Sterling Marketing Commentary for Monday October 22nd, 2012
A Look at Friday’s Market: The overall market moved sharply lower on the 25th anniversary of the stock market crash of 1987. It was a very broad based sell off that saw continuing technical damage done to the market. Almost every single sector index I track is showing either weakness or a clear downward trend in place. The Amex Gold/Silver ‘XAU’ hit its 40 day moving average. The CBOE Technology Index ‘TXX’ closed on its 200 day moving average; and the Amex Computer Index ‘XCI’ closed below its 200 day moving average, as did the Amex Interactive Index ‘IIX’. The Morgan Stanley Healthcare Products Index ‘RXP’ broke through its short term support level. These are all negative trading signals. In the commodities markets, Oil was lower by $2.09 to $90.44 per barrel, and Gold was lower by $20.70 to $1,724.00 per ounce. In the grain markets, Wheat was higher by $0.040 to $8.724 per bushel, and Corn was higher by $0.060 to $7.614 per bushel, while Soybeans were lower by $0.112 to $15.342 per bushel.
A Few Thoughts on Monday’s Market: The overall market is showing considerable weakness, with the high tech sector in an outright bearish trading pattern. A lot of the weakness in the high tech sector can be attributed to a pull back in the shares of Apple, Inc. ‘AAPL’. However it is not just Apple that is causing the weakness in the high tech sector, there is considerable weakness in the WinTel world, those high tech companies that are focused products utilizing either Microsoft or Intel architecture. I think that the stock market is signalling a pullback in the U.S. Economy. I also think that this signal would be a lot louder and clearer if it was not for the Quantitative Easing programs of the Fed and their market manipulation effects. In looking at the charts from Friday’s activity I noticed that the M.S. Consumer Index ‘CMR’ had not yet broken its recent upward trendline. I am keeping an eye on the ‘CMR’. If we have another couple of down days and this index breaks its upward trendline, then I see this as a potential confirmation that the U.S. Economy is headed back into a recession.
The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,343.51 I am looking at upside resistance on the Dow Jones Industrial Average at 13,610.15 on a closing basis. I now see downside support coming in at 13,273.32 and then 13,000.71 on a closing basis. 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 13,273.32 on a closing basis.
Dow Jones Transportation Average: The Dow Jones Transportation Average closed at 5,082.16. 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.
The Bottom Line: I think the market will continue to move lower for the next few trading sessions.