Market Commentary

Sterling Investments Market Commentary for Thursday April 12th, 2012

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A Look at Wednesday’s Market:  The overall market finished Wednesday moderately higher in a broad based move that saw the majority of the various sector indices I track move higher on the day as well.  However,  one day does not make a trend, and nothing I looked at rallied enough to break its current downward trend.  As a result, I am expecting the overall market to continue its downward trend.  In the commodities markets,  Oil was higher by $1.68 to $102.70 per barrel, while Gold was lower by $0.40 to $1,660.30 per ounce.  In the grain markets,  Wheat was higher by $0.022 to $6.280 per bushel, and Corn was higher by $0.012 to $6.360 per bushel, while Soybeans were lower by $0.040 to $14.220 per bushel.

A Few Thoughts on Thursday’s Market: In looking at the charts from yesterday’s trading I noticed that essentially none of the stocks or indices I looked at rallied enough to break their current downward trends.  Additionally volume from yesterday’s trading was light, compared to Monday and Tuesday’s move lower.  These are all bearish trading signals.  I also noticed that it looks like the entire oil and gas sector appears to be moving lower.  I do not think I could find a single stock in that sector that moved higher yesterday.  The jobless claims numbers released this morning were not good, and they moved in the wrong direction.  I think we are seeing signs that the US economy is starting slow.  This should not be a big surprise to anyone.  The Eurozone economy is under severe pressure due to its debt crisis and inability to get the right form of reform in place. As Europe moves towards an obvious recession, it is only natural that this will have a dampening effect on other economies around the world.  Additionally we are seeing a record amount of new regulations in the US, and new regulations always have a slowing effect on what is being regulated.  Combine that with the tax increases to take effect in 2013 due to the expiration of the Bush tax cuts, and I do not think it is a question of if the US economy will slow, but a question of when.

The Bottom Line:  I am expecting the overall market to continue to move lower.

Twitter Model Portfolio Tweet Policy:  Currently Sterling Investment Services is managing a trading strategy based upon covered puts and calls.  Sterling Investments is currently running a “Model Portfolio” that is based upon this strategy.  You can follow us on Twitter under sterlinginv and get our intra-day comments on the market.  Sign up now to follow us and get our thoughts and comments as the market moves!  It should be noted, that at this point in time, Sterling Investment Services is only “paper trading” this model portfolio, and not actually executing trades and creating actual positions within this model portfolio.  Therefore, please do not look for actual volume associated with our options selections.  It is Sterling Investment Services goal to initiate trading in an actual account based upon our model portfolio in the near future.  When that change actually occurs, Sterling Investments will notify its readers via Twitter and our website.

www.sterlinginvestments.com

 

Market Commentary

Sterling Marekt Commentary for Wednesday April 11th, 2012

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A Look at Tuesday’s Market:  The overall market moved sharply lower on Tuesday in a broad based move that saw basically every sector index I track move lower on the day as well.  The Dow Jones Industrial Average broke significantly below its 40 day moving average, and closed below its March 6th closing low in what I believe is a significant breaking of support.  The Dow Jones Industrial Average also closed below a pair of support levels set in July and August of last year.  I consider this to be significant and think that there is a real good chance that the Dow Jones Industrial Average could continue to move lower and test 12,231.11 on a closing basis.

In the commodities markets,  Oil was lower by $1.44 to $101.02 per barrel, and Gold was higher by $16.80 to $1,660.70 per ounce.  In the grain markets,  Wheat was lower by $0.172 to $6.256 per bushel, and Corn was lower by $0.142 to $6.346 per bushel, while Soybeans were lower by $0.050 to $14.260 per bushel.  It should be noted that Argentina is currently experiencing a mild drought that expected to noticeably reduce its Soybean production, and the USDA is reporting dry soil conditions in Iowa that could impact the germination of seeds planted this spring.  We could see a very interesting grain market this year, with significantly higher prices.

A Few Thoughts on Wednesday’s Market:  In looking at the charts from Tuesday’s trading activity I noticed a couple of items of significance.  The 1st being that volume increased significantly on Tuesday.  Heavy volume on the way lower is always considered a bearish trading signal for the markets.  The other significant item I noticed was that the very vast majority of the indices and individual stocks I looked at broke through support during their moves lower.  This break below support was significant enough that even a 100 point move higher in the Dow Jones Industrial Average will not get many of these stocks back above those support levels, which are now upside resistance levels.

While early morning futures are looking positive,  I do not see any move higher today being much more than a bounce before the market moves back lower.  I am going to be looking for a covered put position to enter for this morning’s trade.

Twitter Model Portfolio Tweet Policy:  Currently Sterling Investment Services is managing a trading strategy based upon covered puts and calls.  Sterling Investments is currently running a “Model Portfolio” that is based upon this strategy.  It should be noted, that at this point in time, Sterling Investment Services is only “paper trading” this model portfolio, and not actually executing trades and creating actual positions within this model portfolio.  Therefore, please do not look for actual volume associated with our options selections.  It is Sterling Investment Services goal to initiate trading in an actual account based upon our model portfolio in the near future.  When that change actually occurs, Sterling Investments will notify its readers via Twitter and our website.

Weekly Newsletter

Sterling Weekly for the Week of April 2nd, 2012 – A Look at 1st Quarter Index Performance Results

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1st Quarter Index Performance Results

Since the previous edition of the Sterling Weekly the Dow Jones Industrial Average rose 221.98 points or approximately 1.7% to 13,199.55 Despite the market weakness we saw on Tuesday of this week, I am fairly optimistic on the market for the intermediate term. In yesterday’s edition of our blog, I stated that I see the Dow Jones Industrial Average moving to 14,955.78 over the intermediate term. I generally consider that to be anywhere from 6 to 18 months. Granted there will always be some form of storm clouds on the horizon, and I see the European debt crisis continuing to cause periodic problems. Additionally it is no sure thing that the Dow Jones Industrial Average will reach those levels, but at the end of the day I consider the Dow Jones Industrial Average to be essentially a scale that weighs the size of the U.S. economy, and the bigger the population, the bigger the U.S. economy.

We saw the end of the 1st quarter of the year last week. As usual I like to take a look at the performance of the various sector indices I track and see what the market is telling us. I usually find these results to be somewhat interesting. I have published the results below for your review as well.

Sterling Investment Services 2012 1st Qtr. Index Performance Report
Ticker
Closing Level
1st Quarter
Index Name
Symbol
31-Mar-12
31-Dec-11
Points
Percent
1 Amex Airlines Index XAL 37.74 32.44 5.30 16.34%
2 Amex Biotech Index BTK 1412.97 1,091.42 321.55 29.46%
3 Amex Disk Drive DDX 125.66 101.79 23.87 23.45%
4 Amex Gold Bugs HUI 472.9 498.73 (25.83) -5.18%
5 Amex Gold Miners GDM 1371.91 1,428.98 (57.07) -3.99%
6 Amex Interactive IIX 332.22 281.74 50.48 17.92%
7 Amex MS Commodities CRX 886.46 844.94 41.52 4.91%
8 Amex Networking NWX 257.26 215.15 42.11 19.57%
9 Amex Oil & Gas XOI 1267.43 1,229.10 38.33 3.12%
10 Amex Pharmaceuticals DRG 341.96 332.94 9.02 2.71%
11 Amex Sec. Broker/Dealer XBD 105.43 83.27 22.16 26.61%
12 CBOE Technology Index TXX 1076.61 851.59 225.02 26.42%
13 Computer Tech. Index XCI 1182.08 973.96 208.12 21.37%
14 Dow Jones Industrial Avg. DJ-30 13212.04 12,217.56 994.48 8.14%
15 Dow Jones Transportation DJ-20 5253.16 5,019.69 233.47 4.65%
16 Dow Jones Utilities Index DJ-15 458.93 464.68 (5.75) -1.24%
17 KBW Banking Index BKW 49.74 39.38 10.36 26.31%
18 MS Consumer Index CMR 801.543 759.13 42.41 5.59%
19 MS Cyclical Index CYC 1017.023 874.14 142.88 16.35%
20 MS. Healthcare Providers RXP 1954.924 1,733.89 221.03 12.75%
21 MS. High Tech. Index MSH 716.79 588.88 127.91 21.72%
22 NASDAQ 100 Index NDX 2755.27 2,277.83 477.44 20.96%
23 Natural Gas Index XNG 649.539 636.15 13.39 2.11%
24 North Am. Telecom Index XTC 920.74 881.99 38.75 4.39%
25 Phlx. Gold/Silver Index XAU 175.46 180.64 (5.18) -2.87%
26 Phlx. Oil Services Sector OSX 238.16 216.28 21.88 10.12%
27 Phlx. Semiconductor Index SOX 438.64 364.44 74.20 20.36%
28 Phlx. Utility Sector UTY 469.09 481.45 (12.36) -2.57%
29 Russell 1000 Index RUI 778.92 693.36 85.56 12.34%
30 S&P 100 Index OEX 640.69 570.79 69.90 12.25%
31 S&P 500 Index SPX 1408.47 1,257.60 150.87 12.00%
32 S&P Banking Index BIX 158.01 130.52 27.49 21.06%
33 S&P Chemicals Index CEX 341.77 298.73 43.04 14.41%
34 S&P Healthcare Index HCX 435.76 401.90 33.86 8.42%
35 S&P Insurance Index IUX 188.42 170.17 18.25 10.72%
36 S&P Retail Index RLX 622.38 523.20 99.18 18.96%
37 CBOE 5 Yr. Treasury Yield FVX 10.43 8.30 2.13 25.66%
38 CBOE 10 Yr. Treasury Yield TNX 22.16 18.71 3.45 18.44%
39 CBOE 30 Yr. Treasury Yield TYX 33.45 28.29 5.16 18.24%
———- ———-
Average 105.77 12.21%

In looking at the results of the 1st quarter 2012, the average index gained 12.21%. Overall a very good performance, but one that we should not expect to be repeated for each of the remaining 3 quarters as that would equate to a 48% plus annualized return. As far as the major market indices are concerned, the Dow Jones Industrial Average was up by 994.48 points or approximately 8.14%, the S&P 500 was higher by 150.87 points or approximately 12%, and the NASDAQ 100, obviously benefiting from the effect of Apple, was higher by 477.44 points or approximately 20.96%.

I have included a table below showing the various indices I track ranked based upon their 1st quarter performance results.

Ticker
Closing Level
1st Quarter
Index Name
Symbol
31-Mar-12
31-Dec-11
Points
Percent
1 Amex Biotech Index BTK 1412.97 1,091.42 321.55 29.46%
2 Amex Sec. Broker/Dealer XBD 105.43 83.27 22.16 26.61%
3 CBOE Technology Index TXX 1076.61 851.59 225.02 26.42%
4 KBW Banking Index BKW 49.74 39.38 10.36 26.31%
5 CBOE 5 Yr. Treasury Yield FVX 10.43 8.30 2.13 25.66%
6 Amex Disk Drive DDX 125.66 101.79 23.87 23.45%
7 MS. High Tech. Index MSH 716.79 588.88 127.91 21.72%
8 Computer Tech. Index XCI 1182.08 973.96 208.12 21.37%
9 S&P Banking Index BIX 158.01 130.52 27.49 21.06%
10 NASDAQ 100 Index NDX 2755.27 2,277.83 477.44 20.96%
11 Phlx. Semiconductor Index SOX 438.64 364.44 74.20 20.36%
12 Amex Networking NWX 257.26 215.15 42.11 19.57%
13 S&P Retail Index RLX 622.38 523.20 99.18 18.96%
14 CBOE 10 Yr. Treasury Yield TNX 22.16 18.71 3.45 18.44%
15 CBOE 30 Yr. Treasury Yield TYX 33.45 28.29 5.16 18.24%
16 Amex Interactive IIX 332.22 281.74 50.48 17.92%
17 MS Cyclical Index CYC 1017.023 874.14 142.88 16.35%
18 Amex Airlines Index XAL 37.74 32.44 5.30 16.34%
19 S&P Chemicals Index CEX 341.77 298.73 43.04 14.41%
20 MS. Healthcare Providers RXP 1954.924 1,733.89 221.03 12.75%
21 Russell 1000 Index RUI 778.92 693.36 85.56 12.34%
22 S&P 100 Index OEX 640.69 570.79 69.90 12.25%
23 S&P 500 Index SPX 1408.47 1,257.60 150.87 12.00%
24 S&P Insurance Index IUX 188.42 170.17 18.25 10.72%
25 Phlx. Oil Services Sector OSX 238.16 216.28 21.88 10.12%
26 S&P Healthcare Index HCX 435.76 401.90 33.86 8.42%
27 Dow Jones Industrial Avg. DJ-30 13212.04 12,217.56 994.48 8.14%
28 MS Consumer Index CMR 801.543 759.13 42.41 5.59%
29 Amex MS Commodities CRX 886.46 844.94 41.52 4.91%
30 Dow Jones Transportation DJ-20 5253.16 5,019.69 233.47 4.65%
31 North Am. Telecom Index XTC 920.74 881.99 38.75 4.39%
32 Amex Oil & Gas XOI 1267.43 1,229.10 38.33 3.12%
33 Amex Pharmaceuticals DRG 341.96 332.94 9.02 2.71%
34 Natural Gas Index XNG 649.539 636.15 13.39 2.11%
35 Dow Jones Utilities Index DJ-15 458.93 464.68 (5.75) -1.24%
36 Phlx. Utility Sector UTY 469.09 481.45 (12.36) -2.57%
37 Phlx. Gold/Silver Index XAU 175.46 180.64 (5.18) -2.87%
38 Amex Gold Miners GDM 1371.91 1,428.98 (57.07) -3.99%
39 Amex Gold Bugs HUI 472.9 498.73 (25.83) -5.18%

I have stated many times that I believe that Bull Markets are primarily the result of 2 things; the first being new technology, and the second being changes in government regulation. The results of the 1st quarter are pretty well explained by that thesis. The top performing indices were either the result of new technologies, such as the Amex Biotech Index and the various technology indices that were heavily influenced by Apple, Inc. ‘APPL.’ The second set of indices, those influenced by government regulation were the interest rate indices, the TYX, TNX, and FVX. The poor performing indices reflect the same results, rising interest rates is a negative for the Utility industry, and precious metals such as gold and silver. Additionally the beginning of the implementation of Obamacare and its massive amounts of regulation is a negative for the Healthcare related indices.

Do I see any insight into the 2nd quarter of 2012? I see interest rates continuing to increase, and as a result, I see continued pressure on the interest rate sensitive indices such as the utilities. The other thing that I am sure of is that the second quarter results are going to be far different than what we saw in the 1st quarter of 2012.

Sterling Calendars for the Week of April 2nd, 2012

Economic Calendar

Date

 Est. Time Release For Consensus Prior

04/02

 10:00am ISM Index Mar. 53.0 52.4
04/02 10:00am Construction Spending Feb. 1.0% (0.8%)
04/02 10:00am Factory Orders Feb. 1.4% (1.1%)
04/03 2:00pm FOMC Minutes 3/13
04/03 2:00pm Auto Sales Mar N/A 5.5M
04/03 2:00pm TrucK Sales Mar. N/A 5.9M
04/04 7:00am MBA Mortgage Index 03/31 4.8% (2.7%)
04/04 8:15am ADP Employment Change Mar. 217K 216K
04/04 10:00am ISM Services Mar. 56.7 57.3
04/04 10:30am Crude Inventories 03/31 N/A 7.102M
04/05 7:30am Challenger Job Cuts Mar. N/A 2.0%
04/05 8:30am Initial Claims 03/31 355K 359K
04/05 8:30am Continuing Claims 03/24 3,360K 3,340K
04/06 8:30am Nonfarm Payrolls Mar. 200K 227K
04/06 8:30am Nonfarm Private Payrolls Mar. 215K 233K
04/06 8:30am Unemployment Rate Mar. 8.3% 8.3%
04/06 8:30am Hourly Earnings Mar. 0.2% 0.1%
04/06 8:30am Average Workweek Mar. 34.5 34.5
04/06 3:00pm Consumer Credit Feb. $14.0B $17.8B

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Market Commentary

Sterling Market Commentary for Wednesday April 4th, 2012

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A Look at Tuesday’s Market:  The overall market moved moderately lower in a relatively broad based move that saw the majority of the sector indices I track move lower on the day as well.  The weakest sectors were the the Gold/Silver,  Commodities,  High Tech, Oil & Gas, Cyclicals, Insurance,  Broker/Dealers, Natural Gas, Consumer, Oil Services, Telecom, and Pharmaceuticals.  There was strength in the Airlines,  Biotech, Retailers, Transports, and Healthcare related.  In the commodities markets, Oil was lower by $1.22 to $104.01 per barrel, and Gold was lower by $7.70 to $1,672.0 per ounce.  In the grain the market, Wheat was lower by $0.026 to $6.662 per bushel, and Corn was higher by $0.032 to $6.582 per bushel, and Soybeans were lower by $0.042 to $14.140 per bushel.

A Few Thoughts on Wednesday’s Market: After looking at the charts from Tuesday’s trading activity, it is somewhat surprising the turnaround.  Despite the moderate move lower in yesterday’s market,  the vast majority of the heavy volume stocks I looked at showed negative chart patterns.  I attribute this to two primary factors.  The 1st being the statements from the Fed that there will probably not be any additional quantitative easing, and the second being that the call for Apple to move to $1,001 per share, said that a big portion of the increase in value in Apple would come from market share gains at the expense of its competitors.  Not good to be those guys, and as a result, Apple went higher,  while many of the high tech indices went lower.

Interest rates also moved sharply higher on the day.  I think we are beginning to see the end to the great bull run of the bond market.  There will come a point when even the Fed can’t manipulate interest rates any more.

Twitter Model Portfolio Tweet Policy:  Currently Sterling Investment Services is managing a trading strategy based upon covered puts and calls.  Sterling Investments is currently running a “Model Portfolio” that is based upon this strategy.  It should be noted, that at this point in time, Sterling Investment Services is only “paper trading” this model portfolio, and not actually executing trades and creating actual positions within this model portfolio.  Therefore, please do not look for actual volume associated with our options selections.  It is Sterling Investment Services goal to initiate trading in an actual account based upon our model portfolio in the near future.  When that change actually occurs, Sterling Investments will notify its readers via Twitter and our website.

Yesterday’s Trade Selection:  On Tuesday we were looking at a covered call position on Textron.  We ended up long Textron ‘TXT’ @ $28.86 per share, and sold the April $28 calls at $1.43 per contract.  This should result in a profit of approximately $0.57 per share or annualized return of approximately 42.% by options expiration.

www.sterlinginvestments.com

 

Market Commentary

Sterling Market Commentary for Tuesday April 3rd, 2012

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A Look at Monday’s Market:  The overall market moved moderately higher on Monday and showed broad based strength in the process as the majority of the various sector indices I track moved higher, displaying solid chart patterns in the process.  It has been a long time since I felt the overall market showed the strength that I saw in Monday’s charts. I am looking for the overall market to continue to move higher.  In looking at a chart of the Dow Jones Industrial Average, I see that it completed a “cup pattern” in late February with a measured move to 14,955.78  While I do not expect the move to 14,955.78 to be in a straight line, and I expect at least 1 pullback along the way,  I am now setting our new intermediate to long term target on the Dow Jones Industrial Average at 14,955.78

In the commodities markets, Oil was higher by $2.21 to $105.23 per barrel, and Gold was higher by $7.80 to $1,679.70 per ounce.  In the grains market,  Wheat was lower by $0.036 to $6.570 per bushel, and Corn was higher by $0.11 to $6.550 per bushel, while Soybeans were higher by $0.18 to $14.21 per bushel.

A Few Thoughts on Tuesday’s Market:  A big number of the various sector indices I look at set new yearly highs yesterday,  and I am starting to see more of the stocks I look at break above resistance levels.  These are bullish trading signals and a big chance from a couple of weeks ago.  I am now a lot more optimistic on the market than I have been in a long time.  I am looking to increase our long, covered call positions as a percentage mix in our overall portfolio.

Twitter Model Portfolio Tweet Policy:  Currently Sterling Investment Services is managing a trading strategy based upon covered puts and calls.  Sterling Investments is currently running a “Model Portfolio” that is based upon this strategy.  It should be noted, that at this point in time, Sterling Investment Services is only “paper trading” this model portfolio, and not actually executing trades and creating actual positions within this model portfolio.  Therefore, please do not look for actual volume associated with our options selections.  It is Sterling Investment Services goal to initiate trading in an actual account based upon our model portfolio in the near future.  When that change actually occurs, Sterling Investments will notify its readers via Twitter and our website.

Yesterday’s Trade Selection:  On Monday we were looking at a covered put position on Valero Energy ‘VLO’.    We shorted ‘VLO’ and sold the April $26 Puts.  If this position holds through to options expiration in 2 1/2 weeks, then we will have made a profit of $0.54 or approximately 39% on an annualized basis.  Time will tell on this one.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Tuesday March 27th, 2012

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A Look at Monday’s Market:  The overall market moved sharply higher in a broad based move that saw every index I track move higher on the day as well.  The strongest sectors were the airlines, High Tech, Financial, Retailers, Healthcare related, Chemicals, Gold/Silver, and the Transports.  In the commodities markets, Oil was higher by $0.16 to $107.03 per barrel, and Gold was higher by $23.20 to 1,685.60 per ounce.  In the grain market,  Wheat was higher by $0.052 to $6.594 per bushel, while Corn was lower by $0.084 to $6.360 per bushel, and Soybeans were higher by $0.136 to $13.794 per bushel.

A Few Thoughts on Tuesday’s Market:  In looking at the charts from Monday’s trading I noticed that several of the various indices I track set new yearly closing highs.  Those indices include the S&P 500 ‘SPX’,  the Amex Pharmaceutical Index ‘DRG’,  S&P Chemicals Index ‘CEX’, S&P Healthchare Index ‘HCX’, the S&P Insurance Index ‘IUX’, the CBOE Technology Index ‘TXX’, MS. Consumer Index ‘CMR’, M.S. Healthcare Products Index ‘RXP’, and the S&P Retail Index ‘RLX’.  Obviously on a day with a strong move such as we saw yesterday, the vast majority of the stocks we look at are going to have moved higher.  However despite the strong performance of many of the indices I follow,  not that many of the heavy volume stocks appear to have started new upward trends.  I think this is due to the heavy weighting of several key stocks in these indices, and the inclusion of some of these companies in multiple indices.

Twitter Model Portfolio Tweet Policy:  Currently Sterling Investment Services is managing a trading strategy based upon covered puts and calls.  Sterling Investments is currently running a “Model Portfolio” that is based upon this strategy.  It should be noted, that at this point in time, Sterling Investment Services is only “paper trading” this model portfolio, and not actually executing trades and creating actual positions within this model portfolio.  Therefore, please do not look for actual volume associated with our options selections.  It is Sterling Investment Services goal to initiate trading in an actual account based upon our model portfolio in the near future.  When that change actually occurs, Sterling Investments will notify its readers via Twitter and our website.

Yesterday’s Trade Selection:  On Monday we were looking at a covered call position on Incyte Corp. ‘INCY’.  However,  there was negative time premium in the options.  So no trade.

www.sterlinginvestments.com