Market Commentary

Sterling Market Commentary for Monday November 19th, 2012

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Sterling Market Commentary for Monday November 19th, 2012

A Look at Friday’s Market:  The overall market moved moderately higher Friday in a broad based move that saw the majority of the sectors I follow move higher on the day as well.  In my opinion it was pretty much a bounce from an oversold condition.  I see nothing in the charts from Friday’s trading activity to indicate that the market is going to start any sort of a sustainable rally.  In the commodities markets,  Oil was higher by $1.05 to $86.92 per barrel, and Gold was higher by $0.90 to $1,714.70 per ounce.  In the grain markets, Wheat was lower by $0.074 to $8.380 per bushel, and Corn was higher by $0.056 to $7.270 per bushel, while Soybeans were lower by $0.186 to $13.832 per bushel.

A Few Thoughts on Monday’s Market: In looking at the charts from Friday’s trading session it looked to me as if the market was essentially bouncing from an over sold condition.  We may see a small rally over the course of the next couple of trading session, but then as the major market indices move back towards their 9-day moving averages I expect the market to start to head back lower.  This week’s economic calendar is rather light, so I do not see any big economic news until Thursday’s jobless claims numbers are released.  If this holds true then you have your 3 day bounce in the market before it returns to moving back lower.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 12,588.31   I have lowered my upside resistance level on the Dow Jones Industrial Average at 12,715.93 on a closing basis.  I now see downside support coming in at 12,118.57 on a closing basis.   Current Expectations:  I think we are starting a new trend lower in the Dow.  I am expecting the Dow Jones Industrial Average to continue to move lower and test 12,118.57 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 4,891.27  I continue to see upside resistance on the the Dow Transportation Average at 5,215.97 and downside support at 4,873.76  and then at 4,795.28.  Current Expectations:  I think the Dow Transports are going to track sideways between support and resistance for the foreseeable future.

S&P 500 ‘SPX’:  The S&P 500 closed yesterday at 1,359.88  I currently see upside resistance on the S&P 500 at 1,367.59 and downside support on the S&P 500 at 1,343.36 and then at 1,334.76  Current Expectations:  I think the S&P 500 is going to move lower and test 1,343.36 and then 1,334.76 on a closing basis.

NASDAQ 100 Index ‘NDX’:  The NDX closed yesterday at 2,534.16  I see upside resistance on the NDX currently at 2,623.33 and downside support at 2,458.83 on a closing basis.  Current Expectations:  I think the NDX is going to continue to move lower and test 2,458.83 on a closing basis.

The Bottom Line:  I think the market will continue to move lower for the next few trading sessions.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Friday November 16th, 2012

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Sterling Market Commentary for Friday November 12th, 2012

A Look at Thursday’s Market: The overall market moved moderately lower in a very broad based move that saw essentially every sector  of the market I track move lower as well.  The sell off continues, and a lot of these sector indices look like they have a lot farther to fall.  The utility sector continues to be very hard hit.  I originally discussed my thoughts on the utility sector in the Sterling Market Commentary for November 7th.  I think that we are entering a bear market for the utility sector, and given the current regulatory climate, I think that is going to translate into sharply higher utility bills for consumers.  For a variety of reasons, I think discretionary spending, which is that extra money you have to spend after you pay your bills, is going to take a sharp drop in 2013.  Fiscal Cliff or not, I think there are strong head winds facing the U.S. economy; and what we are seeing now is the market waking up to that fact.

In the commodities markets,  Oil was lower by $0.87 to $85.45 per barrel, and Gold was lower by $16.30 to $1,713.80 per ounce. In the grain markets, Wheat was lower by $0.032 to $8.454 per bushel, and Corn was lower by $0.044 to $7.212 per bushel, while Soybeans were lower by $0.170 to $14.020 per bushel.

A Few Thoughts on Friday’s Market:  In looking at the charts from the recent tradings sessions, it is clear that the current sell off is something more than just a short term pullback. In a short term pullback or market correction there is usually some sector of the market that performs well. That is clearly not the case with the current market.  What we are seeing right now is an across the board sell off, with several sectors being hit far worse than the major market indices.   Just take a look at the utility sector discussed above and earlier in the Sterling Market Commentary for November 7th, 2012.  I’ve included a chart of the Dow Jones Utility Average below for your review.  I think the utility sector is a bell weather for the larger interest rate sensitive segment of the market.  The utilities were among the first to move higher following the financial crisis and the implementation of the Quantitative Easing Programs, and they now appear to be the first to steeply sell off.  The utilities could easily be signalling the start of a larger sell off by the more interest rate sensitive and high dividend paying companies.

Dow Jones Utilities Average - Weekly Chart

Dow Jones Utilities Average – Weekly Chart

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 12,542.38   I have lowered my upside resistance level on the Dow Jones Industrial Average at 12,715.93 on a closing basis.  I now see downside support coming in at 12,118.57 on a closing basis.   Current Expectations:  I think we are starting a new trend lower in the Dow.  I am expecting the Dow Jones Industrial Average to continue to move lower and test 12,118.57 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 4,913.90  I continue to see upside resistance on the the Dow Transportation Average at 5,215.97 and downside support at 4,873.76  and then at 4,795.28.  Current Expectations:  I think the Dow Transports are going to track sideways between support and resistance for the foreseeable future.

S&P 500 ‘SPX’:  The S&P 500 closed yesterday at 1,353.53  I currently see upside resistance on the S&P 500 at 1,358.59 and downside support on the S&P 500 at 1,343.36 and then at 1,334.76  Current Expectations:  I think the S&P 500 is going to move lower and test 1,343.36 and then 1,334.76 on a closing basis.

NASDAQ 100 Index ‘NDX’:  The NDX closed yesterday at 2,524.36  I see upside resistance on the NDX currently at 2,623.33 and downside support at 2,458.83 on a closing basis.  Current Expectations:  I think the NDX is going to continue to move lower and test 2,458.83 on a closing basis.

The Bottom Line:  I think the market will continue to move lower for the next few trading sessions.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Thrusday November 15th, 2012

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Sterling Market Commentary for Thursday November 15th, 2012

A Look at Wednesday’s Market:  The overall market sold off very sharply yesterday in a broad based move that saw every sector of the market that I track move lower as well.  It is pretty clear that the market has entered correction territory and the breaking of key technical support levels indicates that any substantive rally is not likely to occur any time soon.  Of note from Wednesday’s trading, the KBW Bank Index ‘BKX’ broke below its 200 day moving average; the Amex Computer Technology Index ‘XCI’ broke through support; the S&P 500 ‘SPX’ broke below its 200 day moving average; and the M.S. Consumer Index ‘CMR’ broke below its 200 day moving average.  These are all very negative signals for key portions of the U.S. Economy.

In the Commodities markets, Oil was higher by $0.94 to $86.32 per barrel, and Gold was higher by $5.30 to $1,730.10 per ounce.  In the grain markets, Wheat was lower by $0.022 to $8.486 per bushel, and Corn was higher by $0.022 as well to $7.256 per bushel, while Soybeans were higher by $0.110 t0 $14.19 per bushel.

A Few Thoughts on Thursday’s Market:  I think the market in general has reached oversold territory, and we could see a slight bounce.  However as I have been saying in the last several editions of the Sterling Market Commentary I am expecting the market to either enter into a new sideways trading range at these lower levels or worse yet continue to move lower.  As I have been stating since last Friday’s edition of the Sterling Market Commentary, I am expecting the Dow Jones Industrial Average to enter into a new expected short term trading range between 12,715.93 and and 12,118.57 on the lower end.  However in the last Thursday’s edition of the Sterling Market Commentary, I stated that I thought we would see a new bear market develop.

With respects to today’s market, I am expecting the overall market to move lower again today.  I think there is a realization that the fiscal cliff is not going to be resolved in a manner that will be favorable to businesses and investors that fund job creation.  Additionally I believe that the public is beginning to realize that the Fed’s Quantitative Easing programs have lost their effectiveness’; and many people believe that the Fed’s Quantitative Easing programs are actually a big part of the problem.  This is forcing a combination of the examination of the valuation models of the U.S. stock market and moves designed to compensate for a rising tax environment in 2013; the net effect is that it is driving valuations and the market lower.

As I mentioned above, the KBW Bank Index ‘BKX’ broke below its 200 day moving average yesterday with its close of 46.68  I have included a chart of the ‘BKX’ below for your review.  I now see downside support on the ‘BKX’ at 41.00 and upside resistance at 46.83  This is obviously a very negative chart pattern, and I think it is worth discussing what it may mean for the U.S. economy.  The ‘KBX’ Bank Index ‘BKX’ is designed to reflect the performance of the banking industry, which is a significant portion of the U.S. economy and plays a very important function in financing the workings of the U.S. economy.  Poor performance of the U.S. Banking sector is not going to be a good thing for the U.S. Economy. Based upon the chart below, I think the KBW Bank Index ‘BKX’ is going to test the lower end of its trading range at 41.00 on a closing basis.

KBW Banking Index 'BKX'

KBW Bank Index ‘BKX’ w/ New Expected Trading Range

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 12,570.95  With yesterday’s sharp sell off  I have lowered my upside resistance level on the Dow Jones Industrial Average at 12,715.93 on a closing basis.  I now see downside support coming in at 12,118.57 on a closing basis.   Current Expectations:  I think we are starting a new trend lower in the Dow.  I am expecting the Dow Jones Industrial Average to continue to move lower and test 12,118.57 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 4,925.95 I continue to see upside resistance on the the Dow Transportation Average at 5,215.97 and downside support at 4,873.76  and then at 4,795.28.  Current Expectations:  I think the Dow Transports are going to track sideways between support and resistance for the foreseeable future.

S&P 500 ‘SPX’:  The S&P 500 closed yesterday at 1,355.49  I currently see upside resistance on the S&P 500 at 1,358.59 and downside support on the S&P 500 at 1,343.36 and then at 1,334.76  Current Expectations:  I think the S&P 500 is going to move lower and test 1,343.36 and then 1,334.76 on a closing basis.

NASDAQ 100 Index ‘NDX’:  The NDX closed yesterday at 2,531.87  I see upside resistance on the NDX currently at 2,623.33 and downside support at 2,458.83 on a closing basis.  Current Expectations:  I think the NDX is going to continue to move lower and test 2,458.83 on a closing basis.

The Bottom Line:  I think the market will continue to move lower for the next few trading sessions.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Wednesday November 14th, 2012

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Sterling Market Commentary for Wednesday November 14th, 2012

A Look at Tuesday’s Market: The overall market moved moderately lower on Tuesday in what was the 1st day of trading this week by the bond markets, which were closed Monday due to the Veterans Day holiday.  Through the 1st couple of days of this week, the overall market has continued to drift lower towards the support levels I discussed in last Friday’s Sterling Market Commentary.  If you have not had a chance to do so, you should check out the chart I included in that post,  I think it clearly shows the probable trading range the Dow Jones Industrial Average is heading towards.   In the commodities markets, Oil was lower by $0.19 to $85.38 per barrel, and Gold was lower by $6.10 to $1,724.80 per ounce.  In the Grain markets, Wheat was lower by $0.066 to $8.510 per bushel, and Corn was higher by $0.054 to $7.234 per bushel, while Soybeans were higher by $0.030 to $14.08 per bushel.

A Few Thoughts on Wednesday’s Market: In looking at the charts from yesterday’s trading activity, the vast majority of the indices I looked are clearly showing weakness and moving lower.  The market is clearly showing weakness and as it continues to drift lower it is approaching various support levels that as they are broken will further increase the weakness in the overall market.  I think there is a great deal of political risk to the market.  Despite having the election last week, we still have the issue of the “Fiscal Cliff” and a Lame Duck Congress; and there is no reason to believe that either Harry Reid or any of the Congressmen that were defeated in their re-election bids are in any way going to be accommodating.  I think that there is a much greater risk that Harry Reid is going to play hard ball; after all that has been his track record, and he has been very successful at it.  In other words, I think Harry Reid will take things as close to the brink as possible, gambling that by the time 2014 rolls around the votes will have forgotten about the games he likes to play. So here is my forecast,  I think Harry Reid is going to take us as close to the Fiscal Cliff, and possibly over the edge, if he thinks he can get what he wants; and he doesn’t care what happens to the rest of us in the mean time.  I do not see it getting resolved before the end of December, and as  a result I think the overall market will continue to move south.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 12,756.18  I have lowered my upside resistance level on the Dow Jones Industrial Average at 13,000.71 on a closing basis.  I now see downside support coming in at 12,715.93 and then at 12,118.57 on a closing basis.   Current Expectations:  I think we are starting a new trend lower in the Dow.  I am expecting the Dow Jones Industrial Average to continue to move lower and test 12,715.93 and then 12,118.57 on a closing basis.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 5,054.71  I see upside resistance on the the Dow Transportation Average at 5,215.97 and downside support at 4,873.76  and then at 4,795.28.  Current Expectations:  I think the Dow Transports are going to track sideways between support and resistance for the foreseeable future.

NASDAQ 100 Index ‘NDX’:  The NDX closed yesterday at 2,561.86  I see upside resistance on the NDX currently at 2,623.33 and downside support at 2,458.83 on a closing basis.  Current Expectations:  I think the NDX is going to continue to move lower and test 2,458.83 on a closing basis.

The Bottom Line:  I think the market will continue to move lower for the next few trading sessions.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Friday November 9th, 2012

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Sterling Market Commentary for Friday November 9th, 2012

A Look at Thursday’s Market: The overall market sold off sharply again on Thursday in a very broadly based move that saw every sector index I track move lower as well. The market has clearly entered a new phase of downward movement that I expect to continue for quite some period of time.  I think that there is a very good chance that this sell off could turn into a bear market, and we could see the Dow Jones Industrial Average below the 10,900 level.  I will discuss those thoughts in greater detail in this weekend’s Sterling Weekly. I have often said that I believe the Dow Jones Industrial Average is the single best indicator of the future direction of the u.S. Economy.  I generally believe that it is the most accurate indicator at forecasting where the economy will be in 6 months.  Then based on the activity of the market over the course of the last couple of days, I would say there is a very good chance that the market is concerned that the U.S. Economy will slip back into recession in the 1st half of 2013.

In the commodities markets,  Oil was higher by $0.65 to $85.09 per barrel, and Gold was higher by $12.00 to $1,726.00 per ounce.  In the grain markets, Wheat was higher by $0.084 to $9.024 per bushel, and Corn was lower by $0.030 to $7.412 per bushel, and Soybeans were lower by $0.112 to $14.956 per bushel.

A Few Thoughts on Friday’s Market: In looking at the charts from yesterday’s market activity it is very clear that the market is in sell off mode until something happens to change that.  Looking at all the changes that are set to occur in 2013, many of which have negative consequences for the economy, I do not see anything being done in the near future to fix many of the negative events slated to take place in 2013.  As a result, I am expecting this sell off to continue for quite some period of time.  I think the overall market will test the lows put in place in August of 2011 when there was the showdown in Congress over raising the debt ceiling.  If we move below that level, then I believe that we are in for a prolonged period of a sideways to downward market; most likely a new bear market.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 12,811.32  I have lowered my upside resistance level on the Dow Jones Industrial Average at 13,000.71 on a closing basis.  I now see downside support coming in at 12,715.93 and then at 12,118.57 on a closing basis.   Current Expectations:  I think we are starting a new trend lower in the Dow.  I am expecting the Dow Jones Industrial Average to continue to move lower and test 12,715.93 and then 12,118.57 on a closing basis.

I think the Dow Jones Industrial Average is going to break through downside support at 12,715.93 either today or in the next couple of trading sessions.  Once it does I am expecting the Dow Jones Industrial Average to eventually reach of point of being oversold before it breaks through support at 12,118.57; at which point in time I expect it will develop somewhat of a new trading range between 12,715.93 and 12,118.57 on a closing basis. I have inserted a chart of the Dow Jones Industrial Average with my new expected trading range below for your review.

Dow Jones Industrial Average through November 8th, 2012

Dow Jones Industrial Average w/ New Expected Trading Range

However, if the Dow Jones Industrial Average closes below 12,118.57 then it will have broken an important point of support based upon the “3 Leg Principals of Movement” (which I will discuss in greater detail in this week’s Sterling Weekly). If this happens, then this current downward movement which basically started in October will be the 1st of 3 downward movements, with each one setting lower lows.

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 5,054.27  I see upside resistance on the the Dow Transportation Average at 5,215.97 and downside support at 4,873.76  and then at 4,795.28.  Current Expectations:  I think the Dow Transports are going to track sideways between support and resistance for the foreseeable future.

NASDAQ 100 Index ‘NDX’:  The NDX closed yesterday at 2,572.57 I see upside resistance on the NDX currently at 2,623.33 and downside support at 2,458.83 on a closing basis.  Current Expectations:  I think the NDX is going to continue to move lower and test 2,458.83 on a closing basis.

The Bottom Line:  I think the market will continue to move lower for the next few trading sessions.

www.sterlinginvestments.com

Market Commentary

Sterling Market Commentary for Thursday November 8th, 2012

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Sterling Market Commentary for Thursday November 8th, 2012

A Look at Wednesday’s Market:  The overall market moved severely lower in a broad based move that saw every sector index I track move lower on the day as well.  This was a sharp sell off that looks to have inflicted serious technical damage to every sector of the market.  In the commodities markets, Oil was down sharply by $4.27 to $84.44 per barrel, and Gold was lower by $1.00 to $1,714.00 per ounce.  In the grain markets,  Wheat was higher by $0.170 to $8.940 per bushel, and Corn was higher by $0.032 to $7.442 per bushel, while Soybeans were lower by $0.084 to $15.070 per bushel.

A Few Thoughts on Thursday’s Market:  In looking at the charts from Wednesday’s trading activity it is pretty clear the market has started a new downward trend that is going to last for a reasonable period of time.  I do not see this sell off being the result of the news of the weakening economy is Europe, as that news has been on the proverbial table for quite some time.  There may be some credibility to this being an election story,  most of the people who I know that work in the finance and investment banking field were hoping for a Romney victory.  Maybe they let their emotions get the better of them, or the misjudged the mood of the country.  However, even if the election effect is true,  I see that as only being a very tiny factor on the markets.  I think that there are serious structural issues that are coming to head in the next several years, and the only reason why the market hasn’t reflected this sooner is due to the efforts of the Fed to manipulate asset values higher.  The charts very clearly show that essentially every sector of the market is in the midst of a move lower.  In my opinion this is signalling a pullback in the economy, and the possibility of a recession in 2013.

The Dow Jones Industrial Average: The Dow Jones Industrial Average closed at 12,932.73  I have lowered my upside resistance level on the Dow Jones Industrial Average at 13,000.71 on a closing basis.  I now see downside support coming in at 12,715.93 and then at 12,118.57 on a closing basis.   Current Expectations:  I think we are starting a new trend lower in the Dow.  I am expecting the Dow Jones Industrial Average to continue to move lower and test 12,715.93 and then 12,118.57 on a closing basis.

I should point out that the Dow Jones Industrial Average set a multi-year closing high of 13,610.15 in October of this year. A Bear Market is typically defined as a decline of 20% or more from the high point of the market.  In this case, a bear market in the Dow Jones Industrial Average would require a decline of 2,722.03 points.  This would require the Dow Jones Industrial Average to close at 10,888.12 for a bear market to be declared.  I have included a chart on the Dow Jones Industrial Average below for your to review.  Do I think a bear market could be on the horizon?  Unfortunately, Yes.  I will be providing a more detailed discussion on my thoughts in this weekend’s Sterling Weekly.

Dow Jones Industrial Average through november 7th, 2012

Dow Jones Industrial Average

 

Dow Jones Transportation Average:  The Dow Jones Transportation Average closed at 5,103.52  I see upside resistance on the the Dow Transportation Average at 5,215.97 and downside support at 4,873.76  and then at 4,795.28.  Current Expectations:  I think the Dow Transports are going to track sideways between support and resistance for the foreseeable future.

NASDAQ 100 Index ‘NDX’:  The NDX closed yesterday at 2,612.69  I see upside resistance on the NDX currently at 2,623.33 and downside support at 2,458.83 on a closing basis.  Current Expectations:  I think the NDX is going to continue to move lower and test 2,458.83 on a closing basis.

The Bottom Line:  I think the market will continue to move lower for the next few trading sessions.

www.sterlinginvestments.com