Sterling Market Commentary for October 3rd, 2011

A Look at Friday’s Activity:  The overall market moved sharply lower in a broad based move that saw every index I track move lower on the day.  The weakest sectors were the Airlines, Broker/Dealers, Chemicals, Oil Services, Banking,  Cyclicals, High Tech, Commodities, the Retailers, and the Transports. Oil was lower by $2.94 to $79.20 per barrel, and Gold was higher by $4.90 to $1,620.40 per ounce.  In the grain markets, Wheat was lower by $0.45 to $6.092 per bushel, and Corn was lower by $0.40 to %5.924 per bushel, while  Soybeans were lower by $11.79 per bushel.

A Few Thoughts Before the Open:  In looking at the charts from Friday’s market activity I did not see a single index or stock that I would consider buying.  Everything has a negative pattern.  My concern in looking at the charts is that it appears that the selloff, or market downturn, could accelerate and we could see a repeat of August; only this time to lower lows.

 The Bottom Line:  I’ve been saying that I felt the market was in a sideways pattern with a downside bias.  While my 1st Rule of Trends is that a trend remains in place until it is broken. However my 2nd Rule is that the longer a trend remains in place, the greater the chance of it being broken.  One or Two more down days and we could see a retesting of the August lows.

In looking at the indices I track, I have the following updates on support and resistance:

Dow Jones Industrial Average:  The Dow Jones Industrials closed at 10,913.38  I currently see upside resistance on the Dow at 11,613.53 and downside support at 10,719.94 on a closing basis.    If support fails to hold at 10,719.94 then I see the next level of support coming in at 10.415.54 on a closing basis.

S&P 500 ‘SPX’:  The S&P 500 closed at 1,131.42  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 think the S&P 500 is going to move lower and test 1,127.79.  If support fails to hold at that level, then I see the next level of support coming into play at 1,096.48

NASDAQ 100 Index ‘NDX’:  The NASDAQ 100 closed at 2,139.18  I now see upside resistance on the NDX at 2,192.96 and downside support at 2,038.22 I see the NASDAQ 100 continuing to move lower and testing support at 2,038.22 on a closing basis.  If support fails to hold at that level, then I see the next point of downside support beingat 1,975.33 on a closing basis.

The Dow Jones Transportation Average:  The Dow Transports closed at 4,189.37    I now see upside resistance on the Dow Transports at 4,221.60 and downside support level  at 4,082.51 on a closing basis.  I see the Dow Jones Transportation Average  continuing  to move lower and test 4,082.51 on a closing basis.

M.S. Commodities Related Equity Index ‘CRX’:  The Morgan Stanley Commodities Related Index ‘CRX’ closed at 761.16.   I now see upside resistance on the ‘CRX’ at 824.91 and downside support at 684.90

S&P Banking Index ‘BIX’:  The ‘BIX’ closed 113.16.  I see upside resistance on the ‘BIX’ at 120.71 and downside support at 100.96 on a closing basis.

Amex Broker/Dealer Index ‘XBD’:  The ‘XBD’ closed at 79.98   I see upside resistance at 80.87 and downside support at 80.87 on a closing basis. I am expecting the ‘XBD” to continue to move lower and test 63.48  on a closing basis.

S&P Insurance Index ‘IUX’:  The ‘IUX’ closed at 152.88 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. If the S&P Insurance Index ‘IUX’ closes below 143.80, then I expect the ‘IUX’ to continue to move lower and test 120.07 on a closing basis.

Amex Gold & Silver Index:  The Amex Gold & Silver Index ‘XAU’ closed at 185.00  I see upside resistance on the ‘XAU’ at 208.47 and downside support at 177.39

Amex Oil & Gas Index:  The Amex Oil & Gas Index closed at 1,031.82   I currently see upside resistance on the ‘XOI’ at 1,050.78 on a closing basis and downside support at 1,029.20.

M.S. Cyclicals Index:  The M.S. Cyclicals Index ‘CYC’ closed yesterday at 765.15  I currently see upside resistance on the ‘CYC’ at 789.46 and downside support at 710.93  on a closing basis.

M.S. Consumer Index:  The M.S. Consumer Index ‘CMR’ closed at 686.20  I currently see upside resistance on the ‘CMR’ at 691.44. and downside support at 657.87 on a closing basis.

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