Market Commentary

Market Commentary for September 12th, 2011

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A Look at Friday’s Activity:

The overall market was sharply lower in a broad based move that saw every index I track move lower on the day.  The weakest sectors were the High Tech,  Natural Gas, Oil Services,  Biotech,  Banking,  Cyclicals, Commodities,  Oil & Gas, and Chemicals.  The rest of the sector indices I track moved lower as well.

Oil was lower by $1.81 to $87.24 per barrel, and Gold was higher by $1.90 to $1,857.10 per ounce.  Wheat was lower by $0.082 to $7.296 per bushel,  Corn was higher by $0.024 to $7.364 per bushel, and soybeans were higher by $0.084 to $14.26 per bushel.

The markets are obviously under pressure due to the continuing sovereign debt problems in Europe.  The fact that the Europeans are having these problems should come as no surprise to anyone.  A big portion of the current phase of the European sovereign debt crisis is an unwillingness of voters on both sides of the table to go along with the bailout program.  In our June Market Commentary Blog I warned our readers that this could potentially be a big problem.

I think there is a serious possibility that the voters in these debtor countries will be more than willing to drive their own bus off the cliff with the petal to metal,  full speed ahead.  I am not sure there is much that we, or anyone else outside of these countries can do to prevent this.

A Few Thoughts Before the Open: 

The pre-open futures are sharply lower for all the major market indices.  It looks like we are in for another day to the downside here in the United States.  I think today is a good time to take a look at the support levels on the various indices I have writing about recently.  The Dow Jones Industrial Average is the most significant market index in the United States,  it is the leader to which all other indices march.  The Dow Jones Industrial Average closed Friday at 10,992.13  We are looking at an approximately 200 point drop in the Dow Jones Industrial Average on the open of the U.S. markets.

I have been stating for some time that I see downside support on the Dow Jones Industrial Average at 10,719.94 on a closing basis.  The question of the day becomes if support is broken at 10,719.94 where is the next level of support?

I think we need to take a look at the trading levels following the “flash crash of 2010.”  I see downside support at 10,605.50 and then at 10,450.64  If those levels fail, then I see the lower end of downside support at 9,686.48  I hate to say it,  but with the current scenario concerning the world economy and our own political climate I think there is a realistic chance we will test support at 9,686.48 sometime this fall.

In looking at the various indices I track, I have the following comments.

Dow Jones Industrial Average:  The Dow Jones Industrials closed at 10,992.13  The Dow sold off on Friday and closed below its 8-day moving average.  I currently see upside resistance on the Dow at 11,493.57 and downside support at 10,719.94 on a closing basis.  I am currently expecting the Dow to continue to move lower and test its downside support at 10,719.94 on a closing basis.

S&P 500 ‘SPX’:  The S&P 500 closed at 1,154.23  I see upside resistance on the S&P 500 at 1,218.89 and downside support at 1,127.79 on a closing basis.  I am currently expecting the S&P 500 to continue to move lower and test 1,127.97 on a closing basis.

NASDAQ 100 Index ‘NDX’:  The NASDAQ 100 closed at 2,163.66  I continue to see downside support on the NDX at 2,100  and  upside resistance at 2,292.34.

The Dow Jones Transportation Average:  The Dow Transports closed at 4,368.99  I see upside resistance on the Dow Transports at 4,683.96 and downside support level  at 4,320.05 on a closing basis. I am currently expecting the Dow Transports to continue to move lower and test 4,320.05 on a closing basis.

M.S. Commodities Related Equity Index ‘CRX’:  The ‘CRX’ closed at 875.52.  I see upside resistance on the ‘CRX’ at 924.89 and downside support at 847.10

KBW Banking Index ‘BKW:  The ‘BKW’ closed at 36.23.  I see upside resistance on the ‘BKW’ at 41.42 and downside support at approximately 35.10 on a closing basis.

S&P Banking Index ‘BIX’:  The ‘BIX’ closed 110.56.  I see upside resistance on the ‘BIX’ at 117.52 and downside support at 100.96 on a closing basis.

Amex Broker/Dealer Index ‘XBD’:  The ‘XBD’ closed at 83.30   I see upside resistance at 92.97 and downside support at 80.87 on a closing basis. I am expecting the ‘XBD” to continue to move lower and test 80.87  on a closing basis.

S&P Insurance Index ‘IUX’:  The ‘IUX’ closed at 153.02  I see upside resistance on the ‘IUX’ at 175.13 and downside support at 143.80 on a closing basis.  I am currently expecting the ‘IUX’ to continue to move lower and test 143.80 on a closing basis.

Amex Gold & Silver Index:  The Amex Gold & Silver Index ‘XAU’ closed at 223.21  I see upside resistance on the ‘XAU’ at 228.95 and downside support at 220.36  I am expecting the ‘XAU’ to continue to move higher and test 228.95 on a closing basis.

Amex Oil & Gas Index:  The Amex Oil & Gas Index closed at 1,102.41  I currently see upside resistance on the ‘XOI’ at 1,141.92 on a closing basis and downside support at 1,050.78.  I am expecting the ‘XOI’ to continue to move lower and test 1,050.78 on a closing basis.

M.S. Cyclicals Index:  The M.S. Cyclicals Index ‘CYC’ closed yesterday at 822.19  I currently see upside resistance on the ‘CYC’ at 868.97 and downside support at 789.46  on a closing basis.  I am currently expecting the ‘CYC’ to continue to move lower and test 789.46 on a closing basis.

M.S. Consumer Index:  The M.S. Consumer Index ‘CMR’ closed at 716.51  I currently see upside resistance on the ‘CMR’ at 725.78. and downside support at 691.44 on a closing basis.

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Market Commentary

September 9th, 2011

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A Look at Yesterday’s Activity: 

The overall market moved moderately lower yesterday in a broad based move that saw the majority of the sector indices I track move lower on the day.  The weakest sectors were the Broker/Dealers,  Banking, Cyclicals, Insurance,  Airlines, High Tech, Chemcials, and Pharmaceuticals.  The rest of the sector indices I track moved lower as well with the exception of the Gold/Silver index which posted a small gain on the day.

Oil was lower by $0.29 to $89.05 per barrel, and Gold was higher by $40.30 to $1,855.20 per ounce.  A friend of mine pointed out last night that every time the Bernanke speaks Gold rises by a minimum of $25 that day.  Wheat was lower by $0.134 to $7.38 per bushel, Corn was lower by $0.14 to $7.34 per bushel, and Soybeans were lower by $0.024 to $14.18 per bushel.

A Few Thoughts Before the Open: 

In looking at the charts from yesterday’s trading activities it looks as if the market is starting to encounter resistance to moving higher.  I think this week was somewhat in flux throughout the entire week due to the Labor Day weekend, the Republican Presidential Candidate debate, and President Obama’s speech last night.  Basically everyone was more or less waiting to see what was going to be said by all parties.

I think today will be the day where the market settles in for its fall movement.

As of right now,  I am seeing bearish chart patterns my oscillating indicators are starting to turn back lower, signalling another short term move lower.

If I am correct, and the market moves back lower and test new short term lows, then this will have been a very weak retracement of the market’s selloff. In the August 31st edition of our Market Commentary Blog I provided the expected levels of the Dow Jones Industrial Average on typical retracement.  I stated that we could expect to see the Dow Jones Industrial Average rally to somewhere between 11,381.63 on the low end and and 12,043.22 on the high side on a closing basis.  Well the Dow made it to 11,613.53 on a closing basis, about 230 points above the minimum expected rally point, and approximately 430 points from the upper end of a potential retracement rally.

In the past it has been more common for the retracement rallies to get a lot close to the upper end than the lower end.  While it is what it is.  My take is that it was a very weak retracement and a sign of a strong probability of futher downside movement.

The Bottom Line:  I am expecting the overall market to continue to move lower and the Dow Jones Industrial Average to test support at 10,719.94 in the next couple of weeks.

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Market Commentary

Market Commentary – September 8th, 2011

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A Look at Yesterday’s Activity:

The overall market moved sharply higher yesterday in a broad based move that saw basically every sector index I track move higher on the day.  The strongest sectors were the Banking, High Tech,  Insurance,  Broker/Dealers,  Transports,  Airlines,  Biotech,  and Cyclicals.  Oil was higher by $3.32 to $89.34 per barrel, and Gold was sharply lower by $55.70 to $1,814.90 per ounce.  Wheat was lower by $0.084 to $7.51 per bushel, and Corn was lower by $0.076 to $7.48 per bushel.

I know the Dow Jones Industrial Average staged an impressive 275 point rally on the day,  but I just don’t see any justification for the move. I didn’t really see any news to justify the move higher other than the German court decision stating that Germany can proceed with its part in the Greek bailout, but the court’s decision basically stated that every phase of the bailout would require authorization by the German parliament.  Considering that the German Chancellor’s party has lost every local election since agreeing to the bailout terms the idea of seeking authorization from the German parliament for every stage of the bailout seems to be problematic to me.  Basically I think at best it’s just kicking the can down the road, and the market basically cheered the avoidance of failure.  The only other thing I can think of to justify yesterday’s move is positioning by traders as they return from the holiday weekend.  If that is the case, then I expect the market to turn back south within a few days.

A Few Thoughts Before Today’s Open: 

Having just completed my review of the charts of the various indices from yesterday’s trading activity I found nothing positive to those charts.  Despite yesterday’s strong move higher, the vast majority of those indices only managed to rally to their 9-day moving average; a couple did a little better making it to their 40-day moving averages. But at the end of the day with the current chart patterns, I consider the 9 and 40 day moving averages to be points of resistance, not points of support.  There are really only 2 sectors that do not look horrible at this point in time.  The 1st being commodities which I see as being due to inflation concerns over another round of quantitative easing; and the second being healthcare which is probably recovering slightly due to recent court rulings concerning Obamacare.

However, the jobless claims numbers released today are well back above 400,000 new claims;  not good.  In fact, very bad.  Everything I am looking at is pointing to a slowing economy.  The people I talk to during the day are expecting worse!

In the short term I am expecting the Dow to test the lower end of its recent trading range; definitely a retest of 11,100 and most likely 10,719.94 on a closing basis.  Intermediate term,  I am expecting the Dow to trade in the 10,500 to 9,500 range.

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Market Commentary

Market Commentary – September 7th, 2011

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A Few Thoughts Before the Open:

In looking at the charts from yesterday’s trading activity it is clear that the vast majority of the sector indices and individual stocks have negative chart pattern.  However,  the negative open yesterday followed by the intra-day rally more or less made it very difficult to find any trading ideas for the day.  Combine that with the positive futures at the time of the writing of this post and I am going to sit the day out.  My thoughts are that we need 1 or 2 more trading days to shake things out for the post-Labor Day market.

Additionally I am having a hard time to find anything to be positive about this morning. The European crisis has not been resolved, and it has not been resolved.  In looking at the news posts on the Sterling Reporter it is clear that the voters in Europe are not happy with the politicians solutions to the crisis.  The voters in Germany don’t like the idea of paying for it,  and the voters in Italy and Greece don’t like the belt-tightening that comes with it.  Basically no one is happy, and there is a risk that the politicians in all the crucial countries could be voted out of office.  Not a good scenario.  Until this is resolved, and it is going to take some time and my expectations are that we are going to see a fair number of politicians voted out of office,  then I see the market continuing to be under pressure.

Additionally we have our own politicians showing back up in Washington D.C. today, and President Obama addressing the nation tomorrow night.  Until I am proven wrong, I am expecting the campaign rhetoric to start asap and have a negative impact on the market.

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Weekly Newsletter

Sterling Weekly for the Week of September 6th, 2011

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A Look at the Dow Jones Industrial Average

Since the previous edition of the Sterling Weekly the Dow Jones Industrial Average declined 397.19 points or approximately 3.4% to 11,240.26 With all the recent market volatility I thought now would be a good time to take a good look at the Dow Jones Industrial Average and where I think it is headed. As even a casual reader of this newsletter will recall, I consider the Dow Jones Industrial Average to be the leader of the market.

Following the “Flash Crash” of 2010 the Dow Jones Industrial Average reached a closing low of 9,686.48 on July 2nd. Since then the Dow Jones Industrial Average rallied to a closing high of 12,784.62 on May 2nd of this year. This amounted to a gain of approximately 3,098.14 points or approximately 32%. I’ve inserted a chart below showing the movement in the Dow since the Flash Crash.

It looks to me that the move higher by the Dow occurred in a series of 3 movements higher. As my regular readers will know, I am a big believer that the market generally has 3 legs or components to any movement in an upward or downward direction. In looking at the chart below, I have identified what I believe to have been the 3 legs higher. I feel this is confirmed by the fact that the recent market sell off has traded significantly below the March closing lows. I think there is a reasonable chance that the sell off that started in July and ended in early August may have been the 1st leg downward. It is going to take some time to know for sure, but either way I think the overall market has started an intermediate term sell off

What I am looking at is the Dow Jones Industrial Average continuing to move lower and test support in the 9,500 to 9,000 level. My best estimate at this time is that this will be the support level on the 2nd leg downward. After that it gets scary, if we break below those support levels, then the 3rd leg downward could see the Dow Jones Industrial Average trading back at the 8,000 level.

Dow Jones Industrial Average

Sterling Investment Services Site Update

Since the last edition of the Sterling Weekly we have been making some upgrades to our web site (www.sterlinginvestments.com) and the services offered. One of the 1st things visitors to Sterling Investments will notice is a new design to our web pages. We have installed a new content management system and we are in the process of transitioning our legacy pages over to the new system. With several thousand legacy pages this is a time consuming process and will take some time to get fully implemented. We very much appreciate your patience during this process. As part of this process we have cleaned up our graphic images and streamlined our content and hopefully visitors will notice and appreciate the cleaner look to our site. Additionally the improvements to our content management system will allow us to offer more services to our clients; including a daily market commentary blog.

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.
Sterling Calendars for the Week of September 6th, 2011Economic Calendar

Date Est.
Time		 Release For Consensus Prior
09/06 10:00am ISM Services Aug. 51.0 52.7
09/07 7:00am MBA Mortgage Index 09/03 N/A N/A
09/07 2:00pm Fed.’s Beige Book Sep.
09/08 8:30am Initial Claims 09/03 400K 409K
09/08 8:30am Continuing Claims 08/27 3,700K 3,735K
09/08 10:00am Crude Inventories 09/03 N/A 5.281M
09/08 3:00pm Consumer Credit Jul. $5.0B $15.5B
09/09 10:00am Wholesale Inventories Jul. 0.7% 0.6%

Misc. Calendar

Date: Comments:
09/06 Altera Corp. ‘ALTR’ announces earnings after the close.
09/06 Pep Boys ‘PBY’ announces earnings after the close.
09/07 Talbots ‘TLB’ announces earnings before the open.
09/08 Smithfield Foods ‘SFD’ announces earnings before the open.
  The full earnings calendar for this week can be found (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.

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Market Commentary

Market Commentary – September 6th, 2011

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A Few Thoughts Before the Open:

As we prepare to start this Tuesday following the Labor Day holiday we find that world stock markets were under pressure Monday while we in the U.S. had the day off.  Both Asian and European markets sold off on Monday as concerns over a slowing global economy continue to worry investors.

As I write this,  the pre-market futures are sharply lower here in the U.S.  In looking at a chart of the Dow Jones Industrial Average on a slightly longer-term basis it looks to me like following the “flash-crash” last summer the Dow basically had 3 runs (or legs) at moving higher and now entered what is at least going to be a short-term pullback or quite possible an intermediate move lower.  Unfortunately, I see a real good chance the Dow Jones Industrial Average will continue to move lower and test the 9,500 level.

In looking at the various indices I track, I have the following comments.

Dow Jones Industrial Average:  The Dow Jones Industrials closed at 11,240.26  The Dow sold off on Friday and closed below its 8-day moving average.  I currently see upside resistance on the Dow at 11,493.57 and downside support at 10,719.94 on a closing basis.  I am currently expecting the Dow to continue to move lower and test its downside support at 10,719.94 on a closing basis.

S&P 500 ‘SPX’:  The S&P 500 closed at 1,173.97  I see upside resistance on the S&P 500 at 1,218.89 and downside support at 1,127.79 on a closing basis.  I am currently expecting the S&P 500 to continue to move lower and test 1,127.97 on a closing basis.

NASDAQ 100 Index ‘NDX’:  The NASDAQ 100 closed at 2,167.83  I continue to see downside support on the NDX at 2,100  and  upside resistance at 2,292.34.

The Dow Jones Transportation Average:  The Dow Transports closed at 4,445.32  I see upside resistance on the Dow Transports at 4,683.96 and downside support level  at 4,320.05 on a closing basis. I am currently expecting the Dow Transports to continue to move lower and test 4,320.05 on a closing basis.

M.S. Commodities Related Equity Index ‘CRX’:  The ‘CRX’ closed at 888.25.  I see upside resistance on the ‘CRX’ at 924.89 and downside support at 847.10

KBW Banking Index ‘BKW:  The ‘BKW’ closed at 37.00.  I see upside resistance on the ‘BKW’ at 41.42 and downside support at approximately 35.10 on a closing basis.

S&P Banking Index ‘BIX’:  The ‘BIX’ closed 111.98.  I see upside resistance on the ‘BIX’ at 117.52 and downside support at 100.96 on a closing basis.

Amex Broker/Dealer Index ‘XBD’:  The ‘XBD’ closed at 86.35  I see upside resistance at 92.97 and downside support at 80.87 on a closing basis. I am expecting the ‘XBD” to continue to move lower and test 80.87  on a closing basis.

S&P Insurance Index ‘IUX’:  The ‘IUX’ closed at 156.09  I see upside resistance on the ‘IUX’ at 175.13 and downside support at 143.80 on a closing basis.  I am currently expecting the ‘IUX’ to continue to move lower and test 143.80 on a closing basis.

Amex Gold & Silver Index:  The Amex Gold & Silver Index ‘XAU’ closed at 222.79  I see upside resistance on the ‘XAU’ at 228.95 and downside support at 220.36  I am expecting the ‘XAU’ to continue to move higher and test 228.95 on a closing basis.

Amex Oil & Gas Index:  The Amex Oil & Gas Index closed at 1,123.37  I currently see upside resistance on the ‘XOI’ at 1,141.92 on a closing basis and downside support at 1,050.78.  I am expecting the ‘XOI’ to continue to move lower and test 1,050.78 on a closing basis.

M.S. Cyclicals Index:  The M.S. Cyclicals Index ‘CYC’ closed yesterday at 835.62  I currently see upside resistance on the ‘CYC’ at 868.97 and downside support at 789.46  on a closing basis.  I am currently expecting the ‘CYC’ to continue to move lower and test 789.46 on a closing basis.

M.S. Consumer Index:  The M.S. Consumer Index ‘CMR’ closed at 702.67  I currently see upside resistance on the ‘CMR’ at 725.78. and downside support at 691.44 on a closing basis.

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