The Market:

In last weekend's letter I stated that I expected the market to continue to move higher, but I did finish my market commentary with a note of caution that "we've seen a pretty good rally to start the year, and we may be in for a round of profit taking in the near future."

With yesterday's market close the 3 major market indicators that I am tracking generated sell signals. As a result I am expecting the overall market to move lower. At this point in time, I am expecting this move lower to relatively shallow and brief. The reasons for this is that the market has been essentially trading in this area since July of last year, and has built up quite a bit of trading history at these levels that creats many support and resistance levels. The bottom line: There are many points of support that the Dow would need to break through to have a major move lower and at this point in time I jus don't see it happening.

I am viewing this market pullback as an opportunity. I have been wanting to acquire a position in General Electric (NYSE: GE), but like a lot of people I am nervous about paying too much for the stock. With GE having closed Thursday at $25.03 and some less than positive comments this morning I am going to take the following strategy.

I am going to let the market sell off, since GE is a major component of the S&P 500 and the Dow Jones Industrial Average it should move lower. This is a good thing if you believe in buying low and selling high. The chart indicates that there is support for GE at $24.35 & at $23.60 I would expect that the current market move would bring GE down to these levels. There is a remote possibility that GE might test its October lows of $22.00

When it appears that the market has reached its expected support levels and is ready for a rally, I will then look at the price of GE and consider selling either a $22.50 or $25.00 PUT Option on the shares General Electric. This will allow us to realize cash income if the market rally's or reduce our cost basis if it drops lower.

I will further explain this strategy in this weekends' edition of the Sterling Weekly Newsletter.

The Dow Jones Industrial Average:

The Dow Jones Industrial Average closed Thursday at 8,698.15 down 25.03 points. In the process the Dow Jones Industrial Average generated a "Sell Signal". As a result of this I am expecting the Dow Jones to continue to move lower. The good news is that since the Dow has been trading in this area since last July it has now built a trading history that has created substantial near term support, so our risk of a major move lower is limited. I am expecting the Dow to test previous upside resistance levels at 8,602.61 and then 8,538.24 If the Dow closes below that level then I would expect it to test a previous support level of 8,303.78

The S&P 500

Today's Comments (1-17-03): The S&P 500 closed Thursday at 914.63 down 3.59 points. In the process the S&P 500 generated a "Sell Signal". I am expecting the S&P 500 to continue to move lower and test previous upside resistance level of 909.58. If the S&P closes below that level then I expect it to continue to move lower and test 875.40

The NASDAQ 100 (NDX)

Today's Comments (Jan 17, 03): The NASDAQ 100 (NDX) closed Thursday @ 1,061.49 down 12.11 points. In the process it generated a "Sell Signal". As a result I am expecting the NDX to continue to move lower and test support at the 1,049.03 level. If the NDX closes below that level, then I expect it to continue to move lower and test 984.36 on a closing basis.

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