Sterling Market Commentary for Monday October 8th, 2012

Sterling Market Commentary for Monday October 8th, 2012

A Look at Friday’s Market:  The overall market moved moderately higher in a relatively broad based move.  In the commodities market,  Oil was lower by $1.83 to $89.88 per barrel, and Gold was lower by $15.70 to $1,780.80 per ounce.  In the grain markets,  Wheat was lower by $11.60 to $8.574 per bushel, and Corn was lower by $0.090 to $7.480 per bushel, while Soybeans were unchanged at $15.514 per bushel.  Interestingly,  the bond market saw a sharp sell off that moved interest rates higher across the various maturities.  The yield on the 30-Year US Treasury Bond jumped 0.084% from 2.882% to 2.966%   This is just under a 3% move in rates, and a 3% move in basically anything is a big move.  The yield on the 5-Year and 10-Year US Treasury instruments made similar moves.  While moves of this magnitude are not unheard of in the bond market;  I think it does somewhat demonstrate the ineffectiveness of the Fed’s Quantitative Easing programs.

A Few Thoughts on Monday’s Market:  In looking at the charts from Friday’s trading activity I see two markets developing;  those that are perceived to benefit from the Fed’s Quantitative Easing program and those that do not.  I am also seeing a rally in healthcare and insurance related stocks.  I find this a little perplexing given the heavy regulation of those industries due to Dodd-Frank and the Obamacare legislation.  My thoughts are that investors are betting that these companies have either figured out how to successfully navigate the new legislation or that there is going to be significant changes to that legislation.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,610.15 In doing so, the Dow Jones Industrial Average completed a small cup pattern with a measured to 13,692.69 on a closing basis.  I am now looking at upside resistance on the Dow Jones Industrial Average at 13,692.59 on a closing basis.  I now see downside support coming in at 13,406.91 on a closing basis.  Current Expectations:  I am expecting the Dow Jones Industrial Average to continue to move higher and test 13,692.59 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 5,046.43.  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 trend sideways to lower for the next few trading sessions.