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Sterling Weekly for the Week of January 10th, 2011
2010 Index Performance Results

Since the previous edition of the Sterling Weekly the Dow Jones Industrial Average rose 82.42 points or approximately 0.7% to 11,637.45 I thought it would be appropriate to start the new year by taking a look back at 2010 to see the overall market and the various sector indices I track performed. I also thought it might be interesting to see what message the market might be sending us through its 2010 performance.

I track roughly 36 stock market indices. I consider 3 of these to be broad market indices, and the other 33 to be sector indices. In addition to those 36 sector indices I track 3 interest rate indices. Of the 36 stock indices I track, the average return was 17.4%. The Dow Jones Industrial Average gained 11% on the year while the S&P 500 gained approximately 10.1%, and the NASDAQ 100 gained a solid 19.2%. The index that came closest to matching the performance of the average index was the S&P Banking Index 'BIX' which gained 18.7% and was ironically the 18th ranked index. The top performing index was the Amex Airline Index 'XAL' which gained approximately 39.2% on the year The worst performing index was the Amex Pharmaceuticals Index 'DRG' which lost approximately 1.1% on the year, and was the only index I track to actually post a loss on the year.

In looking at how the ranking of these indices shook out I noticed a couple of things. The 1st being that the top performing index, the Amex Airline Index 'XAL', obviously benefited from a rebound in the economy. The same can be said for the MS Cyclical Index 'CYC' which came in 8th with a very respectable 25.65% return. The 2nd best performing index was the Amex Biotech Index 'BTK' with a 37.73% return on the year. I have always said that one of the 2 things that will cause a bull market is new technology; and the return on the 'BTK' bears that out. Unfortunately the biotech sector appears to be one of the few areas of the economy where new discoveries are being made.

The next thing I noticed was that commodity based indices accounted for 5 of the top 10 performing indices. The high tech indices were mid-range performers. The other very significant thing I noticed was that the sector indices that track the areas of the economy where government regulation had the greatest impact where the worst performing indices. I believe that if the Banking and Insurance sectors hadn't been coming off such rotten years in 2009 they too would have fallen into this category.

Finally there was the interest rate indices. They all showed a year over year decline in interest rates. Due to the Quantitative Easing programs, which are basically an attempt to manipulate the market, interest rates moved lower. It should also be noted that I consider the Quantitative Easing programs which create excess liquidity and the inflation fears they are causing to be a major factor driving the price of commodities higher; thus that is why the commodity indices were such strong performers.

Looking at what I see the market telling us, I believe that we could describe 2010 in market terms as the year of the Government in the Market.

Sterling Investment Services 2010 Index Performance Report
Ticker 
Closing Level
1 Year Change
Index Name 
Symbol
31-Dec-10
31-Dec-09
Points
Percent
1 Amex Airlines Index XAL 47.02 33.79 13.23 39.15%
2 Amex Biotech Index BTK 1,297.63 942.13 355.50 37.73%
3 Phlx. Gold/Silver Index XAU 226.58 168.25 58.33 34.67%
4 Amex Gold Miners  GDM 1,705.45 1,273.29 432.16 33.94%
5 Amex Gold Bugs HUI 573.32 429.91 143.41 33.36%
6 Amex Interactive IIX 307.73 233.86 73.87 31.59%
7 Phlx. Oil Services Sector OSX 245.12 194.92 50.20 25.75%
8 MS Cyclical Index  CYC 1,042.71 829.86 212.85 25.65%
9 Dow Jones Transportation DJ-20 5,106.75 4,099.63 1,007.12 24.57%
10 Amex MS Commodities CRX 958.79 772.91 185.88 24.05%
11 S&P Retail Index  RLX 508.38 411.12 97.26 23.66%
12 KBW Banking Index BKW 52.21 42.71 9.50 22.24%
13 Amex Networking  NWX 280.56 231.06 49.50 21.42%
14 North Am. Telecom Index XTC 933.25 777.94 155.31 19.96%
15 NASDAQ 100 Index  NDX 2,217.86 1,860.31 357.55 19.22%
16 S&P Chemicals Index  CEX 309.32 259.76 49.56 19.08%
17 CBOE Technology Index TXX 878.75 739.30 139.45 18.86%
18 S&P Banking Index  BIX 148.80 125.35 23.45 18.71%
19 MS. High Tech. Index MSH 664.20 578.10 86.10 14.89%
20 Phlx. Semiconductor Index SOX 411.82 359.91 51.91 14.42%
21 S&P Insurance Index  IUX 188.22 164.80 23.42 14.21%
22 Russell 1000 Index  RUI 696.90 612.01 84.89 13.87%
23 Amex Oil & Gas XOI 1,213.16 1,068.21 144.95 13.57%
24 S&P 500 Index  SPX 1,257.64 1,115.10 142.54 12.78%
25 Amex Disk Drive  DDX 134.84 119.85 14.99 12.51%
26 MS Consumer Index CMR 753.62 670.32 83.30 12.43%
27 Natural Gas Index  XNG 605.48 539.61 65.87 12.21%
28 Dow Jones Industrial Avg. DJ-30 11,577.51 10,428.05 1,149.46 11.02%
29 S&P 100 Index  OEX 565.90 514.09 51.81 10.08%
30 Computer Tech. Index XCI 956.49 889.12 67.37 7.58%
31 MS. Healthcare Providers RXP 1,640.72 1,528.22 112.50 7.36%
32 Amex Sec. Broker/Dealer XBD 121.51 115.04 6.47 5.62%
33 Dow Jones Utilities Index DJ-15 404.99 398.01 6.98 1.75%
34 Phlx. Utility Sector UTY 421.84 418.00 3.84 0.92%
35 S&P Healthcare Index  HCX 364.78 362.22 2.56 0.71%
36 Amex Pharmaceuticals DRG 305.88 309.21 (3.33) -1.08%
37 CBOE 30 Yr. Treasury Yield TYX 43.62 46.41 (2.79) -6.01%
38 CBOE 10 Yr. Treasury Yield TNX 33.05 38.43 (5.38) -14.00%
39 CBOE 5 Yr. Treasury Yield FVX 20.16 26.86 (6.70) -24.94%
----------
----------
----------
----------
Average
1,086.83
933.78
153.05
17.74%

 

Sterling Calendars for the Week of December January 10th, 2011
Economic Calendar

Date

Est. Time Release

For

Consensus Prior
01/11 10:00am Wholesale Inventories Nov. 1.3% 1.9%
01/12 7:00am MBA Mortgage Purchase Index 01/07 N/A 2.3%
01/12 8:30am Export Prices Ex.-Ag. Dec. N/A 0.8%
01/12 8:30am Import Prices Ex.-Oil Dec. N/A. 0.8%
01/12 10:30am Crude Inventories 01/08 N/A (4.16M)
01/12 2:00pm Treasury Budget Dec. N/A ($91.4B)
01/12 2:00pm Fed's Beige Book Jan.    
01/13 8:30am Initial Claims 01/08 420K 409K
01/13 8:30am Continuing Claims 01/01 4,070K 4,103K
01/13 8:30am Producer Price Index (PPI) Dec. 0.7% 0.8%
01/13 8:30am Core Producer Price Index (Core-PPI) Dec, 0.1% 0.1%
01/13 8:30am Trade Balance Nov. ($40.6B) ($38.7B)
01/04 8:30am Core Consumer Price Index (Core-CPI)   0.1% 0.1%
01/14 8:30am Consumer Price Index (CPI) Dec. 0.4% 0.1%
01/14 8:30am Retail Sales Dec. 0.7% 0.8%
01/14 8:30am Retail Sales Ex.-Auto Dec. 0.6% 1.2%
01/14 9:15am Industrial Production Dec. 0.4% 0.4%
01/14 9:15am Capacity Utilization Dec. 75.5% 75.2%
01/14 9:55am Michigan Sentiment Jan. 75.0 74.5
01/14 10:00am Business Inventories Nov. 0.7% 0.7%
  Misc. Calendar
Date: Comments:
01/10 Aloca 'AA' reports earnings after the close. Est. $0.19
01/10 WD-40 'WDFC' reports earnings after the close. Est. $0.61
01/11 Supervalue 'SVU' reports earnings before the open. Est. $0.32
01/12 DragonWave 'DRWI' reports earnings after the close. Est. ($0.01)
01/13 Infosys 'INFY' reports earnings before the open. Est. $0.66
01/13 Intel 'INTC' reports earnings after the close. Est. $0.53
01/14 JP Morgan 'JPM' reports earnings before the open. Est. $0.99
  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 19 of our last 20 recommendation resulted in profitable trades for an average profit of $0.53/share. This is an 95% 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
Rare Elements 'REE' Dec 28 $13.36 $17.92 $4.56 Sold on Jan. 4th
Moly Corp. 'MCP'' Dec 21 $40.45 $62.80 $22.35 Sold on Jan. 5th
Johnson Controls 'JCI' Jan 4 $39.67 $41.00

$1.33

Still Holding

 

* Our December 20th recommendation of the ProShares Agricultural ETF 'DBA' opened at $31.30/share and reached an intra-day high of $32.72/share on January 3rd for a gain of $1.42

* Our December 27th short sale recommendation of O'Reilly Auto 'ORLY' opened at $60.15/share, and reached an intra-day low of $56.02/share on January 7th for a gain of $4.13

* 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: 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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