Sterling Market Commentary for Monday October 1st, 2012
A Look at Friday’s Market: The overall market moved moderately lower on Friday in a broad based move that saw the majority of the sector indices I track move lower on the day as well. The weakest sectors were the Airlines, Commodities, Telecom, Cyclicals, High Tech, Healthcare related, Financials, and Consumer indices. There was strength in the Utilities, Biotech, and Bonds. In the commodities markets, Oil was higher by $0.34 to $92.19 per barrel, and Gold was lower by $6.50 to $1,771.10 per ounce. In the Grain markets, Wheat was higher by $0.47 to $9.024 per bushel, and Corn was higher by $0.40 to $7.562 per bushel, while Soybeans were higher by $0.302 to $16.01 per bushel.
A Few Thoughts on Monday’s Market: In looking at the charts from Friday’s market, I noticed a couple of items that caught my attention. The 1st being that the vast majority of the indices I looked at are showing weakness; and nearly every index that showed any clarity on its movement appears to be moving lower. To me this is a clear indication of a market pullback. The 2nd thing I noticed was that the Dow Jones Transportation is on the verge of pushing a new yearly low. As I stated in the September 24th edition of the Sterling Market Commentary, I do not see the Transports benefiting from the QE3. If we see the Dow Jones Transportation Average close below 4,847.33 in the near future, then I think it is going to attract a lot of attention to the probability overall market following it lower.
Additionally, the Dow Jones Industrial Average appears to be sitting on an upward sloping trendline. If we see continued weakness over the course of the next couple of days, then I would consider this trendline to be broken; with a high probability that the Dow Jones Industrial Average could move lower and test its 200 day moving average at 12,803.40 (or what ever level it will be at that point in time.)
Dow Jones Industrial Average: The Dow Jones Industrial Average closed Friday at 13,437.13. I continue to see upside resistance on the Dow at 13,558.92. With Friday’s close of 13,437.13 the Dow Jones Industrial Average broke our support level of 13,345. I now see downside support coming in at 13,279.32 Current Expectations: I am expecting the Dow to continue to move lower and test $13,279.32 on a closing basis.
Dow Jones Transportation Average: The Dow Jones Transportation Average closed Friday at 4,892.62.
The Bottom Line: I think the overall market is looking weak, and I think we could see a pullback in the next couple of days. I see upside resistance on the Dow Transports at 4,911.83 and downside support at 4,873.76 and then at 4,795.28 This is obviously a very narrow trading range. Current Expectations: The Dow Transports appear to be in a downward trend. I am expecting Dow Transports to continue to move lower and test 4,873.76 on a closing basis.