Sterling Market Commentary for Monday August 20th, 2012

A Look at Friday’s Market: The overall market was slightly higher on Friday in a relatively lack luster session.  In the commodities markets, Oil was higher by $0.43 to $96.32 per barrel, while Gold was higher by $0.20 to $1,617.30 per ounce.  In the grain markets,  Wheat was higher by $0.126 to $8.744 per bushel, and Corn was higher by $0.006 to $7.984 per bushel, while Soybeans were higher by  $0.146 to $16.710 per bushel.

A Few Thoughts on Monday’s Market:  In looking at the charts from Friday’s market, I noticed a couple of things.  The 1st being that there were a significant number of stocks that broke through downside support on fairly heavy trading volume, and a lot less stocks broke through upside resistance on heavier than normal trading volume.  The other item I noticed is that the S&P 500 ‘SPX’ has yet to surpass its yearly high of 1,419.04 set on April 2nd of this year; while the S&P 100 ‘OEX’ (which we do not hear much about anymore) surpassed its yearly high of 645.29 set on April 2nd of this year with its close of 646.22 on August 10th.  While a couple of weeks of action may not be too significant in the long run, until we reach the long run there may be some significance in the short term message.  The message that I find in the S&P 100 ‘OEX’ out performing the S&P 500 ‘SPX’ is that larger companies are out performing smaller companies.

Normally smaller companies are the faster growing, and better performers in the stock market.  If smaller companies are no longer growing faster than larger companies, then I see this as a sign of weakness in economic growth.

The Bottom Line:  The trend of the market remains to the upside,  but I remain cautious.