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Sterling Weekly for December 15th, 2003

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Well it definitely has been an interesting few weeks since the previous edition of the Sterling Weekly. Since then we have seen a major issue develop with the NASDAQ halting trading in Corinthian Colleges 'COCO' because a single trader entered a erroneous number of shares to sell and sent the market sharply lower. The problem is that the NASDAQ was unable to halt trading on other ECNs and the shares of 'COCO' continued to trade. When the trading resumed the shares moved back higher. Then after trading resumed the NASDAQ cancelled many of the trades that executed during the trading halt. This left many traders who had purchased shares of 'COCO' during the trading halt and then sold after trading resumed for a quick and sizable profit, or at least who thought they had, actually short the shares of 'COCO'. I believe their attempt at dealing with the problem of the number of shares to sell created many more problems than it actually solved. Trading in the shares of 'COCO' should not have been halted unless all the other ECNs and exchanges agreed to halt trading at the same time. A cynical person could say that the NASDAQ moved to protect one of its members and the expense of the trading community. We will probably see new regulations dealing with the halting of trading in issues that trade on many different platforms, if not a multitude of lawsuits from traders who suffered losses.

The 7th Rule of Trading is "Cut Your Losers, Keep Your Winners!" This is a very basic concept and one that you would think would naturally be followed, but it's not. Adjusting your portfolio could be thought of as managing the personnel of a professional sports team. No one in their right mind would trade all their star players for a bunch of bench warmers, because then all you would have is a team of mediocre, or worse, players. Yet investors do the same thing all the time. I saw this many times when I was a stockbroker; an investor who needs money for something calls up and needs to sell an investment to raise the cash, more times than I can count the first thought was to avoid selling something that was not profitable so they would want to sell their biggest winners. Other times it is an investor who is looking to avoid short term capital gains taxes, so they will want to sell shares in a company that is a better performing investment and they have held for a long period of time to simply avoid the higher short term taxes. The bottom line is that an investor should keep their best investments and seek to constantly weed the poorer performers from the portfolio. This will result in a team of superstars that produces championship results.

Economic Calendar for the week of December 15th, 2003.
DATE Est. Time Release For Actual Consensus Prior Revised From
Dec 15 8:30am Empire State Index Dec.   38.0 35.0 41.0  
Dec 16 8:30am CPI Nov.   0.0% 0.1% 0.0%  
Dec 16 8:30am Core CPI Nov   0.1% 0.1% 0.2%  
Dec. 16 8:30am Housing Starts Nov.   1.930M 1.919M 1.960M  
Dec. 16 8:30am Building Permits Nov.   1.920M 1.911M 1.981M  
Dec. 16 8:30am Current Account Q3   ($136.0B)


Dec. 16 9:15am Industrial Production Nov   0.6% 0.5% 0.2%  
Dec. 16 9:15am Capacity Utilization Nov   75.3% 75.4% 75.0%  
Dec. 18 8:30am Initial Claims 12/13   360K 365K 378K  
Dec. 18 10:00am Leading Indicators Nov.   0.3% 0.3% 0.4%  
Dec. 18 12:00pm Philadelphia Fed. Dec.   30.0 25.0 25.9  

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 a $30/month. a 3 DAY TRAIL SUBSCRIPTION IS ONLY $4.95 (more).

NEW FEATURE: In the late 90's and into early 2000 I published the Professional Trader's Newsletter, which featured four (4) trading recommendations daily, as well as my nightly review of all the various sector indices. It was from these four (4) recommendations I selected the one I liked the best, as the expanded recommendation for the Prime Stock Newsletter. I have decided to combine the two newsletter formats and add three additional trading recommendations to the Prime Stock Newsletter. The new Prime Stock Newsletter will continue to have a primary recommendation with expanded information and analysis, three additional trading recommendations (the new feature), and my list of stocks with patterns indicating they are moving either higher or lower.

Highlights from Recent editions of the Prime Stock Newsletter
Recommendation Date Entry Point Recent Close or Exit Price Profit* Note
Pacific Healthcare 'PHS' Nov 26 $61.70/share $65.11 close on 11-28 $3.41 Should continue to move higher.
Dick's Sporting 'DKS' Nov 25 $50.20/share $52.58 close on 11-28 $2.38 Should continue to move higher.
Gilead Sciences 'GILD'

Nov 24

$57.00 $59.39, exit on 11-24 $2.39  
* 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.

The Dow Jones Industrial Average:

Today's Opinion: Closed @ 10,042.16 Last Signal: Called Higher with the close on Nov. 24th of 9,747.79 Current Expectations: I am expecting the Dow Jones Industrial Average to move higher and test 10,097.50 and then 10,259.74

The S&P 500:

Today's Opinion: Closed @ 1,074.15 Last Signal: Called higher with the close on Nov. 24th of 1,052.08 Current Expections: I am expecting the S&P 500 to move higher and test 1,080.95 and then 1,100.64

The NASDAQ 100 (NDX)

Current Opinion: Closed @ 1,417.27 Last Signal: Called lower with the close on December 5th of 1,406.91 Current Expectations: I am expecting the NASDAQ 100 to move lower and test 1,363.49 Longer term I am expecting the NASDAQ 100 to test 1,555.11 and then 1,846.96.

CBOE Ten Year Treasury Index (TNX)

Current Opinion: Closed @ 42.42 Last Signal: Called Lower with the close on Dec. 5th of 42.15 Current Expectations: The TNX should move lower and test 41.47 and then 40.09 on a closing basis.

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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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