The overall market as measured by the Dow Jones Industrial Average lost 193.62 points, or approximately 2.1% last week to finish at 8,635.42. last week. The overall market has posted several trading days to the upside, however the market has been in a prolonged downward trend since it stopped tracking sideway in May and began its move downward that was only briefly interupted over the course of the late summer. While the drawing of trendlines is sometimes more of an Art than a Science, and not always that exact, there is a certain amount of creadence and attention that needs to be paid to them. The chart below shows the trendlines that have been a major influence on the market since the decline began. Until the Dow Jones Industrial Average is able to trade consistently above the upper of the two trendlines I would not put a lot of faith in any market rally being lasting. There is still a reasonable chance the market could pullback from the upper trendline and resume its move lower. After all the market may have come to realize that the world isn't coming to an end due to the credit crisis, but that is a long way from having solved the problems that caused it.

In last week's edition of the Sterling Weekly I briefly discussed the problems surrounding mark to market accounting. The Emergency Economic Stabilization Act of Act 2008, enacted and signed by the President on October 3, 2008, among other things requires the Commission to conduct a study of "mark-to-market" accounting applicable to financial institutions, including depositary institutions, and submit a report to Congress with the findings and determinations within 90 days. The SEC has set up a web page to keep the public informed of their progress and to solicit comments. The SEC's web page on the topic can be found (here). We will do our best to keep everyone informed as to the progress on this issue, as we believe this is one of the key causes of our current economic crisis and reforming the rules around this is one of the keys to an economic recovery.

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Dow Jones Industrial Average (INDU)

Current Opinion: Closed @ 8,141.36Last 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 @ 816.21 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 @ 1,091.16 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 @ 2.719% Current Expectations: With the current market turmoil it is anyone's guess where interest rates are going. However, my guess is that short term debt instruments will be more sought after than longer term ones.