Market Commentary

Sterling Market Commentary for Wednesday January 25th, 2012

by  • 

A Look at Tuesday’s Market:  The overall market finished Tuesday mixed with the NASDAQ finishing slightly higher, while the Dow Jones Industrial Average and the S&P 500 finishing slightly lower on the day.  In looking at the sectors I follow, there was strength in the Disk Drive Manufacturers, Biotech, Networking, Airlines, Oil Services, High Tech, Retailers, Healthcare Providers, Cyclicals, and Chemicals.  There was weakness in the Gold stocks, Natural Gas, Broker/Dealers, Telecom, Utilities, Commodities, Insurance, Banking, Transports, Consumers, and Oil & Gas stocks. In the commodity markets, Oil was lower by $0.63 to $98.25 per barrel, while Gold was lower by $13.80 to $1,664.50 per ounce.  In the grain markets, Wheat was higher by $0.136 to $6.334 per bushel, and Corn was higher by $0.102 to $6.302 per bushel, while Soybeans were higher by $0.024 to $12.20 per bushel.

A Few Thoughts on Wednesday’s Market:  In looking at the charts from yesterday’s trading activity I  noticed that it looks like the NASDAQ 100 ‘NDX’ has entered an area of upside resistance that could be tough to get through.   Additionally the very vast majority of the sector indices I track are not confirming the move higher by the Dow Jones Industrial Average.  Granted I expect the NASDAQ to be higher today due to the incredible earnings by Apple, Inc. ‘AAPL’.  However,  Apple is not the entire economy; and I would like to propose that Apple is very unique in the minds of investors and consumers.  I think the bigger influence on the market will be the populist tone of last night’s State of the Union speech by President Obama.  I consider all this Populist talk to be very detrimental to the economy and the market.  I think the nastiness of this campaign season is going to be very negative for the 1st half of the year.

The Bottom Line:  While the trend of the stock market remains higher, and a trend remains in place until it it broken; I have concerns that we may be entering turning point in the stock market where it may turn lower.  I think time will tell, and we should know within the next few trading days.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for January 24th, 2012

by  • 

A Look at Monday’s Market Activity:  The overall market finished Monday mixed with the S&P 500 slightly higher, while the Dow Jones Industrial Average and NASDAQ finished slightly lower.  Oil was higher by $1.25 to $99.58 per barrel, and Gold was higher by $14.30 to $1,678.30 per ounce.  In the grain markets Corn was higher by $0.088 to $6.20 per bushel,  Wheat was higher by $0.092 to $6.196 per bushel, and Soybeans were higher by a whopping $0.304 to $12.17 per bushel.

A Few Thoughts Before the Open:  It should be noted that on Friday the Dow Jones Industrial Average closed Friday at 12,720.48  Last summer the Dow closed at 12,724.41 on July 21st, and at 12,719.49 on July 7th.  This is significant because if we see the Dow Jones Industrial Average moves back lower from these levels, then we will effectively have put in place a “triple top,” which should be considered a significant point of upside resistance.  It should also be noted that this move higher has not been confirmed by the either the S&P 500 or the  Dow Jones Transportation Average both of which still measurably below last summer’s highs.

I know it has been a while since I last blogged,  but I would still be a little skeptical of this move higher.

The Bottom Line:  My thoughts are that this political season is going to rough on the markets.  I would not be expecting any move back towards all-time highs.

Market Commentary

Sterling Market Commentary for October 20th, 2011

by  • 

A Look at Wednesday’s Market Activity:  The overall market moved moderately lower in a broad based move that saw every sector index I track move lower as well.  The weakest sectors were the Gold/Silver, High Tech, Banking, Broker/Dealer, Chemicals, Oil Services,  Commodities, and Transports.  In the commodities,  Oil was lower by $2.24 to $86.29 and Gold was lower by $5.80 to $1,647 per ounce.  In the grain market, Wheat was lower by $.056 to $6.194 per bushel, and Corn was lower by $0.054 to $6.384 per bushel, while Soybeans were lower by $0.256 to $12.25 per bushel.

A Few Thoughts Before the Open:  In looking at the charts from yesterday’s trading activity I have the following comments:

1.  Granted yesterday was down day and most of the indices I follow appear to be tracking sideways;  however a few appear to be showing renewed weakness.

2.  Individual stocks appear lackluster with no clear direction.

The Bottom Line:  I believe we are still basically in a sideways trading pattern.

 

Market Commentary

Sterling Market Commentary for October 19th, 2011

by  • 

A Look at Tuesday’s Market:  The overall market moved sharply higher on Tuesday in a broad based move that saw every index I track move higher on the day.  I really didn’t see anything to justify the move higher; and in talking to the various market professionals I speak with, and in my review of the market news from our various sources I could not find anything to have sparked the mid-day rally.  As one of my friends said,  its as if all the quant traders hired the same programmer and they have a heard mentality.  In the commodities market,  Oil was higher by $1.91 to $88.53 per barrel, and Gold was lower by $23.80 to $1,652.80 per ounce.  In the grain market, Wheat was higher by $0.01 to $6.252 per bushel, and Corn was higher by $0.034 to $6.44 er bushel,  while Soybeans were lower by $0.022 to $12.506 per bushel.

A Few Thoughts Before the Open:  In looking at the charts from yesterday’s trading activity I have the following thoughts and comments.

1.  Trading volume continues to be light.  This causes me concern over the strength of the rally.

2.  Several of the sector indices I am looking at indicate that they could be in the process of breaking out to the upside.

3.  This is option’s expiration week.  As I have written about in the past,  I have seen a common trend of the market reversing its previous trend during options expiration week, and then resuming its prior trend at the start of the new options month.  I believe this is a result of traders unwinding their hedged positions prior to expiration.  If this is the case,  then we could see the market turn back lower next week.

4.  In light of CPI data being released this morning which shows year over year inflation at 3.9%,  real interest rates are sharply negative.

5.  I think the problems in Europe are getting worse,  not better.

The Bottom Line:  I wish it was different,  but it is still a sideways market in my opinion.

Market Commentary

Sterling Market Commentary for October 18th, 2011

by  • 

A Look at Monday’s Activity:  The overall market moved sharply lower Monday in a broad based move that saw every sector index I track move lower on the day.  The weakest sectors were the Banking,  Oil Services, Cyclicals, High Tech, Insurance,  Commodities, Broker/Dealers,  and Transports.  The Dow Jones Industrial Average was lower by 212 points.  Among the Dow 30 the weakest stocks were Alcoa,  Hewlett-Packard, 3M, and United Technologies.  In the commodity sector,  Oil was lower by $0.38 to $86.62 per barrel, and Gold was lower by $6.40 to $1,676.60 per ounce.  In the grains,  Wheat was higher by $0.014 to $6.242 per bushel, and Corn was higher by $0.004 to $6.404 per bushel, while Soybeans were lower by $0.17 to $12.53 per bushel.

A Few Thoughts Before the Open:  In looking at the charts from Monday’s trading I have the following thoughts and comments.

1.  Trading volume continues to be weak.  As a result I am skeptical of all moves in the market.

2.  Never short a dull market.

3.  After reading an article in the Wall Street Journal about Belgium’s share of the bailout of its most recent bank to fail.  The tab came in at almost 15% of the Belgium’s GDP.  Maybe the problem isn’t that these banks are too big to fail (that’s another topic) but that these banks are too big for the countries they call home.

The Bottom Line:  It’s earnings season, the announcements from a few key companies can easily move the market right now; and my thoughts are the market will probably drift lower.

www.sterlinginvestments.com

Uncategorized, Weekly Newsletter

Sterling Weekly for the Week of October 17th, 2011 – Time to Start the Inflation Watch

by  • 

Sterling Weekly for the Week of October 17th, 2011
Time to Start the Inflation Watch

Since the previous edition of the Sterling Weekly the Dow Jones Industrial Average rose 483.62 points or approximately 4.4% to 11,397.00 Over the course of the last 2 weeks the overall market staged a fairly impressive rally with the Dow Jones climbing from a closing low of 10,655.30 set on October 3rd to a closing high of 11,644.49 on October 14th, for a gain of 989.19 points or approximately 9.3%. Despite this strong move higher, I have been commenting in my daily blog that I have been skeptical that it would continue much past its current levels, let alone reach the highs of the summer. I have continued to maintain that I thought the overall market was in a sideway’s trading pattern with a slight downward bias. While I could easily be proven wrong in the next few days on that opinion, the light volume in the market has been causing me a lot of concern, and until I see a volume confirmation I am going to be skeptical of any breakout.

The economy continues to be a major topic of conversation for most of the country. The European Debt Crisis continues to be a major talking point and news item. However, I have serious concerns that the European Crisis while very severe in nature is also distracting us from our own economic problems here in the United States. Our economy has stagnated as a businesses adopt a defensive posture over concerns about rising regulatory costs and general uncertainty. Additonally you do not need to talk to anyone in business for too long before they start to voice concerns about rising inflation as a result of the sky-high budget deficits being run by the Federal government.

I have constantly stated that I believe inflation is a cancer that eats away at our assets and standard of living. Inflation numbers are due to be released this week with the Producer Price Index ‘PPI’ being released on the 18th, and Consumer Price Index ‘CPI’ being released on the 19th. In looking at the available information, which can be found below, the year over year change in the PPI is running at just over 6%, and the year over year change in the CPI is just under 4%. With the exception of 2007, this will be the highest inflation rate since 2007. Inflation is a very damaging thing to have in the economy. I remember the economic pain of the 1970’s and it wasn’t a fun time, and the inflation we are experiencing now is causing real pain.

In case you think I am barking at moon or crying wolf, I took a look at our current expenses and compared them to five years ago. In our household we have seen a 40% increse in our cost per kilowatt on our electric bill, making our utiltiy bill our second largest monthly expense after our house payment. We’ve seen our home and auto insurance rise a nearly equal amount; and gasoline having risen from $2.195 a gallon five years ago this week to $3.41 per gallon for an increase of $1.236 a gallon or 56% Additionally as my wife constantly reminds me, our weekly food bill has risen quite dramatically. These are real expenses that hit every American; and those with lower incomes take the hit the worst. The unfortunate reality is that when incomes fail to keep up with the rising inflation, consumers are forced to cut back in other areas. This hurts the economy and slows economic growth. Eventually interest rates will rise in response to rising inflation. When they eventually do the economic pain will be worse.

Unfortunately when I look to towards the future I do not see any changes being implemented in the near future to deal with what I view as a rising inflationary problem. President Obama and the Congressional Democrats are comitted to full throttle spending and sky high deficits along with tax increases that are only going to worsen the problem; and the Bernanke is doing his best to repeat the mistakes of the Gernan central bank between the two World Wars. I expect that a year from now, the inflation rate will be higher than it currently it is and the economy will be entering another recession. As for the stock market, rising inflation and high interest rates reduce the Price to Earnings ‘PE’ multiple of the market; basically a lower stock market.

It should also be noted that we have entered a period of such malaise that we now consider what used to be rotten economic numbers to be something to cheer about and be excited over. Just think of jobless claims numbers to be released on Thursday. A few short years ago we would have thought 400,000 in new jobless claims would be a disaster, now we consider them good news.

Finally, in the September 26th, 2011 edition of the Sterling Weekly I commented on where I thought interest rates would be with higher inflation. If the economy is not doing well now, what do you think higher interest rates will do?
Sterling Calendars for the Week of October 17th, 2011
Economic Calendar
Date Est.
Time		 Release For Consensus Prior
10/17 8:30am Empire Manufacturing Oct. (4.0) (8.82)
10/17 9:15am Industrial Production Sep. 0.2% 0.0%
10/17 9:15am Capacity Utilization Sep. 77.5% 77.3%
10/18 8:30am Producer Price Index ‘PPI’ Sep. 0.2% 0.0%
10/18 8:30am Core PPI Sep. 0.1% 0.1%
10/18 9:00am Net Long Term TIC Flows Aug. N/A $9.5B
10/18 10:00am NAHB Housing Market Index Oct. 15 14
10/19 7:00am MBA Mortgage Index 10/15 N/A 1.3%
10/19 8:30am Consumer Price Index ‘CPI’ Sep. 0.3% 0.4%
10/19 8:30am Core CPI Sep. 0.2% 0.2%
10/19 8:30am Housing Starts Sep. 595K 571K
10/19 8:30am Building Permits Sep. 610K 620K
10/19 10:30am Crude Inventories 10/15 N/A 1.344M
10/19 2:00pm Fed’s Beige Book Oct.
10/20 8:30am Initial Claims 10/15 403K 404K
10/20 8:30am Continuing Claims 10/08 3,690K 3,670K
10/20 10:00am Existing Home Sales Sep. 4.92M 5.03M
10/20 10:00am Philadelphia Fed. Oct. (8.8) (17.5)
10/20 10:00am Leading Indicators Sep. 0.3% 0.3%

Sterling Market Commentary Blog

As part of our new services we are now publishing a blog. The primary focus of our blog is a daily market commentary. Over the course of the last 12-18 months there have been a lot of changes to the functioning of the stock market. One of the biggest being the growth in computer driven algorithmic and flash trading. While this form of trading serves to help increase the liquidity in the market, it has also dramatically changed the nature of the open of the market; specifically in my opinion it has dramatically increased the swings in the pre-market futures to the point where the expected open could change completely in the last 20 minutes prior to the open. While I still believe it is possible to engage in the form of short term trading I wrote about in the Prime Stock Newsletter, I no longer felt it was possible to publish the Prime Stock Newsletter with enough time prior to the open for it to be of meaningful value to our readers. As a result we have discontinued the publication of the Prime Stock Newsletter. Additionally I have decided to continue to write the daily commentary portion of the Prime Stock Newsletter as the main part of the Sterling Market Commentary Blog, making it free to the general public.

Additionally, the Sterling Market Commentary Blog is available as an RSS feed; and later this week we plan on having our blog available for real time email delivery as well.

Small Cap Research

Sterling Investment Services publishes custom research on micro and small cap companies. Our focus is on companies that are not receiving research coverage from the brokerage community.

Our latest research report Probe Manufacturing, Inc. (OTC: ‘PFMI’) This company is a contract electronics that we feel is an interesting turn around story. To see a of our report, please here.

Companies that are interested in obtaining research coverage should click here.

Prime Update:

We have discontinued the publication of the Prime Stock newsletter in order to focus our efforts on our Market Commentary Blog and white paper research publications. Archived copies of the Prime Stock Newsletter Performance Reports can be found (here).
Disclaimer:
The Sterling Investments series of newsletters is produced by Sterling Investment Services, Inc. All information used in the production has been obtained from sources believed to be reliable and accurate. Sterling Investment Services does not warrant or assume any liability for inaccuracy of the information used to produce our publications. To receive further information on these services please visit our web page at: www.sterlinginvestments.com If you would like to contact us our fax # is (404)-816-8830 Email address is: enelson@sterlinginvestments.com Sterling Investment Services may hold positions in the securities recommended or may be providing consulting services to the companies mentioned within this report.