Well the last couple of weeks have definitely been interesting since the last edition of the Sterling Weekly. Normally in the past I have stayed away from strong political topics. However, as I have stated in the past, I believe that the single biggest influence on the markets is politics and political decisions. My biggest regret about the period of time I took off from writing my newsletter is not getting my opinions concerning topics I felt strongly about on the record. Therefore this week I am going to talk about Iraq.

The Iraq problem continues to overhang the market, and I've come to believe the market will continue to trend lower until it is resolved. I definitely believe we have long passed the point of no return The US military today is greatly superior to the military force we fielded in 1991, and the Iraqi military is far weaker than it was in 1991. Even without a "northern front" this war should be over very quickly. If Iraq uses chemical or biological weapons it will only further validate the US position.

There are three basic outcomes and multiple variations/combinations of the following: A) Regardless of the outcome of the actual battles, demonstrations and unrest breakout throughout the Arab world. I am overall a very optimistic person, and I believe basically everyone on the planet wants to live in a free society. Once the US begins to implement democratic reforms in Iraq, the demonstrations would end and our Arab allies would begin to institute badly needed reforms. We may even see "Pro US" demonstrations in some parts of the Arab world. This would cause the US markets to move lower in the short term due to the unrest and turmoil potentially hurting the earnings of US multinational companies. In the longer term the reduced threat of turmoil and the reforms cause the markets to move higher. B) The war is over very quickly, other rogue nations tone down their aggressive behavior and over the next several months reforms begin to occur in the Arab world. This is the best case scenario, and the markets will move instantly higher. C) We do nothing and there is an increase in the level of world terrorism and unrest. This would cause the markets to move lower, stay lower, and have a lower P/E ratio for future valuations. This would be because the increased level of unrest and terrorism would increase the risk of loss to US companies. This is our worst case scenario, and in my opinion the most difficult to recover from.

The Bottom Line: The worst thing we can do is to do nothing. The sooner we do something concerning Iraq, then the better. Until then, the US markets are going to move lower and probably test new multi year lows.

In the last several editions of the Sterling Weekly I had discussed a strategy for acquiring General Electric (GE) by selling a "Puts" to generate income and acquire GE at a below market price. As a result we had sold the GE February 25 Puts for $1.80/contract and acquired GE with a cost basis of $23.20/share.

In the last edition of the Sterling Weekly, I suggested selling the March $22.50 GE Calls if we could get greater than $1.25/contract. Last night the GE March $22.50 Calls closed at $1.30 by $1.40/contract. Since I am expecting the overall market to move lower, I am looking to reduce our risk and generate some cash in the process by selling the March Calls. IF we are able to sell the March $22.50 Calls at $1.30/contract, then we will have reduced our cost basis on GE to $21.90/share.

If the market moves sharply lower and I get the chance to buy back the GE March Calls for less than $0.50/contract, I will strongly consider doing so.

The Dow Jones Industrial Average:

The Dow Jones Industrial Average closed Monday at 7,568.18 down 171.85 points. It's lowest level since early October of last year. I believe that one of the things the market hates the most is uncertainty, and the uncertainty over the Iraq situation is taking it's toll on the US markets. The fact that France opposes us is not significant in respect to our ability to defeat Iraq and create a democracy in the Arab world. I was recently at the Springsteen concert here in Atlanta and ran into a friend of mine who works for a French owned company. He admitted to me that the salesman for his company were having a very difficult time due a backlash against the French position regarding Iraq. A very wise man once told me that if you want to figure out the behavior of someone you can't understand, then follow the money trail!!! France has more trade dollars with Iraq than the US!!!??????? I don't think so!!!!!!!!!!!!!! So, if France stands to loose more than it gains by Saddam Hussein being removed power, then maybe that means France will loose more trade dollars with the US & the rest of the word if Saddam Hussein is removed from power than if they oppose the US and we allow him to remain in power???!!!! What would cause this to happen??? How about this: After the US topples Saddam Hussein and it is discovered France has been violating the UN embargo and supplying Iraq with the technology to make weapons of mass destruction and other "no no" items. It's either that or the post World War II French identity is completely based upon opposing the United States what ever the cost. However, until we again take a position of leadership our markets will continue to trade like those of a second rate country such as France.

Today's Opinion: Closed @ 7,568.18 Last Signal: Sell Signal on Feb. 24th, 2003 from the closing level of 7,858.24 Current Expectations: The index should move lower and test 7,533.95 and then 7,286.27.

The S&P 500 closed Monday at 807.48 down 21.41 points. The trend of the S&P 500 is clearly lower. I expect the S&P 500 to find a minor amount of support at 803.92, the point from which it gapped higher on October 11th, 2002. However I am not expecting that point of support to hold, and there is a high likelihood that the S&P 500 will test 776.76, the low point of 2002.

Today's Opinion: Closed @ 807.48 Last Signal: Sell Signal on 2-24 with the close of 832.58 Current Expections: Lower The index should test 803.92 and then 776.76 on a closing basis

The NASDAQ 100 Index closed Monday @ 964.29 down 22.53 points. The NDX gapped lower on the open Monday and appears to be heading towards support @ 951.90. There is a slight amount of support at that level, but I do not expect it to hold. I expect that the NDX will continue to move lower and test 910.13, the point from which it gapped higher on October 17, 2002. However there is a gap at 849.57 that needs to be repaired on the chart, so sooner or later, expect the NDX to move back to that level and "fill" the gap and repair the chart.

Current Opinion: Closed @ 964.29 Last Signal: Called lower on 2-24-03 @ 994.69 Current Expectations: The NDX should move Lower and test 951.90 and then 910.13