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Sterling Weekly for February 16th, 2009

The overall market as measured by the Dow Jones Industrial Average lost 430.18 points or approximately 5.2% to finish the week at 7,850.41 I've included in this week's edition of the Sterling Weekly a current chart of the Dow Jones Industrial Average that shows a continuation of the trendlines I published in the December 8th edition of the Sterling Weekly. The chart shows how the trendlines create a downward trading channel that appears to be influencing the activity of the Dow Jones Industrial Average. I've drawn in what I believe to have been a rough line of support roughly around 7,950. In "technical terms" the convergence of these two (2) trendlines would create what market technicians refer to as a "triangle pattern." The important thing to remember about triangle patterns is that they generally signal a big break from the prevailing/current movement; generally it would be either a very big move to upside or the downside.

If I am reading this pattern correct, which I believe I am, then what last week's trading activity is telling us is that the market is going to be making a big move to the downside. I wish it wasn't so, but it looks like the Dow Jones Industrial Average is going to test 7,522.29 on a closing basis, and if that level of support fails to hold then I would expect the Dow Jones Industrial Average to continue to move lower and test 7,286.27 on a closing basis. My guess is that we will know for sure if I am correct or not before the close of trading on Wednesday, as that is the day President Obama is expected to announce his plan to fix the housing market. Oh, and by the way, nothing I've seen yet from anyone is even remotely coming close to addressing the problems impacting the housing market which in my opinion is a failure of the CDO's to function as they were designed which is partly made worse by the government's attempts to prevent foreclosures. (more on that later.) So unfortunately I am expecting Wednesday's announcement to only make things worse. Not to be overly critical, I'll put my money where my mouth is and have my paper commenting on the housing market and what I think needs to be done in order to fix it out before Wednesday's market open.


Sterling Calendars for the Week of February 16th, 2009
Economic Calendar
Date Est. Time Release

For

Consensus Prior
02/17 8:30am Empire State Mfg. Feb. (24.0) (22.2)
02/17 9:00am Net Long Term TIC Flows Dec $20.0B ($21.7B)
02/18 8:30am Housing Starts Jan 530k 550k
02/18 8:30am Building Permits Jan 525k 547k
02/18 8:30am Export Prices Ex.-Ag. Jan    
02/18 8:30am Import Prices Ex.-OIL Jan    
02/18 9:15am Capacity Utilization Jan 72.5% 73.6%
02/18 9:15am Industrial Production Jan (1.4%) (2.0%)
02/18 2:00pm FOMC Minutes Jan 28.    
02/19 8:30am Core PPI Jan. 0.1% 0.2%
02/19 8:30am PPI Jan. 0.2% (1.9%)
02/19 8:30am Initial Claims 02/14 615K 623K
02/19 10:00am Leading Indicators Jan 0.0% 0.3%
02/19 10:00am Philadelphia Fed. Feb (25.0) (24.3)
02/19 11:00am Crude Inventories 02/13   4.72M
02/20 8:30am Core CPI Jan 0.1% 0.0%
02/20 8:30am CPI Jan. 0.3% (0.7%)
           

  Misc. Calendar
Date: Comments:
02/16 Market closed for the President's Day holiday.
02/17 Medtronic 'MDT' announces earning @ 7:15am. Est. $0.70
02/17 Wal-Mart 'WMT' announces earning. Time N/A. Est $0.99
02/18 CBS Corp. 'CBS' announces earnings. Time N/A. Est. $0.26
02/18 Comcast Corp. 'CMCSA' announces earnings before the open. Est $0.22
02/18 Deere & Co. 'DE' announces earnings before the open. Est. $0.63
02/18 Hewlett-Packard 'HPQ' announces earnings after the close. Est. $0.93
02/18 Kinross Gold 'KGC' announces earnings after the close. Est. $0.12
02/19 CVS Caremark 'CVS' announces earnings before the open. Est. $0.69
02/20 JCP Penny 'JCP' announces earnings before the open. Est. $0.93
02/20 Lowe's Companies 'LOW' announces earnings before the open. Est. $0.12
  The full earnings calendar for this week can be found (here)

Prime Update:

Sterling Investment Services is an investment research and money management firm publishing the Prime Stock Newsletter. The Prime Stock Newsletter is a daily comprehensive newsletter that is useful for investors and traders alike. Whether you are looking for short term trading opportunities ranging from day trading to a couple of weeks or if you looking to acquire a long term portfolio at smart entry points. Subscriptions are $50/month. A Free 2 Week Trial is currently being offered.

Our most recent Performance Report is now available available (here). 16 of our last 20 recommendation resulted in profitable trades for an average profit of $1.06/share. This is an 80% success rate.

Highlights from Recent editions of the Prime Stock Newsletter
Recommendation Date Entry Point Recent Close or Exit Price Profit* Note
Norfolk Southern 'NSC'' Short Sale Jan 14 $41.68 $34.15 $7.53 Covered on the 23rd
Devon Energy 'DVN'' Short Sale

Jan 20

$57.67 $54.53 $3.14 Covered on the 20th

Aetna 'AET'

Jan 28 $32.03 $34.39 $2.36 Sold on the 28th.
* The per share PROFIT is a theoretical calculation based upon the opening price the day the recommendation is published and the intra day high (or low for short sales) on the exit day. The exit day is determined based upon the application of our "Rules for Trading", the implementation of "stops" within our stated policy, and may not reflect the complete or full movement of the underlying recommendation.

Dow Jones Industrial Average (INDU)

Current Opinion: Closed @ 7,850.41 Last Signal: Called Lower (again) with the close of 8,378.95 on October 24th. Current Expectations: We might see a short term rally however the Dow should continue to move lower and test 7,552.29 on a closing basis.


The S&P 500

Current Opinion: Closed @ 826.84 Last Signal: Called Lower (again) with the close of 876.77 on October 24th. Current Expectations: We might see a short term rally however the S&P 500 should continue to move lower and test 805.22 and then 752.44 on a closing basis.


The NASDAQ 100 (NDX)

Current Opinion: Closed @ 1,236.85 Last Signal: Called Lower (again) with the close of 1,202.27 on October 22nd. Current Expectations: The NDX should continue to move lower and test 1,136.61 on a closing basis.


CBOE Ten Year Treasury Index (TNX)

Current Opinion: Closed @ 2.873% Current Expectations: The TNX should move higher and test 3.027% and then 3.340% on a closing basis.


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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