Sterling Market Commentary for Wednesday October 17th, 2012

Sterling Market Commentary for Wednesday October 17th, 2012

A Look at Tuesday’s Market:  The overall market moved sharply higher in a broad based move that saw the vast majority of the sector indices I track move higher on the day as well.  The strongest sectors were the Chemicals, High Tech,  Gold/Silver, Oil & Gas, Cyclicals, Commodities, and Healthcare related indices.  Only the Banking indices moved lower on the day.  That move could be attributed to the resignation of Vikram Pandit from Citibank ‘C’.  In the commodities markets,  Oil was higher by $0.08 to $92.94 per barrel, and Gold was higher by $8.70 to $1,746.30 per ounce.  In the grain markets, Wheat was lower by $0.40 to $8.476 per bushel, and Corn was higher by $0.010 o $7.382 per bushel, while Soybeans were higher by $0.012 to $14.936 per bushel.

A Few Thoughts on Wednesday’s Market:  In looking at the charts from yesterday’s trading activity I was surprised by the strength of the move higher in a couple of sectors including the Chemicals, High Tech, and Healthcare related indices.  The problem I am having today  in particular is that I do not have any faith in the market at this point in time.  I think that we are currently in a situation where the Fed through its Quantitative Easing programs is actively manipulating the market to artificially high levels.  Why do I say this?  Because the Fed has stated that the goals of its Quantitative Easing programs is to flood the bond market with liquidity and drive investors into other classes of savings and investments, and along the way raise asset valuations.  In other words their stated goal is to manipulate markets higher.  I also believe they are creating a bubble in the bond market that when it bursts will make the bursting of the housing bubble look like a party.  Through in the political uncertainty and the effects of computerized trading, and I think you have a market that could suddenly without warning sharply reverse itself.  David Vitner, the CFO of Goldman Sachs was quoted in this morning’s Wall Street Journal as saying “There is still so much political uncertainty out there that is driving markets.  A speech by Politician X or Politician Y drives markets up or down as much as any economic situation.”  If nothing else,  I guess I am not out there alone in my feelings.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,551.78   With yesterday’s trading activity, I am now widening trading range by raising my upside resistance to the closing high set earlier this month.  I am now 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 13,373.32 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 5,118.87.  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.