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Sterling Weekly for the Week of September 12th, 2011
A Look at the Dow Jones Industrial Average

Since the previous edition of the Sterling Weekly the Dow Jones Industrial Average declined 248.13 points or approximately 2.2% to 10,992.13 The overall market sold off sharply late last week and looks to be starting this week off with another large move to the downside. The selling right now is being attributed to the European sovereign debt crisis. This is a very legitimate cause of market concern, but in my opinion it is not the sole reason for our market downturn. The other major issue effecting the market that is not currently getting as much attention as it deserves is the slowing economic growth rate.

This week has a heavy economics calendar with several key announcements being released starting with whole sale inflation in the form of the Producer Price Index (PPI) and Retail Sales on Wednesday, and inflation at the consumer level in the form of the Consumer Price Index (CPI) and jobs data on Thursday. Additionally Industrial Production and Capacity Utilization are to be released on Thursday as well. I feel that these various releases are going to give us a fairly decent look at where the U.S. economy is headed. If you notice, the expectations for most of these release is showing a continuing decline in economic activity. This is clearly indicating expectations of an economic slowdown; and if that is the case then we are probably looking at the U.S. economy slipping back into a recession later this year or sometime in early 2012.

If I am correct, and the U.S. economy slips back into recession, then I am expecting the Dow Jones Industrial Average to continue to move lower reflecting the declining U.S. economic output. I currently see downside support on the Dow Jones Industrial Average at the upper and lower end of the trading range established last summer following the Flash Crash of 2010. I see the upper end of this range at 10,605.50 and the lower end at 9,686.48.

Dow Jones Industrial Average for September 9th, 2011

 

Sterling Calendars for the Week of September 12th, 2011
Economic Calendar

Date

Est. Time Release

For

Consensus Prior
09/13 8:30am Export Prices - Ex. Ag. Aug. N/A 0.5%
09/13 8:30am Import Prices - Ex. Oil Aug. N/A 0.4%
09/13 2:00pm Treasury Budget Aug. ($132.0B) ($90.5B)
09/14 7:00am MBA Mortgage Index 09//10 N/A (4.9%)
09/14 8:30am Producer Price Index (PPI) Aug. (0.1%) 0.2%
09/14 8:30am Core Producer Price Index (Core PPI) Aug. 0.2% 0.4%
09/14 8:30am Retail Sales Aug. (0.5%) 0.5%
09/14 8:30am Retail Sales Ex - Auto Aug. (0.2%) 0.5%
09/14 10:00am Business Inventories Jul. 0.4% 0.3%
09/14 10:30am Crude Inventories 09/10 N/A (3.963K)
09/15 8:30am Initial Claims 09/10 410K 414K
09/15 8:30am Continuing Claims 09/03 3,700K 3,717K
09/15 8:30am Core Consumer Price Index (Core CPI) Aug. 0.2% 0.2%
09/15 8:30am Consumer Price Index (CPI) Aug. 0.2% 0.5%
09/15 8:30am Empire Manufacturing Sep. (5.0) (7.7)
09/15 8:30am Current Account Balance Q2 ($121.0B) ($119.3B)
09/15 9:15am Industrial Production Aug. (0.2%) 0.9%
09/15 9:15am Capacity Utilization Aug. 77.0% 77.5%
09/15 10:00am Philadelphia Fed. Sep. (15.0) (30.7)
09/16 9:00am Net Long-Term TIC Flows Jul. N/A $3.7B
09/16 9:55am Michigan Sentiment Sep. 53.0 55.7

Sterling Investment Services Site Update

Since the last edition of the Sterling Weekly we have been making some upgrades to our web site (www.sterlinginvestments.com) and the services offered. One of the 1st things visitors to Sterling Investments will notice is a new design to our web pages. We have installed a new content management system and we are in the process of transitioning our legacy pages over to the new system. With several thousand legacy pages this is a time consuming process and will take some time to get fully implemented. We very much appreciate your patience during this process. As part of this process we have cleaned up our graphic images and streamlined our content and hopefully visitors will notice and appreciate the cleaner look to our site. Additionally the improvements to our content management system will allow us to offer more services to our clients; including a daily market commentary blog.

Sterling Market Commentary Blog

As part of our new services we are now publishing a blog. The primary focus of our blog is a daily market commentary. Over the course of the last 12-18 months there have been a lot of changes to the functioning of the stock market. One of the biggest being the growth in computer driven algorithmic and flash trading. While this form of trading serves to help increase the liquidity in the market, it has also dramatically changed the nature of the open of the market; specifically in my opinion it has dramatically increased the swings in the pre-market futures to the point where the expected open could change completely in the last 20 minutes prior to the open. While I still believe it is possible to engage in the form of short term trading I wrote about in the Prime Stock Newsletter, I no longer felt it was possible to publish the Prime Stock Newsletter with enough time prior to the open for it to be of meaningful value to our readers. As a result we have discontinued the publication of the Prime Stock Newsletter. Additionally I have decided to continue to write the daily commentary portion of the Prime Stock Newsletter as the main part of the Sterling Market Commentary Blog, making it free to the general public.

Additionally, the Sterling Market Commentary Blog is available as an RSS feed; and later this week we plan on having our blog available for real time email delivery as well.

 

Prime Update:

We have discontinued the publication of the Prime Stock newsletter in order to focus our efforts on our Market Commentary Blog and white paper research publications. Archived copies of the Prime Stock Newsletter Performance Reports can be found (here).

 

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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