Sterling Market Commentary for October 5th, 2011

A Look at Tuesday’s Market Activity:  The overall market staged a very impressive rally in the last hour of the day with the Dow Jones Industrial Average rallying almost 300 point in 45 minutes.  While it is not entirely clear what sparked this rally,  the media is giving credit to comments from Europe about their realization that they need to protect their banks from failure.  If this is the case,  then  I consider it be nothing more than than a case of computer driven momentum activity.  I help edit the Sterling Reporter, and this so called news, was basically reported on very early in the morning by the UK newspapers.  Unfortunately I think this volatility is pretty much the new normal,  we are going to need to learn how to deal with this volatility and ride it out.

Oil was lower by $1.94 to $75.67 per barrel, and Gold was lower by $41.70 to $1,616.00 per ounce.  In the grain markets, Wheat was lower by $0.154 to $6.04 per bushel, and Corn was lower by $0.046 to $5.876 per bushel, while Soybeans were lower by $0.174 to $11.60 per bushel.

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

1.  Despite yesterday’s strong rally,  the Dow Jones Industrial Average closed below 9-Day moving average and still has a bearish chart pattern.  If anything, I see yesterday’s move lower as testing the weakness of support at the 10,400 level.

2.  I continue to maintain that the overall market is in a sideways pattern with a downward bias.

The Bottom Line:  Until I see a close above our stated upside resistance levels I do not see any indication of a sustainable market rally.