The overall market as measured by the Dow Jones Industrial Average lost approximately 76.70 points or approximately 1.0% last week. The downward trendlines that I discussed in the December 8th edition of the Sterling Weekly are still exerting a strong influence on the market. As a result there is still a reasonable chance we will see the Dow Jones Industrial Average continue to move lower and test 7,552.29 on a closing basis.

On Friday January 30th, the Dow Jones Transportation Average closed at 2,965.69 and in the process closed below its November closing low of 2,988.99. This is a bearish trading signal as the transportation average closed below the support level that was established during the market turmoil of last year. This is also very significant because the transportation index represents companies that transport goods and services across the country, and as a result is a vital indicator of the health of the US economy. Secondly there is the belief that the transportation index is an important confirmation of the moves in the Dow Jones Industrial Average, both to the downside and to the upside. In other words, if the Dow Jones Industrial Average is setting new highs and the transportation average is not also setting new highs, then the rally is the Industrial Average is probably not sustainable. However, if the transportation average is setting new highs, then the rally in the Industrials probably has some room to run. Well, the same is true to the downside. So, what we have in this case is a confirmation of continued downside movement in the overall market.

The single best indicator of where the economy will be six (6) months to 1 year from now is the Dow Jones Industrial Average. What these indices are telling us with their trading activity is that the economy should be expected to continue to decline for the next 6-12 months, and not to be expecting an economic recovery anytime soon.

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Dow Jones Industrial Average (INDU)

Current Opinion: Closed @ 8,000.86Last Signal: Called Lower (again) with the close of 8,378.95 on October 24th. Current Expectations: We might see a short term rally however the Dow should continue to move lower and test 7,762.34 on a closing basis.

The S&P 500

Current Opinion: Closed @ 825.88 Last Signal: Called Lower (again) with the close of 876.77 on October 24th. Current Expectations: We might see a short term rally however the S&P 500 should continue to move lower and test 752.44 on a closing basis.

The NASDAQ 100 (NDX)

Current Opinion: Closed @ 1,180.25 Last Signal: Called Lower (again) with the close of 1,202.27 on October 22nd. Current Expectations: The NDX should continue to move lower and test 957.05 on a closing basis.

CBOE Ten Year Treasury Index (TNX)

Current Opinion: Closed @ 2.844% Current Expectations: The TNX should move higher and test 2.966% and then 3.340% on a closing basis.