A Few Thoughts on Tuesday’s Markets: In looking at the charts from yesterday’s market, I noticed that the vast majority of the sector indices and heavy volume stocks that I follow all looked very positive on their charts. However, I am always cautious the 1st couple of days following an options expiration week. Experience has taught me that it generally takes a day or so, for the underlying trend to resume its movement. As a result, I expect the activity of Tuesday and Wednesday to set the general direction of the market for the next few weeks. Also, in general we have been in a very tight trading range for the last several months. We all know that this is rather unusual given the trading history of the markets over the last couple of years. My underlying concern is that the longer we track sideways, the greater the move to either the up or downside will be when we finally break from this tight trading range; and I do not want to be caught to heavily weighted to the wrong side.
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Sterling Market Commentary for Tuesday March 13th, 2012
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I have written many times in the past that I believe that during options expiration week you will see a reversal of the overall trend of the market as traders unwind their positions prior to the actual expiration; then following expiration at the start of the next current month, the trend will resume. What that means for today and this month is that I have felt there is a slight downward bias to the market, that could see a temporary reversal back to the upside this week before resuming its slight downward movement next week. ….
Sterling Market Commentary for March 12th, 2012
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In looking at the charts from Friday’s trading activity there was not a whole lot to see, it was pretty much a dull market. There really was not a whole lot to see, with many of the sector indices and individual stocks are somewhere between support and resistance. Basically a lot of sideways movement, but not a lot of clear breakouts to the upside or downside. There has been a definite decrease in the volatility in the markets this year. While this decreased volatility has gotten a minor amount of coverage in the press, one of the consistent themes for this decreased volatility is the upcoming “Volker Rule,” and that many of the big banks and investment banking firms have curtailed their proprietary trading operations. I definitely believe that time will tell on this topic, I do think the volatility last fall had gotten out of hand, and that sort of volatility can do long term damage to the market. While I still have some mixed feelings about the Volker Rule, I think any reduction in volatility, if it can be legitimately attributed to the Volker Rule, is more of an unintended consequence than a designed effect.
Sterling Market Commentary for Thursday March 8th, 2012
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In looking at the charts from Wednesday’s trading the trend of the market remains weak, however yesterday’s big bounce tends to pull stocks and indices that recently broke below support back above those support levels. What this really ends up doing in my opinion is that it greatly reduces the number of potential trading candidates for the day. It also tends to throw the continuation of any downtrend in doubt.
With the volatility we have seen in the market over the last several years I have adopted my strategy from one of being a purely short term, day trader to one of selling covered puts and calls. This results in my building a portfolio of covered puts and calls over the course of a month that then reverts back to cash on options expiration. During this process I generally try to build a portfolio that is a mixture of long and short positions. I am looking for today to be a day where I can balance out my put positions with a call position that will not get stopped out prior to expiration.
Sterling Market Commentary for Wednesday March 7th, 2012
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A Few Thoughts on Wednesday’s Market: In looking at the charts from yesterday’s trading activity it is pretty clear that basically every index I track has broken its upward or sideways trend and looks to starting what should be at least a short term pullback. There only 2 stocks with a more than a million shares in average daily trading volume that closed at a new yearly high yesterday; and the very vast majority of the heavy volume stocks moved lower on the day.
I continue to see support on the Dow Jones Industrial Average coming in at….
Sterling Market Commentary for Tuesday March 6th, 2012
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In my review of the charts from yesterday’s trading activity I noticed that the vast majority of the various indices I track appear to be starting to move lower. This is generally a bearish signal for the overall market. The second thing I noticed was the vast majority of the heavy volume stocks appear to be moving lower, another bearish signal for the overall market. It looks to me as if we are starting a market pullback. If that is the case, then I expect the Dow Jones Industrial Average to move lower and test support at 12,719.49 If that level fails to hold support on the Dow Jones Industrial Average, then I see a good possibility that the Dow Industrials will move lower and test …..
Sterling Market Commentary for Friday February 24th, 2012 – A Quick Look at Oil
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Also, it should be noted that despite the upward movement of the Dow Jones Industrial Average and the S&P 500, the Dow Jones Transportation Index has been moving lower. For those who believe in the Dow Theory this is a negative signal for the overall market. My thoughts are that the Dow Transports are being pushed lower due to higher oil prices; additionally the Dow Jones Transportation Average is generally considered to be a fairly reliable indicator as transports companies ship goods and services, thus providing a good look at where the economy is going. If this trend continues, then the odds are that the broad market will follow the transports lower, not the other way around. ….
Sterling Market Commentary for Tuesday February 21st, 2012
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In looking at the charts from Friday’s market, the vast majority of the stocks and various sector indices I looked at continue have upward chart patterns. This is obviously a busllish sign for the market. However, a point of concern is that the Dow Jones Transportation Average now has a negative chart pattern and appears to be headed lower. While the Dow Jones Transportation Average may reverse this trend and head back higher, my concerns are that the rising price of oil and other regulatory issues are going to put the earnings of the components under pressure and ultimately send the Dow Jones Transportation Average lower. However, if you believe in the Dow Theory, as I do, then
Sterling Market Commentary for Tuesday February 14th, 2012
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A Few Thoughts on Tuesday’s Market: In looking at the charts of the various indices I track, I noticed a couple of things. The 1st being that several of the various sector indices appear to be looking as if they could easily turn lower. Additionally the Gold/Silver indices continue to look weak. The second thing that I noticed is that a couple of the high tech indices appear to have gone parabolic with their chart patterns. In effect, they sort of look similar to the chart of Apple, Inc. ‘AAPL’ over the course of the last several months. The NASDAQ 100 has also been effected by this as well. This is a result of the way in which these indices are designed. They are capitalization weighted indices, which means that the ratio, or weighting, of the stocks within the index is based upon the market capitalization of the companies that comprise the index. I have never been in favor of this form of index construction. I think it has several drawbacks, some of which can have very devastating consequences……
Sterling Market Commentary for Monday Feburary 13th, 2012
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In looking at the charts from Friday’s market I noticed that a pretty high number of the various sector indices I track appear to be turning negative. Also in looking at the stocks with the highest trading volume, the majority of those that are not moving sideways look weak with negative chart patterns. History has taught me that this generally precedes a turn lower by the market. My thoughts are that the recent move higher may be beginning to run out of steam. With respect to the Greek Financial Crisis, I just do not see the Greek people easily accepting the mandated reforms. I do not think the Greek Financial Crisis is over yet……..