Market Commentary

Sterling Market Commentary for Wednesday October 10th, 2012

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Sterling Market Commentary for Wednesday October 10th, 2012

A Look at Tuesday’s Market: The overall market moved sharply lower yesterday in a broad based move that saw almost every sector index I track move lower on the day as well. I will admit I was out of the office most of yesterday and missed the markets move lower; and as a result I missed what was getting the blame for the move lower.  However, when in doubt you can probably just blame the Europeans.  They are a mess over in Europe, and probably are going to remain a mess for a very long time.   In the commodities markets, Oil was sharply higher yesterday moving upwards by $3.06 to $92.39 per barrel, and Gold was lower by $10.70 to $1,765.00 per ounce.  In the grain markets,  Wheat was higher by $0.032 to $8.642 per bushel, and Corn was unchanged at $7.420 per bushel, while Soybeans were lower by $0.010 to $15.500 per bushel.

A Few Thoughts on Wednesday’s Market:  In looking at the charts from yesterday’s trading activity I was struck by the apparent breakdown and weakness in the vast majority of the charts I looked at.  While there is a good possibility several of these indices could bounce from these levels, another couple of down days will break the upward trend that has been in place since early summer and signal the start of a new downward trend.  The charts of the various sector indices I track can be grouped into 3 basic categories.  The 1st being the capitalization weighted tech indices that are very heavily weighted with Apple, Inc. ‘AAPL’.  Due to the excessive weighting of Apple within these indices as Apple has moved lower,  these indices have been dragged lower at a sharp paces.  Basically a kind of “Live by the Sword, Die by the Sword” situation.

The second category would be those indices that found support on either their 9 day or 40 day moving average.  These moving averages can generally be seen as a point of support or resistance depending upon where they are at on the chart in relationship to the price level on the chart they are being drawn on.  In the case when they are functioning as support levels, the movement through these support levels to lower levels is generally seen as a reliably negative indicator.  The indices I noticed on their 9 day or 40 day moving average include the Amex Pharmaceuticals Index ‘DRG’, the Amex Gold/Silver ‘XAU’, the Amex Broker/Dealer ‘XBD’, the Banking Index ‘BIX,’ the Amex Airline Index ‘XAL’, and the Healthcare Index ‘HCX’.

The third category is those indices that appear to either be in the process of breaking below or have already broken below their upward trendlines, which are typically pretty solid levels of support.  These indices include the Dow Jones Industrial Average ‘INDU’, the S&P 100 ‘OEX’, the S&P Chemicals Index ‘CEX’, and the S&P 500 ‘SPX’.  Another couple of days moving lower and I think these indicse will be in a clear downward trend.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,473.53  I am now looking at upside resistance on the Dow Jones Industrial Average at 13,692.59 on a closing basis.  I now see downside support coming in at  13,406.91 on a closing basis.  Current Expectations:  I think we may be seeing a short term top forming to the Dow Jones Industrial Average and there is a good chance it will move lower.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 4,999.56.  I 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.

The Bottom Line:  I think the market will continue to trend sideways to lower for the next few trading sessions.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Tuesday October 9th, 2012

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Sterling Market Commentary for Tuesday October 9th, 2012

A Few Thoughts on Monday’s Market:  The overall market basically moved sideways Monday on a lackluster trading day in which the bond markets and banks were closed.  What was noticeable in Monday’s market was that many of the high tech indices I look at appear to be in the process of breaking lower;  thus signalling weakness in the high tech portion of the U.S. economy.  In the commodities markets,  Oil was lower by $0.55 to $89.33 per barrel, and Gold was lower by $5.10 to $1,775.70 per ounce.  In the grain markets,  Wheat was higher by $0.034 to $8.610 per bushel, and Corn was lower by $0.060 to $7.420 per bushel, while Soybeans were $0.004 to $15.510 per bushel.

A Look at Tuesday’s Market:  I think the election debate schedule now has the markets attention, and Thursday night’s debate between Joe Biden and Paul Ryan promises to be a really entertaining event.  I hate to say it, but I think the market is being dominated by the computers with a majority of the humans doing their best to tread water until there is election clarity.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,583.65  I am now looking at upside resistance on the Dow Jones Industrial Average at 13,692.59 on a closing basis.  I now see downside support coming in at 13,406.91 on a closing basis.  Current Expectations:  I am expecting the Dow Jones Industrial Average to continue to move higher and test 13,692.59 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 5,057.05.  I 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.

The Bottom Line:  I think the market will continue to trend sideways to lower for the next few trading sessions.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Monday October 8th, 2012

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Sterling Market Commentary for Monday October 8th, 2012

A Look at Friday’s Market:  The overall market moved moderately higher in a relatively broad based move.  In the commodities market,  Oil was lower by $1.83 to $89.88 per barrel, and Gold was lower by $15.70 to $1,780.80 per ounce.  In the grain markets,  Wheat was lower by $11.60 to $8.574 per bushel, and Corn was lower by $0.090 to $7.480 per bushel, while Soybeans were unchanged at $15.514 per bushel.  Interestingly,  the bond market saw a sharp sell off that moved interest rates higher across the various maturities.  The yield on the 30-Year US Treasury Bond jumped 0.084% from 2.882% to 2.966%   This is just under a 3% move in rates, and a 3% move in basically anything is a big move.  The yield on the 5-Year and 10-Year US Treasury instruments made similar moves.  While moves of this magnitude are not unheard of in the bond market;  I think it does somewhat demonstrate the ineffectiveness of the Fed’s Quantitative Easing programs.

A Few Thoughts on Monday’s Market:  In looking at the charts from Friday’s trading activity I see two markets developing;  those that are perceived to benefit from the Fed’s Quantitative Easing program and those that do not.  I am also seeing a rally in healthcare and insurance related stocks.  I find this a little perplexing given the heavy regulation of those industries due to Dodd-Frank and the Obamacare legislation.  My thoughts are that investors are betting that these companies have either figured out how to successfully navigate the new legislation or that there is going to be significant changes to that legislation.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,610.15 In doing so, the Dow Jones Industrial Average completed a small cup pattern with a measured to 13,692.69 on a closing basis.  I am now looking at upside resistance on the Dow Jones Industrial Average at 13,692.59 on a closing basis.  I now see downside support coming in at 13,406.91 on a closing basis.  Current Expectations:  I am expecting the Dow Jones Industrial Average to continue to move higher and test 13,692.59 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 5,046.43.  I 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.

The Bottom Line:  I think the market will continue to trend sideways to lower for the next few trading sessions.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Friday October 5th, 2012

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Sterling Market Commentary for Friday October 5th, 2012

A Look at Thursday’s Market: The overall market moved solidly higher in a broad based move that saw every sector index I track move higher on the day.  The strongest sectors were the Gold/Silver,  Financials, Commodities, Oil Services,  Cyclicals,  Telecom, Retailers, and Transports.  Maybe we should call this a Romney Rally?? !!!!!

In the commodities markets,  Oil rebounded sharply from yesterday’s losses by rallying $3.31 to $91.45 per barrel, and Gold was higher by $12.20 to  $1,792.00 per ounce.  In the Grain markets,  Wheat was higher by $0.016 to $8.746 per bushel, and Corn was higher by $0.054 to $7.622 per bushel, while Soybeans were higher by $0.242 to $15.560 per bushel.

A Few Thoughts on Friday’s Market: In looking at the charts on the various indices I follow I am having a hard time getting excited about any of the upward movements I see.  I thought it might be a case of pre-election blues, and then I decided to look at the volume levels.  I am seeing low volume and a declining trend in the volume.  This is not the stuff that market rallies are made of.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,575.36  I am now looking at upside resistance on the Dow Jones Industrial Average at 13,579.47 on a closing basis.  I now see downside support coming in at 13,406.91 on a closing basis.  Current Expectations:  I am not quite sure.  I think the next 2-3 days will clarify the direction of the market.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 5,012.71.  I 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.

The Bottom Line:  I think the market will continue to trend sideways to lower for the next few trading sessions.

www.sterlinginvestments.com

 

Market Commentary

Sterling Market Commentary for Thursday October 4th, 2012

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Sterling Market Commentary for Thursday October 4th, 2012

A Look at Wednesday’s Market:  The overall market moved moderately higher in a relatively broad based move.  There were a few notable exceptions as the commodities based indices moved lower.  A lot of this move lower was sparked by a sharp sell off in Oil, which was lower by $3.75 to $88.14 per barrel.  In searching the news reports related to the sharp drop in the price of Oil,  I found that it was attributed to 2 primary factors.  The 1st being a slowing of the global economy, and the 2nd being a slowing of the Chinese economy.  Neither of these things is good for the U.S. Economy and the overall market.  In looking at  a chart on the price of Oil it appears to me that their is a reasonable chance that the price of Oil could continue to move lower and test its support level of $79.01 per barrel set on June 28th of this year.  While the lower price of Oil would be good for consumer’s pocket books,  my concerns are that with all the computerized trading, the lower price Oil would be a sign of a significantly weakening global economy.

Gold was higher on Wednesday by $4.20 to $1,779.80 per ounce.  In the Grain markets,  Wheat was higher by $0.014 to $$8.730 per bushel, and Corn was lower by $0.014 to $7.566 per bushel, while Soybeans were higher by $0.012 to $15.316 per bushel.

A Few Thoughts on Thursday’s Market:  I watched the Presidential debate last night.  I, and I think the vast majority of Americans,  thought that Mitt Romney was the clear winner of the debate.  He demonstrated a strong command of the facts and conveyed his message in a manner that left Barrack Obama unable to defend his track records or make a solid case for why he should have another 4 years.  As a result the futures are higher this morning based upon expectations of a Romney victor and an improved post election economic climate.  I think this creates a perverse situation in the market where it is basically Heads you win,  Tails they loose.

Every child at some point is tricked into a game of Heads I win,  Tails you loose.  They very quickly figure out there is no way for them to win and quit playing the game.  I think the market right now is the opposite.  If Barrack Obama wins the election, then the Fed will continue with its Quantitative Easing programs until they have monetized so much debt that the US Economy either collapses due to taxes and interest payments or until hyper inflation sets it.  If Mitt Romney wins the election, then the anti-business climate of the Obama administration will be over and new pro-business climate will allow the U.S. Economy to start growing and creating jobs again.

However, there is a downside to this scenario.  As I stated several times before, the Fed’s Quantitative Easing programs are actually creating a climate of business uncertainty that I believe is holding back economic growth.  Worse yet,  no country has ever used and combination of higher taxes, deficit spending, higher regulation, or deficit monetization to produce economic growth and prosperity.  It has always resulted in economic ruination.  There is absolutely no reason in the world to believe that the United States will be the 1st country in the world to escape this outcome.  So if Barrack Obama wins the election, I ultimately see an economic crisis on the horizon where it does not matter how much money you made between now and then.

If Mitt Romney wins the election, then I foresee a scenario where the real pain of dealing with the balancing the budget and bringing the Fed’s Quantitative Easing programs to an end will significantly prolong the amount of time it takes to restore the U.S. Economy to a healthy and vibrant state far longer than we have seen in the past.  One of the main problems I see is that as interest rates return to normalized levels the enormous amount of Federal Debt that the country now has will increase interest payments on the Federal Debt and despite spending cuts the deficit will remain stubbornly high.  Unless massive reform can be done to the entitlement programs the debt increase of the Obama administration may have pushed our annual deficit beyond the point of no return.  This will still be a very painful outcome; the only good news would be that it will probably not be as painful as another four (4) years of an Obama presidency.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,494.61  I continue to see upside resistance on the Dow at 13,558.92.   With last Friday’s close of 13,437.13 the Dow Jones Industrial Average broke our support level of 13,345.  I now see downside support coming in at 13,279.32  Current Expectations:  I am expecting the Dow to continue to trend lower and test 13,279.32 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 4,966.10.  Despite yesterday’s close above our stated upside resistance level of 4,951.07 I am just not ready to call for a move higher in the Dow Transports.  I continue to see upside resistance on the the Dow Transportation Average at 4,951.07 and downside support at 4,873.76  and then at 4,795.28  This is obviously a very narrow trading range.  Current Expectations:  The Dow Transports appear to be in a downward trend.  I am expecting Dow Transports to continue to move lower and test 4,873.76 on a closing basis.

The Bottom Line:  I think the market will continue to trend sideways to lower for the next few trading sessions.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Wednesday October 3rd, 2012

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Sterling Market Commentary for Wednesday October 3rd, 2012

A Look at Tuesday’s Market:  The overall market moved moderately lower on Tuesday in what was really a very narrow based move.  The majority of the indices I track were higher on the day.  There was strength in the Telecoms, Biotech, Healthcare, High Tech, Utilities, Financial, Natural Gas, Oil & Gas, and Bonds.  There was weakness in the Gold/Silver, Retailers, Commodities, Oil Services, and Consumer indices.  The Transports were mixed.  In the commodities markets, Oil was lower by $0.59 to $91.89 per barrel, and Gold was lower by $7.70 to $1,775.60 per ounce. In the Grain markets,  Wheat was lower by $0.126 to $8.714 per bushel, and Corn was higher by $0.014 to $7.582 per bushel, while Soybeans were lower by $0.296 to $15.304 per bushel.

A Few Thoughts on Wednesday’s Market:  In looking at the charts from yesterday’s market I really did not see a clear overall direction being painted.  There are a very small handful of sectors that appear to be doing well, and the rest either have a sideways or downward bias.  I think that the market will probably tread water today as it waits for the Presidential debate tonight. We are faced with a very stark contrast in the two presidential nominees; and more than any other election since that of Lyndon Johnson, this election will probably determine the economic future of this country.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 13,482.36  I continue to see upside resistance on the Dow at 13,558.92.   With last Friday’s close of 13,437.13 the Dow Jones Industrial Average broke our support level of 13,345.  I now see downside support coming in at 13,279.32  Current Expectations:  I am expecting the Dow to continue to trend lower and test 13,279.32 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 4,908.44.  I continue to see upside resistance on the the Dow Transportation Average at 4,951.07 and downside support at 4,873.76  and then at 4,795.28  This is obviously a very narrow trading range.  Current Expectations:  The Dow Transports appear to be in a downward trend.  I am expecting Dow Transports to continue to move lower and test 4,873.76 on a closing basis.

The Bottom Line:  I think the market will continue to trend sideways to lower for the next few trading sessions.

www.sterlinginvestments.com