed Policy Is a Drag on the Economy” in the Monday January 28th, 2013 edition of the Wall Street Journal.  Sooner or later, the party from the ultra-low interest rate policy of the Federal Reserve is going to come to a crashing end, and the results are likely to be an even bigger disaster than the financial crisis of 2008.

The Bottom Line:  I am continuing to expect the overall market to move sideways with an upward bias.

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Sterling Market Commentary for Wednesday January 30th, 2013

Sterling Market Commentary for Wednesday January 30th, 2013

A Look at Tuesday’s Market:  The overall market moved moderately higher in yet another broad based move that saw the majority of the various indices I track move higher as well.  In the commodities markets,  Oil was higher by $1.13 to $97.57 per barrel, and Gold was higher by $7.90 to $1,660.80 per ounce.  In the grain markets, Wheat was lower by $0.022 to $7.770 per bushel, and Corn was higher by $0.002 to $7.294 per bushel, while Soybeans were to $0.040 to $14.516 per bushel.

A Few Thoughts on Wednesday’s Market:  With yesterday’s move higher by the overall market, the Dow Jones Industrial Average and the S&P 500 both set new short term closing highs.  I thought today would be a good opportunity to take a look at the NASDAQ Composite Index which closed yesterday at 3,117.50 but has yet to set a new short term closing high.  I have inserted a chart of the NASDAQ Composite below for your review.

NASDAQ 100 Index 'NDX' showing cup pattern being formed with a measured move to 3,514.77

NASDAQ 100 Index ‘NDX’ showing cup pattern being formed.

The NASDAQ Composite Index  set a short term closing high when it closed at 3,183.95 on Friday September 14th of last year.  From there, the NASDAQ Composite declined to a low of 2,853.13 before rallying back to its current levels.  It looks like the NASDAQ Composite may be in the process of completing a cup pattern.  While the cup pattern will not be completed until the NASDAQ Composite closes above 3,183.95  However, if the NASDAQ Composite closes above 3,183.95 in the near term,  then it will have completed a cup pattern with a measure move to 3,514.77 on a closing basis.  Be warned that once the  NASDAQ Composite completes the cup pattern, it does not forecast a move directly or quickly to the 3,514.77 level, or that there will not be pullbacks along the way.  But I do think it provides a reasonable target for the NASDAQ Composite 6 to 9 months out.

The Bottom Line:  I am continuing to expect the overall market to move sideways with an upward bias.

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Sterling Weekly for the Week of January 28th, 2013

 Sterling Weekly for the Week of January 28th, 2013

Since the previous edition of the Sterling Weekly, the Dow Jones Industrial Average rose 647.54 points or approximately 4.9% to 13,895.98.  As I stated last week in the January 17th edition of  Sterling Market Commentary, I feel that the Dow Jones Industrial Average has completed a cup pattern with a measured move to 14,677.92 on a closing, and that it would probably take a couple of months to get there.

In this week’s edition of the Sterling Weekly, I decided to publish our annual performance report on the various sector indices that we track.  I always tend to find this interesting as I feel that it tells us a fair amount about the stat of the U.S. economy.  For the year,  the Dow Jones Industrial Average was higher by $886.58 points or approximately 7.26%, and the NASDAQ 100 ‘NDX’ was higher by 383.10 points or approximately 16.82% primarily driven by the strength of Apple, Inc. ‘APPL’; while the S&P 500 was higher by 168.59 points or approximately 13.41%.  The average index was higher by approximately 10.3%

I think we should consider 2012 as the year of restructuring.  My thoughts are that while the Amex Biotech Index ‘BTK’ is always one of the top performing indices,  the remainder of the top performing indices benefited from restructuring activity;  Airlines, Banking, Chemicals, Healthcare, and Cyclicals.  Unlike previous years, I do not see a clear message in the ranking of the remaining indices.  I think this is a reflection of the uncertainty in the U.S. economy resulting from the election and all the new regulatory changes scheduled to take effect this year.

Sterling Investment’s 2012 Market Index Performance Report
Ticker Closing Level 1 Year Change
Index Name Symbol 31-Dec-12 31-Dec-11 Points Percent
Amex Biotech Index BTK 1,547.03 1,091.42 455.61 41.74%
Amex Airlines Index XAL 44.25 32.44 11.81 36.41%
KBW Banking Index BKX 51.28 39.38 11.90 30.22%
MS. Healthcare Providers RXP 2,107.96 1,733.89 374.07 21.57%
S&P Chemicals Index CEX 361.03 298.73 62.30 20.85%
MS Cyclical Index CYC 1,047.05 874.14 172.91 19.78%
North Am. Telecom Index XTC 1,047.18 881.99 165.19 18.73%
NASDAQ 100 Index NDX 2,660.93 2,277.83 383.10 16.82%
MS. High Tech. Index MSH 685.80 588.88 96.92 16.46%
Amex Interactive IIX 327.00 281.74 45.26 16.06%
CBOE Technology Index TXX 986.12 851.59 134.53 15.80%
Russell 1000 Index RUI 789.90 693.36 96.54 13.92%
S&P 500 Index SPX 1,426.19 1,257.60 168.59 13.41%
Amex Sec. Broker/Dealer XBD 94.34 83.27 11.07 13.29%
S&P 100 Index OEX 646.61 570.79 75.82 13.28%
Amex Pharmaceuticals DRG 369.57 332.94 36.63 11.00%
Computer Tech. Index XCI 1,075.49 973.96 101.53 10.42%
MS Consumer Index CMR 837.14 759.13 78.01 10.28%
Dow Jones Industrial Avg. DJ-30 13,104.14 12,217.56 886.58 7.26%
Dow Jones Transportation DJ-20 5,306.77 5,019.69 287.08 5.72%
Phlx. Semiconductor Index SOX 384.06 364.44 19.62 5.38%
Amex Networking NWX 226.55 215.15 11.40 5.30%
Natural Gas Index XNG 650.11 636.15 13.96 2.19%
Phlx. Oil Services Sector OSX 220.16 216.28 3.88 1.79%
Amex Oil & Gas XOI 1,241.84 1,229.10 12.74 1.04%
Amex MS Commodities CRX 840.61 844.94 (4.33) -0.51%
Amex Disk Drive DDX 99.45 101.79 (2.34) -2.30%
Dow Jones Utilities Index DJ-15 453.09 464.68 (11.59) -2.49%
Phlx. Utility Sector UTY 458.63 481.45 (22.82) -4.74%
Phlx. Gold/Silver Index XAU 165.60 180.64 (15.04) -8.33%
Amex Gold Miners GDM 1,288.22 1,428.98 (140.76) -9.85%
Amex Gold Bugs HUI 444.22 498.73 (54.51) -10.93%
———- ———- ———-
Average 1,172.58 108.30 10.30%

 

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Sterling Market Commentary for Monday January 28th, 2013

Sterling Market Commentary for Monday January 28th, 2013

A Look at Friday’s Market:  The overall market moved moderately higher on Friday in a relatively broad based move that saw the majority of the various sector indices I track move higher as well.  In the commodities markets,  Oil was lower by $0.07 to $95.88 per barrel, and Gold was lower by $13.30 to $1.656.60 per ounce. In the grain markets, Wheat was higher by $0.080 to $7.764 per bushel, and Corn was lower by $0.034 to $7.206 per bushel, while Soybeans were higher by $0.056 to $14.410 per bushel.

The S&p 500 closed above 1,500 for the 1st time since late 2007.    While this is not an all-time high, I thought it was important to take a look at the current chart of the S&P 500 and see what it tells us.  I’ve have inserted the chart below for your review.

S&P 500 through January 25th, 2013 showing cup pattern with measured move to 1,578.21

S&P 500 through January 25th, 2013

It looks like in the first week of 2013, the S&P 500 completed a cup pattern, which I have drawn on the chart. As frequent readers of my blog and newsletters will know, I believe that cup patterns are among the most reliable chart patterns.  The starting point on the cup pattern was 1,465.77 the S&P 500’s closing level on Friday September 14th of last year; and the low point was 1,353.33 the S&P 500’s close on November 15th.  This puts our near term upside target on the S&P 500 at 1,575.21 on a closing basis.

A Few Thoughts on Monday’s Market: I think the overall trend of the market is to the upside.  I continue to remain cautious due to the situation in Washington D.C.,  however I think the gridlock in Washington provides a form of stability that allows businesses show some form of stability, at least in the short term.

The Bottom Line:  I am expecting the overall market to continue to move higher.

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