Market Commentary

Sterling Market Commentary for Monday March 26th, 2012

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A Look at Friday’s Market:  The overall market finished Friday moderately higher in a relatively broad based move that saw the vast majority of the sector indices I track move higher on the day as well.  There was strength in the Gold/Silver, Oil Services, Airlines, Chemicals, Broker/Dealers, Natural Gas, Oil & Gas, Banking, Biotech, Transports, Consumer, High Tech, and Retailers.  There was weakness in the Telecom and Dow Jones Transportation Average.  There was strength in the bond markets as interest rates moved lower.  In the commodities markets,  Oil was higher by $1.52 to $106.87 per barrel, and Gold was higher by $19.90 to $1,662.40 per ounce.  In the grain markets,  Wheat was higher by $0.080 to $6.542 per bushel, and Corn was higher by $0.020 to $6.464 per bushel, while Soybeans were higher by $0.162 to $13.656 per bushel.

A Few Thoughts on Monday’s Market:  In looking at the charts from Friday’s market I noticed that a fair number of the various sector indices and individual stocks I track appear to be moving sideways and with the level of trading volume we have been seeing this could continue for a while.   I think there is a good chance we could see the Dow Jones Industrial Average could continue to slowly drift lower and stabilize into a sideways trading pattern at the 12,800 level.

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.

 

Market Commentary

Sterling Market Commentary for Tuesday March 20th, 2012

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A Look at Monday’s Market:  The overall market finished Monday slightly higher.  However it was a relatively broad based move that saw the majority of the sector indices I track move higher on the day.  There was strength in the High Tech, Financials, Airlines, Natural Gas, Oil & Gas, Commodities, Healthcare related, Chemicals, Transports, and Retailers.  There was weakness in the Gold/Silver, Telecom, Consumer and Utilities.  There was also weakness in the bond markets, with interest rates again moving higher.

In the commodities markets, Oil was lower by $0.51 to $107.58 per barrel, and Gold was lower by $9.0 to $1,658.30 per ounce. In the grain markets, Wheat was lower by $0.074 to $6.446 per bushel, and Corn was lower by $0.070 to $6.564 per bushel, while Soybeans were lower by $0.066 to $13.596 per bushel.

A Few Thoughts on Tuesday’s Markets:  In looking at the charts from yesterday’s market, I noticed that the vast majority of the sector indices and heavy volume stocks that I follow all looked very positive on their charts. However, I am always cautious the 1st couple of days following an options expiration week.  Experience has taught me that it generally takes a day or so, for the underlying trend to resume its movement.  As a result, I expect the activity of Tuesday and Wednesday to set the general direction of the market for the next few weeks.  Also, in general we have been in a very tight trading range for the last several months.  We all know that this is rather unusual given the trading history of the markets over the last couple of years.  My underlying concern is that the longer we track sideways, the greater the move to either the up or downside will be when we finally break from this tight trading range; and I do not want to be caught to heavily weighted to the wrong side.

This is going to be a tough morning to select a trading position.  All of our candidates are for covered calls, and the pre-market futures are signaling a fairly decent drop on the open.  I will tweet my selection once I have made it.

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 Selection:  I was looking at a covered put position on Teva Pharma ‘TEVA’ yesterday.  However I could not find any options with a suitable premium.  So no trade.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Friday March 16th, 2012

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A Look at Thursday’s Market:  The overall market moved solidly higher in a relatively broad based move that saw a fairly decent amount of follow through with the various sector indices I track.  A few more days like Thursday, and I will feel a lot more comfortable with the thoughts of the market moving higher.  One of the things that added to my comfortable level was a strong move higher by the Dow Jones Transportation Average, which moved sharply higher based upon what appears to be a solid move in the airlines.

In the commodities markets, Oil was lower by $0.32 to $105.11 per barrel, and Gold was higher by $16.60 to $1,659.50 per ounce.  I still think Gold is moving lower and yesterday’s move in Gold was probably a bounce before moving back lower.  In the grain markets, Wheat higher by $0.21 to $6.646 per bushel, and Corn was higher by $0.102 to $6.690 per bushel, while Soybeans were higher by $0.186 to $13.690 per bushel.

A Few Thoughts on Friday’s Market: In looking at the charts from yesterday’s trading activity I noticed that many of the various sector indices I track moved higher and appear to be in a position where they could break upside resistance in a few days.  If they are able to do so,  this would signal a continuation of the upward trend that started late last year.  The individual stocks with the highest volume were mostly mixed in my opinion;  and this is an improvement over the last several days when I felt the high volume stocks were mostly to the downside.

It is also very important to remember that today is quarterly options and futures expiration day.  It is not unusual to see a short reversal of the overall trend as traders unwind their position, only to see the trend resume at the start of next week.  Therefore a word or warning,  there is always the possibility that any perceived upward trend of the last couple of days could be reversed at the start of next week.

This morning we have managed to select our candidate for today’s trading position.  We are looking at covered puts on Newmont Mining ‘NEM’.  We have not yet selected the options position and will tweet our selection as soon as it is made.  On Twitter we can be found at sterlinginv

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 Selection:  We entered a paper trade with a covered Juniper Networks ‘JNPR’ going short at $20.75 per share, and selling the April $22 Puts @ $1.71l.  This should result in a potential profit of $0.46/share, or approximately 20.20% annualized return by options expiration on April 21st, 2012.

 

 

 

Market Commentary

Sterling Market Commentary for Thursday March 15th, 2012

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A Look at Wednesday’s Market:  The overall market finished Wednesday slightly higher on a day that saw many of the various sector indices I track reverse Tuesday’s gains, something I expressed my concerns about in yesterday’s market commentary.  It should be noted that bond yields have moved sharply higher over the last couple of days.  I think that this is primarily a result of the Fed’s comments on Tuesday that it sees the US. economy improving and there the need to continue to maintain artificially low rates decreasing.  In last week’s Sterling Weekly I took a look at bond prices and how I thought they would change as interest rates moved higher.  If you haven’t read my analysis or looked at the chart on changing bond prices it is definitely worth a look; as rates move higher there is going to be pain among the holders of government bonds.

In looking at the commodities markets,  Oil was lower by $1.28 to $105.43 per barrel, and Gold was lower by a whopping $51.30 to $1,642.90 per ounce.  It is obvious that there has been a sell off in Gold this month.  It looks to me that we could see the price of Gold continue to move lower and test $1,543.30 on a closing basis.  In the grain markets, Wheat was lower by $0.052 to $6.436 per bushel, and Corn was lower by $0.032 to $6.586 per bushel, while Soybeans were higher by $0.014 to $13.50 per bushel.

A Few Thoughts on Thursday’s Markets:  In looking at the charts from yesterday’s trading I noticed that many of the stocks that moved sharply higher on Tuesday reversed course and moved back lower yesterday.  This is a very clear example of what I find frustrating and annoying about these big, broad moves that are sparked by the announcement of one company.  I think the trading in the shares of Met Life ‘MET’ are a good example of this.  The shares of ‘MET’ moved sharply higher Tuesday, despite the fact that the company’s capital plan failed the government’s stress test.  The shares of ‘MET’ then moved sharply lower on Wednesday after the buying frenzy of Tuesday was over.  Basically when the knee jerk reaction was over, the reality of the news set in. It should seem obvious that the shares of ‘MET ‘ moved higher on Tuesday due to all the program trading and ETF trading that was sparked by the JP Morgan’s announcement on Tuesday. I find these sort of movements to be short term distortions of the market, that one has to be very careful to avoid falling into the trap of thinking that they are actually a trend reversal.

In looking at the various sector indices and the heavy volume stocks, I see continued pressure on the market moving into options expiration on Friday.  While I would like to balance out my “model portfolio” with a few call positions, the vast majority of the trading candidates are on the put side.

I will tweet my trading selection as soon as I selected.  Look for it out close to the open.  On Twitter we can be found at sterlinginv

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 Selection:  We entered a paper trade with a covered call position on CBS, going long at $31.56 per share, and selling the April $31 Calls at $1.20 per call.  This should result in a potential profit of $0.64/share, or approximately 20.25% annualized return by options expiration on April 21st, 2012.

The Bottom Line:  I see today’s market having a downward bias.

www.sterlinginvestments.com

 

 

Market Commentary

Sterling Market Commentary for Wednesday March 14th, 2012

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A Look at Tuesday’s Market:  And the Computers Went Wild!  I think that about best sums up how I feel about the markets move yesterday.  The overall market was moderately higher until J.P. Morgan announced that the Fed had allowed it to increase its dividend and enact a $15 billion share buyback,  then everything went sharply higher; with the exception of the gold stocks. I know that the justification for this is that this is seen as a key sign of health for the overall market, and that the economy (and the banks) are advancing to the next level of health and strength.  I just do not think that justifies the size and breadth of the move.

A Few Thoughts on Wednesday’s Market:  For the record I do not like moves like we saw yesterday.  I think they distort the charts, and increase the chances that the trading the next day will result in a loss. Generally I like to see a day or two of follow through with a form of consolidation that indicates that you are not going to get whipsawed out of the position.  While that doesn’t mean that I won’t be looking to trade today, it just means that I am going to be very cautious about entering a position.

We are going to start something new today at Sterling Investments;  we are going to start tweeting our daily trading idea.  I used to to publish a daily trading letter,  the Sterling Prime Stock Newsletter, but I found that the changes to the market from the rise of modern computer driven trading has pushed the time by which I selected  the day’s recommendation closer and closer to the open where I was unable to publish the recommendation with enough time for my readers to take advantage of the recommendation.  Additionally as the volatility in the market increased, I found the short term trading of individual stocks to be increasingly more difficult to manage.  This resulted in my shifting my trading strategy to one of covered puts and calls.  Granted it is not the most exciting, but the results are a lot more consistent.  So,  starting with tomorrow’s market commentary, I am going to start tweeting our daily stock and options recommendation once we have selected the position.

If you would like to follow our daily activities,  on Twitter we can be found at sterlinginv

www.sterlinginvestments.com

 

 

Market Commentary

Sterling Market Commentary for Tuesday March 13th, 2012

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A Look at Monday’s Market:  The major market indices finished Monday mixed with the Dow Jones Industrial Average finishing the day slightly higher while the S&P 500 and the NASDAQ finished the day slightly lower. In looking at the Dow Jones Industrial Average and its components,  Exxon, Procter and Gamble,  and Merck were the stronger performers on the day; which probably account for the Dow finishing in positive territory while the other major market indices were lower on the day.  The overall market and the various sector indices I track were mostly to the downside.  There was weakness in the Oil Services, Gold Miners, Gold/Silver, Natural Gas, Networking, Airlines, High Tech, Commodities, Banking, Biotech, Cyclicals, Telecom, Transports, Chemicals, and Oil & Gas indices.  There was strength in the Pharmaceuticals, Retailers, and Consumer indices.

In the commodities markets, Oil was lower by $1.06 to $106.34 per barrel, and Gold was lower by $11.70 to $1,699.80 per ounce.  In the grain market, Wheat was higher by $0.082 to $ 6.512 per bushel, and Corn was higher b $0.144 to $6.594 per bushel, while Soybeans were lower by $0.032 to $13.344 per bushel.

A Few Thoughts on Tuesday’s Markets:  In looking at the charts from Monday’s trading activity, I noticed a couple of points of interest.  The 1st being of the various sector indices that showed any movement other than sideways,  the majority of them appear to be moving lower.  The second point of interest is that the stocks with the heaviest volume, more appear to be moving lower than higher. I think that this points to continued pressure on the overall market going into options expiration at the end of the week. Additionally I am seeing continued weakness in the Dow Jones Transportation Average; and that always makes me nervous with respects to the overall market going higher.

I have written many times in the past  that I believe that during options expiration week you will see a reversal of the overall trend of the market as traders unwind their positions prior to the actual expiration;  then following expiration at the start of the next current month, the trend will resume.  What that means for today and this month is that I have felt there is a slight downward bias to the market, that could see a temporary reversal back to the upside this week before resuming its slight downward movement next week.

With respect to my trading plans for today; I am looking for a covered put or call position that I feel will move with the market following options expiration.  I think I have my work cut out for me today.

www.sterlinginvestments.com