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Sterling Weekly for the Week of April 12th, 2010
Finally Some Divergence

Since the previous edition of the Sterling Weekly, the Dow Jones Industrial Average gained 255.37 points or approximately 2.3%, to finish at 10,997.35 The overall market overall market continues to look positive; and I must admit I am happy to finally see some divergence in the performance of the various sector indices. The market in general has a tendency to overreact to both the upside and the downside. This is just a normal part of the market's function, and is nothing to be worried about, but is something that should be acknowledged. During periods of overreaction the broad market tends to move in unison, or the same direction. This was true during the downturn in the 1st half of 2009, and the subsequent rally through the remainder of 2009. While this type of movement may seem somewhat idyllic, it doesn't really provide the ideal trading environment some might imagine.

I used to have a bond manager when I first started in the market that was fond of saying there was always a bull market somewhere; and the flip side of that is that there should always be sectors that are not performing. This divergence in the performance of the various sector indices helps create the volatility that traders need to generate substantial profits, economically it helps direct capital to the most profitable areas of the economy.

My belief is that uncertainty creates this lack of divergence that causes the market to move in unison to the upside and the downside. Uncertainty as to how bad things might have gotten caused the entire market to move lower in the 1st half of 2009. The realization that things were not as bad as feared caused an united rebound after the lows were set in March of 2009; and uncertainty how new legislation and regulatory changes would affect the economy and market kept the various market sectors locked in a relatively united movement. As this uncertainty has cleared, the various sector indices have unlocked and started to move independently based upon their own fundamentals.

I've inserted a chart below showing the diverging performance of the Dow Jones Utility Average when compared to the S&P Healthcare Products Index 'RXP' which recently set a new yearly high.

Please note that this week is the start of earnings season.

Sterling Calendars for the Week of April 12th, 2010.
Economic Calendar


Est. Time Release


Consensus Prior
04/12 2:00pm Treasury Budget Mar. $67.5B ($191.6B)
04/13 8:30am Export Prices Ex-Ag. Mar. N/A. (0.2%)
04/13 8:30am Import Prices Ex.-Oil Mar. N/A 0.2%
04/13 8:30am Trade Balance Feb. ($39.0B) ($37.3B)
04/14 8:30am CPI Mar. 0.1% 0.0%
04/14 8:30am Core CPI Mar. 0.1% 0.1%
04/14 8:30am Retail Sales Mar. 1.1% 0.3%
04/14 8:30am Retail Sales Ex-Auto Mar. 0.5% 0.8%
04/14 10:00am Business Inventories Feb. 0.3% 0.0%
04/14 10:30am Crude Inventories 04/10 N/A 1.98M
04/14 2:00pm Fed's Beige Book Apr.    
04/15 8:30am Continuing Claims 04/03 4,600K 4,555K
04/15 8:30am Initial Claims 04/10 440K 460K
04/15 9:00am Net Long Term TIC Flows Jan. N/A $19.1B
04/15 9:15am Capacity Utilization Mat. 73.3% 72.7%
04/15 9:15am Industrial Production Mar. 0.7% 0.1%
04/15 10:00am Philadelphia Fed. Apr. 20.0 18.9
04/16 8:30am Building Permits Mar. 626K 637K
04/16 8:30am Housing Starts Mar. 610K 575K
04/16 9:55am Michigan Sentiment APr. 75.0 73.6
  Misc. Calendar
Date: Comments:
04/12 Alcoa 'AA' announces earnings after the close. Est. $0.10
04/12 Heartland Express 'HTLD' announces earnings. Time N/A. Est. $012
04/12 JB HUnt 'JBHT' announces earnings. Time N/A. Est. $0.26
04/13 Fastenal Announces 'FAST' earnings before the open. Est. $0.33
04/13 Talbots 'TLB' announces earnings before the open. Est. $0.02
04/13 CSX Corp. 'CSX' announces earnings after the close. Est. $0.69
04/13 Intel 'INTC' announces earnings after the close. Est. $0.38

Linear Tech 'LLTC' announces earnings after the close. Est $0.39

04/14 JP Morgan 'JPM' announces earnings before the open. Est. $0.64
04/14 Progressive 'PGR' announces earnings before the open. Est. $0.37
04/15 Charles Schwaab 'SCHW' announces earnings before the open. Est. $0.11
04/15 Fairchild Semiconductor 'FCS' announces earnings before the open. Est. $0.23
04/15 Advanced Micro 'AMD' announces earnings after the close. Est. ($0.10)
04/15 Amlin Pharm. 'AMLN' announces earnings after the close. Est. ($0.29)
04/15 Google 'GOOG' announces earnings after the close. Est. $6.57
04/16 Bank of America 'BAC' announces earnings before the open. Est $0.09
04/16 General Electric 'GE' announces earnings before the open. Est. $0.16
04/16 Genuine Parts 'GPC' announces earnings before the open. Est. $0.61
04/16 Mattel 'MAT' announces earnings before the open. Est. ($0.03)
  The full earnings calendar for this week can be found (here)

Prime Update:

The Prime Stock Newsletter is our daily newsletter that contains commentary on the overall market, and our single best trading idea for the day! (Both Long & Short Sale Recommendations) We select this stock through a combination of technical (charting) and fundamental (financial) analysis. The Prime Stock Newsletter provides select expanded quotation information, corporate description, select recent company news, our technical analysis of the shares and our expectations, and our options recommendation for the company.

Our most recent Performance Report is now available available (here). We are proud to report 17 of our last 20 recommendation resulted in profitable trades for an average profit of $0.40/share. This is an 85% success rate.

Archived copies of our Performance Reports can be found (here).

Highlights from Recent (20) Editions of the Prime Stock Newsletter
Recommendation Date Entry Point Recent Close or Exit Price Profit* Note
ConocoPhillips 'COP' Apr 9. $54.22 $55.47 $1.25 Still Holding
Avon Prod. 'AVP' Mar 29 $33.35 $34.32 $0.97 Sold on the 29th
Lincoln Nat'l 'LNC' Mar 16 $28.30 $30.74 $2.44 Sold on the 17th

* Our April 6th short sale recommendation of Forest Labs 'FRX' @ $30.80/share, closed @ $27.99/share on April 8th for a 2 day gain of $2.81/share.

* Our April 1st recommendation of Omnivision Tech. 'OVTI' @ $16.77/share, closed at $18.97/share on April 6th for a 5 day gain of $2.20/share.

* Our March 11th recommendation of Universal Health 'UHS' @ $33.31/share, closed at $36.59/share on March 22nd for an 11 day gain of $3.28/share.

* Our March 8th recommendation of Williams Sonoma 'WSM' @ $23.39/share, closed at $29.43/share on April 9th for a 31 day gain of $6.04/share.

* 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.


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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