Market Commentary

Market Commentary – August 9th, 2011

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A Few Thoughts Before the Open:

It’s about 7:00am this morning and as I write put the finishing touches on this report pre-market futures are showing a bounce higher this morning,  however that can change in a heartbeat now days.  Also,  let’s not forget we have economic news to be released this week, and that still has the potential to move the market.

I thought I would take a look at some of the support and resistance levels that might be coming into play today.

The Dow Jones Industrial Average:  The Dow Jones Industrial Average closed at 10,809.85.  I am now seeing upside resistance at 11,006.22 and downside support at 10,698.75.  If downside support at 10,698.75 fails then the next level of support comes into play at 10,415.54 on a closing basis.

I was speaking to friend of mine who I used to work with as a broker when we both just out of college.  He asked where I thought the Dow might stabilize. In looking at a longer term chart on the Dow,  I see a high probability of the Dow settling into a trading range between 10,600 and 9,600.

I’ll try to go through the support and resistance points a little later when I’ve got some extra time.  Hopefully, I ‘ll get this updated later tonight or tomorrow.

The S&P 500 Index ‘SPX’:  The S&P 500 ‘SPX’ closed at 1,119.46.  I am now seeing upside resistance on the S&P 500 at 1,127.79 I see downside support at 1,115.01, and if that level fails, then I see the next level of downside support at 1,096.48 on a closing basis.

The NASDAQ 100 Index ‘NDX’:  The NASDAQ 100 closed at 2,060.29.  I am now seeing upside resistance at 2,100 and downside support at 1,975.33 on a closing basis.

The Dow Jones Transportation Average:  The Dow Transports closed at 4,363.50.  I am now seeing upside resistance at 4,516.35 and downside support at 4,320.05.  If that level of downside support fails, then the next downside support level is at 4,277.44 on a closing basis.

In looking at the various sector indices I track, they all look extremely bad;  granted at some point there is going to be a great buying opportunity.  However, until then, some serious technical damage has been done to the market and I do not see the market bouncing back anytime soon.

My concern is that when Congress returns from its August break we are going to see the political rhetoric go into campaign mode of the nastiest proportions.  This brings back memories of early 2009.  My concern is that this may be an all too certain possibility.

Market Commentary

Market Commentary – August 8th, 2011

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A Few Thoughts After the Close:

The overall market sold off sharply today with a major portion of the sell off coming in the last 45 minutes of the day.  For the day,  the Dow Jones Industrial Average was lower by 634 points or approximately 5.6% to 10,809.85  Year to date,  the Dow Jones Industrial Average is now down 6.7%.  The S&P 500 ‘SPX’ was lower by approximately 80 points or approximately 6.6% to 1,119.46  Year to date,  the S&P 500 ‘SPX’ is down by approximately 11%.  The NASDAQ 100 Index ‘NDX’ was lower by 134 points or approximately 6.1%.  Year to date,  the NASDAQ 100 ‘NDX’ is down by approximately 7.4%.

The weakest indices on the day were the Banking indices with the KBW Banking Index ‘BKW’ down by just under 11%.  Oil Services as measured by the ‘OSX’ declined by just over 10%,  and the M.S. Cyclicals Index ‘CYC’ was down by just over 9% closing at 820.64 .  I see significance in the movement of the Cyclicals Index ‘CYC’ as I feel it is a reasonable indicator of the direction of the economy.

Interestingly enough,  the Amex Gold/Silver Index ‘XAU’ was down approximately 1.7% on the day, and is down approximately 13.7% year to date.  One would think that with the record price of Gold this index would also be setting record highs. While I will be the 1st to admit that I have not taken a good look at the fundamentals of the individual components of this index,  I see the failure of the ‘XAU’ (and the other gold producer indices) to track the upward movement of the price of Gold as an indicator that their input costs a/k/a cost of production are also moving higher.  If I am correct on this,  then that is a bad sign on the inflation front.

Also, Oil was lower by $6.05 to 80.83 per barrel, and Gold was higher by $63.80 to $1,714.0 per ounce,  setting a record closing high in the process.  On the soft commodities side,  Corn was lower by $0.176 to $6.752 per bushel, and Wheat was lower by $22.40 to $6.564 per bushel.

I’ll try to be back later tonight with some updated support and resistance levels for the various indices I track.  If not,  I’ll be back early in the morning with an update prior to 8:00am, as I have an early morning meeting and won’t be in the office for the open.

www.sterlinginvestments.com

A Few Thoughts Before the Open:

Standard & Poors downgraded the U.S. credit rating Friday evening.  This obviously had a negative impact on world market, and the pre-open U.S. futures are extremely negative.  With what looks to be a severe selloff in the making, I thought this would be an excellent time to looks at the support levels on the various indices I track.

Dow Jones Industrial Average:  The Dow Jones closed at 11,444.61  (It should be noted that this is essentially the upside resistance level I published prior to the market open on August 5th)  Pre-market futures are indicating a drop of almost 250 points on the open, placing the Dow Jones at approximately 11,190 At that level,  support comes in at 11,006.02  IF support fails to hold, then the next level of support is at 10,698.75 on a closing basis.

S&P 500:  The S&P 500 ‘SPX’ closed at 1,199.38  Pre-market futures are indicating an approximate 30 point drop in the ‘SPX’.  This would put the SPX at approximately 1,169.  At this level, support comes in at 1,150.23  IF support fails to hold at that level,  then the next level of support is at 1,127.79 on a closing basis.

NASDAQ 100 Index:  The NASDAQ 100 ‘NDX’ closed at 2,194.38  Pre-market futures are indicating an almost 60 point drop in the ‘NDX’.  This would put the ‘NDX’ at approximately 2,134  At this level,  support comes in at 2,117.33  IF support fails to hold at that level,  then the next level of support is at 2,100 and then 1,975.33 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 4,693.59  I see downside support on the Dow Transports at 4,657.38.  If support fails to hold at that level, then I see the next level of support at 4,516.35 on a closing basis.

M.S. Commodities Related Equity Index ‘CRX’:  The ‘CRX’ closed Friday at 886.17.  I see upside resistance on the ‘CRX’ at 941.05 and downside support at 847.10.  IF support fails to hold at that level, then I see the next level of support at 843.77

FINANCIAL INDICES:  Of the approximately 35 different indices I track,  there are four (4) that are basically financial sector indices;  the Amex Broker/Dealer,  S&P Insurance, and 2 banking indices.  The D0dd-Frank legislation has put the earnings of these firms at severe risk.  A downgrade of the U.S. credit ratings has the potential to hit balance sheets particularly hard and thus their individual stock prices and these indices particularly hard.

KBW Banking Index ‘BKW:  The ‘BKW’ closed Friday at 41.42.  I see upside resistance on the ‘BKW’ at 44.52 and downside support at 34.28 on a closing basis.

S&P Banking Index ‘BIX’:  The ‘BIX’ closed Friday at 121,89.  I see upside resistance on the ‘BIX’ at 127.98 and downside support at 117.52 and then  100.96 on a closing basis.

Amex Broker/Dealer Index ‘XBD’:  The ‘XBD’ closed Friday at 95.43  I see upside resistance at 101.13 and downside support at 92.97 and then at 80.87 on a closing basis.

S&P Insurance Index ‘IUX’:  The ‘IUX’ closed Friday at 165.66  I see upside resistance on the ‘IUX’ at 175.13 and downside support at 143.80 on a closing basis.

I think the overall market is starting a new intermediate term downward trend.  As a result, I would not be surprised to see the Dow Jones Industrial Average drop below 11,000 in the next few trading sessions and possibly below 10,000 before the end of the year.

Market Commentary

Market Commentary – August 5th, 2011

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A Few Thoughts Before the Open:

With yesterday’s brutal move lower in the markets I am going to sit this morning out from a trading perspective;  not because I am afraid of the market moving lower, but because I am worried about a sharp rally.  Here is why,  obviously after yesterday all the chart patterns are bearish, therefore all the trading recommendations would be for short sales; however the market is so oversold that there is a high probability of some sort bounce back higher.  As a result,  going short today could lead to a situation where one would find themselves stopped out at a loss on a short term rally.  Given the high probability of this, I don’t see it being worth the risk.  So, I am saving myself some time and not looking at any individual charts this morning.

I thought I would take a more in depth look at the various indices I track and give some thoughts.

Dow Jones Industrial Average:  The Dow closed at 11,383.68  I currently see upside resistance on the Dow at 11,444.08 and downside support 11,006.02 on a closing basis.  I think the Dow is starting a new intermediate downward trend.  As a result I am expecting the Dow to continue to move lower and test 11,006.02

S&P 500:  The S&P 500 ‘SPX’ closed at 1,200.07  I currently see upside resistance on the ‘SPX’ at 1,225.85 and downside support at 1,178.34. If that level of support fails to hold, then the next point of support is 1,150.23 on a closing basis.  I am also expecting the ‘SPX’ to move lower with the Dow.

NASDAQ 100 Index:  The NASDAQ 100 ‘NDX’ closed at 2,207.20 I currently see upside resistance on the ‘NDX’ at 2,254.23 and downside support at 2,207.97 and 2,192.96  If support fails at those levels, then I see the next point of support at 2,117.33  I am obviously expecting the ‘NDX’ to continue to move lower.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at4,711.74  Year to date, the Dow Transportation Average is down approximately 7.8%  For those who are familiar with the Dow Theory and the confirmation of a move in the Dow Jones Industrial Average by the Dow Jones Transportation Average,  the move lower by the Transports confirms the start of a new intermediate downward trend in the Industrial Average.  I see upside resistance on the Transports at 4,759.66 and downside support at 4,657.86  I am expecting the Transports to continue to move lower.

Amex Gold & Silver Index:  The Amex Gold & Silver Index ‘XAU’ closed at 197.12  Despite record high prices in the price of Gold, the ‘XAU’ is actually down 12.65% year to date.  I see upside resistance on the ‘XAU’ at 208.78 and downside support at 189.48  Unfortunately as of right now I have no clear indication as to the direction of the ‘XAU’.  My thoughts are that we are going to need a few more trading days to see a clearer picture on the ‘XAU’.

Amex Oil & Gas Index:  The Amex Oil & Gas Index ‘XOI’ closed at 1,151.54  Year to date the ‘XOI’ is down approximately 5%.  I currently see upside resistance on the ‘XOI’ at 1,228.18 and downside support at 1,141.92 on a closing basis.  Aside from yesterday’s market selloff the ‘XOI’ appears to be moving lower.  I am expecting the ‘XOI’ to continue to move lower and test 1,141,92 on a closing basis, if support fails to hold at that level, then I see the next point of downside support being 1,093.86

M.S. Cyclicals Index:  The M.S. Cyclicals Index ‘CYC’ closed yesterday at 909.97  Year to date the ‘CYC’ is down approximately 12.7%.  I currently see upside resistance on the ‘CYC’ at 935.00 and downside support at 895.10  I am currently expecting the ‘CYC’ to continue to move lower and test 895.10 and then 868.97 on a closing basis.

M.S. Consumer Index:  The M.S. Consumer Index ‘CMR’ closed at 695.25  Year to date, the ‘CMR’ is down approximately 7.8%  I currently see upside resistance on the ‘CMR’ at 711.38 and downside support at 691.44  The ‘CMR’ has been in a downward trend since mid-July.  I am currently expecting this index to continue to move lower and test support at 691.44 and then at 682.94 on a closing basis.

It should be noted that the Transports, ‘CYC’ and the ‘CMR’ have both broken through support levels set in February of 2010, while the major market indices have yet to do so.  I see this as indicating a strong probability that the major market indices will also do the same.

Market Commentary

Market Commentary – August 4th, 2011

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A Few Thoughts After the Close:

The overall market sold off extremely sharply today.  The Dow Jones Industrial Average was lower by 512 points closing at 11,383.58 and in the process went negative on the year.  The Dow is now down 1.74% on the year, while the S&P 500 ‘SPX’ and the NASDAQ 100 ‘NDX’ are down 4.6% and 0.83% respectively for the year.

The weakest sectors/indices on the day were the Biotech ‘BTK’,  Oil Services ‘OSX’, High Tech,  Commodities ‘CRX’, Oil & Gas ‘XOI’, and the Financials.  Nothing went higher on the day except bonds.  Oil was lower by $5.30 to $86.63 per barrel, a 6 month low; and Gold was lower by $7.40 to $1,657.50 per ounce.

There has been a lot of chatter about what has been the cause of this sell off.  I’ve heard people talking about the European Debt Crisis and slowing growth here in the United States.  My thoughts are that both of those items are factors in the current market selloff;  however I would like to add a third factor to the equation.  I think the negative, anti-growth Keynesian economic policies being pushed by the Democrats in Washington are starting to have an effect.  I see the sharp selloff in the price of oil as an indication by the market that it is expecting the economy to decline from its current levels.  If that is the case,  then we will have a true double-dip recession situation where I expect the 2nd recession to be much worse than the 1st one due to the already weakened state of the U.S. economy.

I am probably going to sit tomorrow out from a trading perspective.  However I will be back in the morning before the open with my look at the various sector indices I track.

A Few Thoughts Before the Open:

In reviewing the charts from yesterday’s trading activity of the various indices I follow I noticed the following:

  1. The NASDAQ 100 ‘NDX’ reached an intra-day low of 2,254.91, before closing at 2,312.78, basically bouncing off its 200 day moving average in the process.
    With yesterday’s close at 1,260.34 the S&P 500 ‘SPX’ is only up 0.20% on the year.
  2. The S&P Chemicals Index ‘CEX’ with a close of 313.54 basically closed on its 200 day moving average.
  3. Despite yesterday’s late rally,  the Amex Oil & Gas Index ‘XOI’ closed lower yesterday at 1,235,44 and below its 200-day moving average.  It looks like the ‘XOI’ has broken down.  I am expecting it to continue to move lower. I see support coming in at 1,228.18.  If the ‘XOI’ closes below that level, then I expect it to continue to move lower and test 1,141.92 on a closing basis.

In looking at the charts on the individual stocks I noticed the following:

  • I did not see any heavy volume stocks in the new high list.  This is definitely unusual.
  • The pre-market futures are sharply lower.  A good number of the charts I have looked at this morning have clearly broken below support.  However there are still a fair number that have not broken support;  but another day sharply lower could cause a good number of these stocks to break support.  If this happens I see this very bearish for the overall market, and signaling significant further declines.

I see the downward pressure on the market as primarily being the result of the debt-ceiling and Federal Deficit issues, and the way liberals are hell bent to raise taxes at all costs.  I think what we are seeing is a preview of their campaign rhetoric; and I am afraid that they will take to levels not seen since the 1st quarter of 2009. Additionally, as the new regulations from Obamacare and Dodd-Frank begin to take an effect their negative impact upon the economy is beginning to be realized.  If I am correct,  then unfortunately the market is going to be under pressure until late 2012.  OUCH !

Again, for today I am looking for stocks with negative chart patterns, and are not over extended.  I am looking to write a covered-put position where the breakeven point is above the resistance point and our subsequent would be stop loss position if we were doing a straight equity trade.

www.sterlinginvestments.com

Market Commentary

Market Commentary – August 3rd, 2011

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A Few Thoughts Before the Open:

In looking at the charts from yesterday’s trading activity of the individual stocks I have the following thoughts:

  1. Everything has a negative chart pattern. This doesn’t mandate an end to the world,  but don’t confuse a “dead cat bounce” with a market rally.
  2. Many charts showed an oversold pattern, so we may see a couple of days of rebound before moving back lower.

For today I am looking for stocks with negative chart patterns, and are not over extended.  I am looking to write a covered-put position where the breakeven point is above the resistance point and our subsequent would be stop loss position if we were doing a straight equity trade.

Don’t forget that despite ADP did reporting higher job additions,  Challenger also reported higher than expected layoffs.

We might see the Dow Jones Industrial Average rally to its 200 day moving average which is currently at 11,944.35

www.sterlinginvestments.com

Market Commentary

Market Commentary – August 2nd, 2011

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A Few Thoughts After the Close:

The overall market moved sharply lower yesterday in a broad based selloff that saw every index I track move lower on the day.  The weakest the Airlines,  Retailers,  High Tech,  Cyclicals, Transports, and Banking indices. Bonds moved higher sending interest rates sharply lower.  Oil was lower by $1.10 to $93.79 per barrel, and Gold was sharply higher by $22.90 to 1,641.90 per ounce.

In looking at the charts from today’s on the various indices I track I noticed the following.

  1. The Dow Jones Industrial Average down 266 points at 11,868.36.  In the July 12th edition of this blog with the Dow Jones Industrial Average at 12,446.88 I stated that I thought the Dow Jones Industrial Average would continue to move lower and test 11,934.58  The Dow  obviously closed below that level today, and below its 200 day moving average, which was at 11,944.09, in the process.  It looks to me that the Dow is starting a new intermediate downward movement.  I am expecting the Dow to continue to move lower and test support at 11,613.30  Granted that support level is only about 250 points away; if the Dow moves through that level of support, then I see the next point of support being 11,444.08
  2. The Dow Jones Transportation Average also moved sharply lower and closed at 4,942.27 and below its 200 day moving average. In the July 12th edition of this blog with the Dow Jones Transportation Average having closed at 5,386.16 I stated that I thought the Dow Transports would move lower and test 5,060.59 With the Dow Transports having closed below that level today, I now see support 4,749.99  I am expecting the Dow Transports to continue to move lower and test this level
  3. The S&P 500 closed at 1,254.05 today.  In the July 15th edition of this blog, with the S&P 500 having closed at 1,308.87 I stated that I expect the S&P 500 would continue to move lower and test 1,265.42.  The S&P obviously broke though support at the 1,265 level.  I am now expecting the S&P 500 to continue to move lower and test support at 1,225.85 If that level of support fails to hold, then I see the next level of downside support at 1,178.34
  4. The Amex Pharmaceuticals Index ‘DRG’ closed below its 200 day moving average.  This index continues to look very bearish.
  5. The MS Commodities Index ‘CRX’ closed at 960.20, below its 200 day moving average.  This index looks to continue to move lower and test 945.20  If that level of support fails to hold, then I expect it to continue to move lower and test 887.75
  6. The S&P Healthcare Index ‘HCX’ closed at 379.01 in the process it closed below its 200 day moving average.  In the July 19th edition of this blog, with the ‘HCX’ having closed at 403.88 I stated that I expected it to continue to move lower and test 391.31.  With the ‘HCX’ having closed below that level, I am expecting the ‘HCX’ to continue to move lower and test support at 364.17
  7. The S&P Chemicals Index ‘CEX’ closed at 311.21 and below its 200 day moving average.
  8. In the July 19th edition of this blog I with the N.A. Telecom Index ‘XTC’ having closed at at 892.08 I stated that I expected the ‘XTC’ to continue to move lower and test 871.74  Today the ‘XTC’ closed at 858.61.  I am expecting the ‘XTC’ to continue to move lower and test support at 823.39

Overall, all the indices I looked at looked very bearish.  That is not to say the world is going to come to an end,  but it may be signaling the start of a new intermediate downward trend for the market.

I’ll take a look at the charts of the individual stocks and be back with my thoughts in the morning before the open.

www.sterlinginvestments.com