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Sterling Weekly for January 16th, 2006


The overall market continues to look strong. I think the overall economy is performing very well and unless we experience a "shock to the system" I don't see anything that will interrupt our current strong economic growth. The Bottom Line: I am expecting the overall market to remain strong and the Dow Jones Industrial Average to set new record highs later this year.

I have decided to take a look at the price of Oil & the Amex Oil Index 'XOI' this week. I have inserted charts of both below and included separate discussions of each. While I haven't generally tried to make predictions for the upcoming year, I do think that the price of oil will have an impact upon the economy and our lives in 2006.

A close look at the chart of the 'XOI' I've inserted below shows that the 'XOI' reached a closing high of 1,091.02 on September 29th of last year and then pulled back to a low of 912.63 Since late December the XOI has rallied sharply higher and closed last week at 1,078.40 This has helped the XOI create a "cup pattern" and if the 'XOI' closes above 1,091.02 then it will complete this pattern which forecasts the XOI continuing to move higher towards the 1,269.41 level, or an approximate 16% increase. By the way, I would like to point out that if the price of Oil rises the same percentage above its previous closing high, then the price of oil would move to $81.25/barrel. This is reasonably close to what my analysis of the chart of Oil indicates it could reach. Current prices for Oil can be found (here.) Our most recent analysis of the Amex Oil Index 'XOI' can be found (here.)

I have inserted below a daily chart on the price of oil. The price of Oil reached a closing high of $69.82/barrel on August 30th following Hurricane Katrina, and then trended lower until it reached $56.15/barrel on November 18th. Since roughly mid-December the price of Oil has been trending higher. This is where it becomes important to remember the 1st rule of trends, they remain in place until they are broken. My analysis of this chart indicates that the price of crude oil is going to continue to move higher and test $69.82/barrel. If the price of Oil closes above this level, then it will have completed the cup pattern I have outlined below, which then forecasts a continued move higher to approximately $83.50/barrel. While there is no guarantee that the price of Oil will close above its old highs, if it does, look for it to continue to move higher to the mid $80/barrel price range.

Note: In case you are wondering about my track record with the price of oil in the past. In the March 7th, 2005 edition of the Sterling Weekly with oil in the mid $40/barrel range I forecast that oil would move to $64-$69/barrel. In the August 29th edition of the Sterling Weekly following Hurricane Katrina I wrote that the price of Oil might "hit $70 barrel, but that should be about it." I stand by what I've wrote and there it is for you to read.

Sterling Calendars for the Week of January 16th, 2006
Economic Calendar
Date Est. Time Release For

Consensus Prior
1/17 8:30am NY Empire State Index Jan 22.0 22.0 28.7
1/17 9:15am Capacity Utilization Dec 80.7% 80.5% 80.2%
1/17 9:15am Industrial Production Dec. 0.7% 0.6% 0.7%
1/18 8:30am Core CPI Dec. 0.2% 0.2% 0.2%
1/18 8:30am CPI Dec. 0.2% 0.2% (0.6%)
1/18 9:00am Net Foreign Purchases Nov. n/a n/a $106.8b
1/18 10:30am Crude Inventories 1/13 n/a n/a (2,887K)
1/18 2:00pm Fed's Beige Book        
1/19 8:30am Housing Permits Dec. 2,100k 2,100k 2,163k
1/19 8:30am Housing Starts Dec. 2,080k 2,050k 2,123k
1/19 8:30am Initial Claims 1/14 320k N/A 309k
1/19 12:00pm Philadelphia Fed. Jan 14.0 13.4 12.6
1/20 9:50am Michigan Sentiment-Prel. Jan. 92.0 93.0 91.5

  Misc. Calendar
Date: Comments:
1/16 The stock market is closed in observance of Martin Luther King Day.
1/17 Continental Airlines 'CAL' reports earnings before the open. Est. ($1.63)
1/17 Intel Corp. 'INTC' reports earnings. Time n/a. Est. $0.43/share.
1/17 IBM reports earnings after the close. Est. $1.94/share
1/17 MDC Holdings 'MDC' reports earnings before the open. Est. $4.01/share.
1/17 Wells Fargo 'WFC' reports earnings before the open. Est. $1.15/share.
1/17 Yahoo, Inc. 'YHOO' reports earnings. Time n/a. Est. $0.17
1/18 AMR Corporation 'AMR' reports earnings. Time n/a. Est. ($2.45)
1/18 Apple Computer 'AAPL' reports earnings after the close. Est. $0.55
1/18 eBay 'EBAY' reports earnings. Time n/a. Est. $0.22/share.
1/18 JP Morgan Chase 'JPM' reports earnings before the open. Est. $0.72
1/19 Capital One Financial 'COF' reports earnings after the close. Est. $0.93
1/19 D.R. Horton 'DHI' reports earnings before the open. Est. $0.94
1/19 Merrill Lynch 'MER' reports earnings. Time N/A. Est. $1.30
1/20 Citigroup 'C' reports earnings before the open. Est. $1.00
1/20 General Electric 'GE' reports earnings. Time N/A. Est. $0.55
1/20 Schlumberger 'SLB' reports earnings before the open. Est. $0.96
  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.

Highlights from Recent editions of the Prime Stock Newsletter
Recommendation Date Entry Point Recent Close or Exit Price Profit* Note
Advanced Micro 'AMD' Nov. 7th $24.63 $37.46 January 12th intra-day high.


Capital One 'COF' Dec. 19th $85.74 $89.14 January 11th intra-day high $3.40  
Gold Corp. 'GG'

Dec. 29th

$21.72 $25.29 $3.48 Should continue to move higher.
* 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 @ 10,959.87 Last Signal: Called Higher with the close of 10,823.72 on December 13th. Current Expectations: I think the end of the year weakness is over for the market. I am expecting the Dow Jones Industrial Average to move higher and test 10,940.55 on a closing basis.

The S&P 500

Current Opinion: Closed @ 1,287.61 Last Signal: Called higher with the close of 1,267.43 on December 13th. Current Expectation: I am expecting the S&P 500 to continue to move higher and test 1,312.54 on a closing basis.

The NASDAQ 100 (NDX)

Current Opinion: Closed @ 1,746.78 Last Signal: Called Higher with the close of 1,679.93 on January 3rd. Current Expectations: This index was hit harder by the end of the year selling, declining more than the other major indices. I am now expecting the NDX to continue to move higher and test 1,751.45 on a closing basis.

CBOE Ten Year Treasury Index (TNX)

Current Opinion: Closed @ 4.350% Last Signal: Called Lower after the close of trading on January 13th with a close of 4.350% Current Expectations: This index should move lower and test then 4.176% 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: If you would like to contact us our fax # is (404)-816-8830 Email address is: 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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