Sterling Market Commentary for Monday November 26th, 2012
A Look at Friday’s Market: The overall market moved sharply higher on Friday in a very broad based move that occurred on a holiday shortened trading day. Friday’s move would have been impressive on any trading day, to come on a shortened trading day is even more impressive. However, on closer inspection the very light trading volume is not so impressive. Last week was a holiday shortened trading week, and the results of last week’s trading should be taken with a massive grain of salt. I would also like to point out that time and time again you see the market undergo a temporary trend reversal or retracement during a holiday shortened trading week, only to resume its prior course once the holiday week is past. I am not sure who really shows up during these holiday shortened trading weeks. It always seems to look as if the real trading professionals have taken as much time off as possible, and the activity in the market is dominated by a few players who have figured out how to make some money by bumping the market in the opposite direction of its current trend. I am pretty sure that the serious professionals have taken as much time off as possible, and it is basically those that have to be there that are left to play this game; and over time it becomes its own self-fulling event. This is what I think happened last week, and was really evident in Friday’s market activity.
In the commodities markets, Oil was higher by $0.90 to $88.28 per barrel, and Gold was higher by $23.20 to $1,751.40 per ounce. In the grain markets, Wheat was higher by $0.024 to $8.476, and Corn was higher by $0.044 to $7.454 per bushel, while Soybeans were higher by $0.104 to $14.186 per bushel.
A Few Thoughts on Monday’s Market: In looking at the charts from last week’s trading activity it is clear that the market has reached an over bought condition and the trading volume was light on the move higher. Individually each of those is an indication of a potential move lower by the market; combined I think they are signalling that the market is poised to resume its move back lower. I think it may take a day or so, but I am expecting the overall market to move back lower and test its lows set on November 15th.
The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,009.68 With the change over to decimalization of quotes and the increased use of computerized trading, support and resistance levels are not always as solid as they used to be. As a result they can be temporarily violated for a day or so before regaining their importance. Despite the fact that the Dow Jones Industrial Average closed above my upside resistance level 3 trading days ago, I am going to maintain my current upside resistance level on the Dow Jones Industrial Average for an another day or so to see if it the Dow moves back below it or not, and if I need to raise it or not. I still see upside resistance on the Dow Jones Industrial Average at 12,715.93 on a closing basis. I now see downside support coming in at 12,118.57 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 12,118.57 on a closing basis.
Dow Jones Transportation Average: The Dow Jones Transportation Average closed at 5,051.76 I continue to 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.
S&P 500 ‘SPX’: The S&P 500 closed yesterday at 1,409.15 I currently see upside resistance on the S&P 500 at 1,419.04 and downside support on the S&P 500 at 1,359.88 and then at 1,343.36 Current Expectations: I think the S&P 500 is going to move lower and test 1,359.88 and then 1,343.36 on a closing basis.
NASDAQ 100 Index ‘NDX’: The NDX closed yesterday at 2,639.59 I see upside resistance on the NDX currently at 2,655.81 and downside support at 2,524.36 on a closing basis. Current Expectations: I think the NDX is going to continue to move lower and test 2,524.36 and then 2,458.83 on a closing basis.
The Bottom Line: I think the market will continue to move lower for the next few trading sessions.