Since the previous edition of the Sterling Weekly the Dow Jones Industrial Average declined 277.31 points or approximately 2.48% to 10,913.38 As we have been commenting on in our Daily Blog, I believe the Dow Jones Industrial Average, as well as the overall market, is in a sideways pattern with a downward bias. I am now starting to believe we may be seeing a net set of downward trendlines form that may foreshadow a steep selloff to come. I’ll do some more work on this over the course of the next week and we can see how things develop.

Last Friday was the end of the 3rd quarter for 2011. I thought I would take a look and see how the various indices I track performed for the quarter and year to date. The results were worse than I thought. With the exception of 2 sectors which were mixed, every sector of the market I track was down for the quarter. The best performing sectors were the Gold/Silver and Utilities; both of which had mixed index performance for the quarter. I’ve posted the results below for everyone to review. It’s worth noting that the Dow Jones Industrial Average lost approximately 1,500 points for 12.1% in the 3rd quarter, and the Dow Jones Transportation Average lost approximately 1,234 points for 22.76% in the quarter as well. For those who follow the Dow Theory, this is a clear signal of a bear market; and in my opinion an indication that we will be back in a recession within the next 6 months.

The year to date numbers were only slightly less depressing. For the year to date, the Utility Sector is up almost 7%, while everything else is down; only just not as bad as the quarterly numbers. Year to date the Dow Jones Industrial Average is down approximately 664 pointy for a 5.74% decline, while the Dow Jones Transportation Average is down approximately 917 point for an 18% decline. Again, a clear signal of a bear market and a recession.

I really wish the numbers and results were better, but they are not. Over regulation continues to be a weight around the neck of our economy that is dragging it down like a drowning man trying to swim with an anchor tied to his foot. Unfortunately I do not see this situation changing anytime soon. My expectations are that we will continue to see a decline in the economy, and thus the market, through the 2012 election cycle. While things might change start to improve sooner if it looks early on like there is going to be a landslide that creates a change in Washington DC; however with the partisan nature of today’s politics I doubt that will happen. So, until things do change, I’ll probably spend a big chunk of my time looking for downside support levels.

Finally, it should be noted that the unemployment rate is scheduled to be released on Friday. This has the potential to be a major mover for the market.

Sterling Investment Services Site Update

Since the last edition of the Sterling Weekly we have been making some upgrades to our web site (www.sterlinginvestments.com) and the services offered. One of the 1st things visitors to Sterling Investments will notice is a new design to our web pages. We have installed a new content management system and we are in the process of transitioning our legacy pages over to the new system. With several thousand legacy pages this is a time consuming process and will take some time to get fully implemented. We very much appreciate your patience during this process. As part of this process we have cleaned up our graphic images and streamlined our content and hopefully visitors will notice and appreciate the cleaner look to our site. Additionally the improvements to our content management system will allow us to offer more services to our clients; including a daily market commentary blog.

Sterling Market Commentary Blog

As part of our new services we are now publishing a blog. The primary focus of our blog is a daily market commentary. Over the course of the last 12-18 months there have been a lot of changes to the functioning of the stock market. One of the biggest being the growth in computer driven algorithmic and flash trading. While this form of trading serves to help increase the liquidity in the market, it has also dramatically changed the nature of the open of the market; specifically in my opinion it has dramatically increased the swings in the pre-market futures to the point where the expected open could change completely in the last 20 minutes prior to the open. While I still believe it is possible to engage in the form of short term trading I wrote about in the Prime Stock Newsletter, I no longer felt it was possible to publish the Prime Stock Newsletter with enough time prior to the open for it to be of meaningful value to our readers. As a result we have discontinued the publication of the Prime Stock Newsletter. Additionally I have decided to continue to write the daily commentary portion of the Prime Stock Newsletter as the main part of the Sterling Market Commentary Blog, making it free to the general public.

Additionally, the Sterling Market Commentary Blog is available as an RSS feed; and later this week we plan on having our blog available for real time email delivery as well.

Small Cap Research

Prime Update:

We have discontinued the publication of the Prime Stock newsletter in order to focus our efforts on our Market Commentary Blog and white paper research publications. Archived copies of the Prime Stock Newsletter Performance Reports can be found (here).