Sterling Market Commentary for Friday November 2nd, 2012

Sterling Market Commentary for Friday November 2nd, 2012

A Look at Thursday’s Market:  The overall market moved sharply higher Thursday in a broad based move that saw virtually every index I track move higher on the day as well, with the exception of the Utility sector. It is really common for the market to rally following a natural disaster.  The logic for this trade is that the stimulative effects of the government spending to repair the storm damage is going to be greater than the depressing economic effect resulting from the storm damage. I do not really agree with this logic,  but it is the standard market reaction to these storms, particularly when there hasn’t been one in a while.  In the commodities markets, Oil was higher by $0.85 to $87.09 per barrel, and Gold was lower by $3.60 to $1,715.50 per ounce.  In the grain markets, Wheat was higher by $0.040 to $8.684 per bushel, while Corn was lower by $0.046 to $7.510 per bushel, and Soybeans were higher by $0.112 to $15.600 per bushel.

A Few Thoughts on Friday’s Market:  In looking at the charts from Thursday’s market I noticed that pretty much everything went up by a similar amount. My thoughts are that basically the short sellers took the remainder of the week off.  While we could see near normal trading volume today, my estimate is that it will be sometime next week before the market returns to normalized trading.  I know a little bit about these sort office disruptions.  I was trading in the Atlanta office of Momentum Securities in the summer of 2009 when Mark Barton came into the office on a Thursday afternoon and opened fire, killing four (4) of my friends before he went across the street to AllTrade and shot 16 more people.  The office remained closed for about a month before it reopened.  During that period of time some people took an extended vacation, others traded remotely, and still some others moved to other firms.  While not exactly the same,  I think you will see a lot of people taking some extended time off, whether by choice of necessity, some working remotely, some returning to the office, and unfortunately a few firms may be down for a while.  I think the real excitement in the market will begin sometime after next Wednesday when the election results begin to roll in.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,232.62   I see upside resistance level on the Dow Jones Industrial Average at 13,275.20 on a closing basis.  I now see downside support coming in at 13,000.71 and then at 12,943.82 on a closing basis.  I should point out that the support level at the 12,943.82 level is basically a “double bottom” on the charts and breaking through this level would be significant.  Current Expectations:  I think we are starting a new trend lower in the Dow.  I am expecting the Dow Jones Industrial Average to continue to move lower and test 13,000.71 and then 12,943.82 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 5,167.499  I see upside resistance on the the Dow Transportation Average at 5,215.97 and downside support at 4,873.76  and then at 4,795.28.  Current Expectations:  I think the Dow Transports are going to track sideways between support and resistance for the foreseeable future.

NASDAQ 100 Index ‘NDX’:  The NDX closed yesterday at 2,657.66  I see upside resistance on the NDX currently at 2,687.52 and downside support at 2,647.47 and then at 2,623.33 on a closing basis.  Current Expectations:  I think the NDX is going to continue to move lower and test 2,647.47 and then 2,623.33 on a closing basis.

The Bottom Line:  I think the market will continue to move lower for the next few trading sessions.