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Hottest Deals of the Week

Sterling Weekly for November 7th, 2005

The overall market has continued to move higher since the October 31st edition of the Sterling Weekly in which I discussed an apparent "triangle pattern" forming on the Dow Jones Industrial Average. Since then the Dow has rallied to the upper end of that expected trading range. (see chart below) Now is when we will all get a chance to see how accurate I am. If this pattern is going to hold then what I expect will happen is that the Dow will see 1 or 2 more days of upside movement before a pullback starts that will take it back lower towards the 10,200 level. Or if this pattern was just a figment of my imagination then the Dow will continue higher towards the 10,700 level.


This week I wanted to take a look at the Amex Securities Broker/Dealer Index 'XBD'. Even though the overall market has been rallying recently, the 'XBD' has been the only sector index to have set a new yearly high (actually a new all-time high) within the last week. The index is designed to measure the performance of large companies in the US securities industry. There are 12 individual companies which comprise the 'XBD'. They are Raymond James 'RJF', Schwab 'SCH', Goldman Sachs 'GS', Lehman Bros. 'LEH', Jefferies Group 'JEF', Ameritrade 'AMTD' , Merrill Lynch 'MER' Legg Mason 'LM', Bear Stearns 'BSC', E*Trade 'ET', AG Edwards 'AGE', and Morgan Stanley 'MWD.' A couple of very basic principals to consider; 1) a trend remains in place until it is broken, and 2) indices are comprised of component issues and they move their respective indices not the other way around. Therefore if you are buying one of the best performing companies within a top performing index, the your chances of having a profitable trade are pretty darn good. And that is exactly what I did with the October 20th edition of the Prime Stock Newsletter when I recommended Merrill Lynch 'MER' at $62.45/share; and yesterday the shares of 'MER' closed at $65.80/share, up $3.35 or 5.3% in 13 trading days. Not too bad!

So here is the big question, where do I think the 'XBD' will go to over the short term?? Well I looked at a longer term chart and it appears that the 'XBD' will make a move over the intermediate term to approximately the 212 level. With the 'XBD' having recently closed at 186.57 that is a move of approximately 25 or an additional 13% of upside movement.

Sterling Calendars for the Week of November 7th, 2005
Economic Calendar
Date Est. Time Release For

Briefing.com

Consensus Prior
11/07 3:00pm Consumer Credit Sep $3.0B $6.0B $4.9B
11/09 10:00am Wholesale Inventories Sep 0.4% 0.4% 0.5%
11/09 10:30am Crude Inventories 11/04     N/A
11/10 8:30am Export Prices Ex.-Ag. Oct. N/A N/A 1.1%
11/10 8:30am Import Prices Ex.-Oil Oct. N/A N/A 1.2%
11/10 8:30am Trade Balance Sep ($60.0B) ($61.3B) ($59.0B)
11/10 8:30am Initial Claims 11/05 320K 320K 323K
11/10 9:45am Mich. Sentiment-Prel. Nov. 77.0 76.0 74.2
11/10  2:00pm Treasury Budget Oct. ($50.0B) ($50.0B) ($57.3)

  Misc. Calendar
Date: Comments:
Nov. 07 American Bio Medica 'ABMC' reports earnings after the close. Est. N/A
Nov. 07 Midway Games 'MWY' announces earnings after the close. Est. ($0.25)
Nov. 07 Rural Cellular Corp. 'RCCC' announces earnings. Time N/A. Est. ($0.70)
Nov. 07 ViroPharma 'VPHM' announces earnings before the open. Est. $0.21
Nov. 07 WD-40 Co. 'WDFC' announces earnings. Time N/A Est. $0.54
Nov. 08 Agilysys 'AGYS' announces earnings before the open. Est. $0.16
Nov. 08   Blockbuster 'BBI' announces earnings before the open. Est. ($0.15)
Nov. 08   EchoStar Comm. 'DISH' announces earnings. Time N/A. Est. $0.47
Nov. 09   Cisco Systems 'CSCO' announces earnings after the close. Est. $0.24
Nov. 09   Delta Airlines 'DALRQ' announces earnings. Time N/A. Est. ($3.00)
Nov. 09   King Pharmaceuticals 'KG' announces earnings before the open. Est. $0.32
Nov. 09   NVIDA Corp. 'NVDA' announces earnings. Time N/A. Est. $0.36
Nov. 09   US Airways 'LCC' announces earnings before the open. Est. ($2.12)
Nov. 10 Inter'l Game Tech. 'IGT' announces earnings before the open. Est. $0.30
Nov. 10   News Corp. 'NWS' announces earnings after the close. Est N/A
  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
Caterpillar 'CAT' shorted Oct. 13 $54.56/share $48.25 intra day low on October 21st

$6.31

Very negative chart ahead of earnings.
XM Satellite 'XMSR' shorted Oct. 21 $30.42 $27.63 intra day low on Oct. 27th $2.79 This was our 2nd short rec. in Oct. on XMSR which ultimately announced disappointing earnings on the 27th.
Amgen 'AMGN' shorted

Oct 6

$78.01 $73.51 intra-day low on October 13th. $4.50 Should move lower.
* 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 @ 10,586.23 Last Signal: None. Current Expectations: I am expecting the Dow Jones Industrial Average to move higher and test 10,682.94 on a closing basis.

The S&P 500

Current Opinion: Closed @ 1,222.81 Last Signal: none Current Expectation: I am expecting the S&P 500 to move higher and test 1,228.81 and then 1,241.48 on a closing basis.

The NASDAQ 100 (NDX)

Current Opinion: Closed @ 1,629.27 Last Signal: none Current Expectations: In Friday's edition of the Prime Stock Newsletter I mentioned that the NDX had reached a level of resistance marked by a "double top." Friday's upward move in the NDX carried the index above that level. While the index may see a short term pullback below the 1,627 level, I am expecting the NDX to move higher and test 1,675.03 and then 1,720.91

CBOE Ten Year Treasury Index (TNX)

Current Opinion: Closed @ 4.639% Last Signal: Called Higher after the close of trading on October 25th at 4.508% Current Expectations: This index made a very quick trend reversal and should continue to move higher and test then 4.695% 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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