sta market update 6-7-10 corrected copy

8/9/2019 STA Market Update 6-7-10 Corrected Copy

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Corrected CopyMixed MessagesLibor-OIS spread narrowed last week which, together with our internal indicators,helps to keep our (very) short-term bullish bias into early this week. Our internalindicators lead us to believe Mondays close will be up from Fridays close. TheRatio between tech stocks (market leaders) and the SPX has broken out and maybe telling us the bounce is still intact. That all could change, however, by Mondaysclosing bell. Were going to have to play this one day at a time so be sure to checktheDaily Commentary regularly. OurBest Case Scenario is still 9,400 Dow/1,010SPX. Sell signals in Crude Oil, FXI, and the Japanese Yen. Buy the Nikkei, TLT

(and the Japanese Yen)

The Week that Was (and we wish wasnt)Last week we found out that we need a new acronym for sinking Europeaneconomies as PIIGS wont work now that weve added Hungary and Romania; andwhat about Dubai? Another Japanese Prime Minister resigned. U.S. and SouthKorean warships were daring Kim Il Jong to play a game of chicken but decidedthey werent prepared. STOP THE WAR were not ready yet. Its no wonderEVERYBODY loves gold, but if everyone loves it, how long can that trade last? Iranannounced it will start selling Euros and buying Dollars (???). The U.S. Mint isrunning out of gold and silver. Warren Buffett wont testify to Congress unless

subpoenaed. Investors are getting serious about removing their money frommutual funds. And we havent even touched on B.P. or Fridays non-farm payrollreport.

SentimentInvestors Intelligence

39.8% bulls and 28.4% bears - stubbornly bullish

AAII bear to bull ratio1.7

TrimTabs weekly database shows that there have been net (mutual fund)redemptions of over $37 billion in May the most since October 2008 and thefifth heaviest outflow on record.

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June 7th, 2010

arketUpdate

ixed Messages

he Week that Was

ntiment

S Equities

&P 60 minute

&P Daily Trends

ch/SPX Ratio

cClellan Oscillator

reign Equities

kkei

TSE/Xinhua25

S Treasuries

LT

urrencies

ollar

uron

ommodities

CI

ude Oil

old


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Information provided by Seattle Technical Advisors is expressed in good faith but is not guaranteed.

US EquitiesS&P 500Both the 150-day and200-day moving averages are now pointed down which confirms ourearlier RSI comments in the May 17thMarket Watch concerning equities now being in a bearmarket:

Most technicians look at the direction of the 200 (or 150) day moving average to determine bull

vs. bear markets. While we follow that indicator, we prefer to determine labels by the range in

which 14-day RSI is travelling. If RSI is trading in a high range (consistently breaking above 70

but never dropping below 30) we think of that as a bull market.

And the May 24thMarket Watch:The S&Ps 14-day RSI dipped to 29.80 last Thursday, just barely below the 30 level we identified

as necessary to call this a bear market as opposed to the direction of the 150 or 200-day

moving averages

Bullish Head and Shoulders is Broken

The S&P and Dow made new closing lows for the post-April decline on Friday, but the NASDAQfailed to confirm that low. The Feb10 closing low is still intact. 1103 has been tough resistancefor SPX. There is some Fib resistance there but we didnt think it would be enough to turn backthe advance (bounce). Tough resistance does exist at 1,120-1,125 and almost-impossibleresistance at 1,150. The head and Shoulders on the S&Ps 60-minute chart which pointed to1,040 would appear to have been disqualified by Fridays drop below its right shoulder so wedont have much hope of reaching that 1,145 target set previously.

Figure 1: S&P 500, 60-minute chart

3-day RSI has been unable to break above 80 or breach 20 May 26th. Trading range? The Dowstopped dead at the Fib zone surrounding 10,300. Fib support at 9,900 and 9,400.


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One trendline which we drew several weeks ago but never shared with readers because it was abit experimental has come into play when SPX respected it by closing right on it on Friday. Itseems only a matter of time before it is breached but were also watching to see if it is breachedbefore the post April declining trendline is broken and what happens with other indicators if thedeclining line is broken. Well also be watching closely to see if the S&P can get through that1,103 level before breaching the long-term trendline.

Figure 2: S&P 500

A close by 14-day RSI below 35.33 today will be a fresh sell signal assuming the bandwidthindicator stays in its sell-mode. As of Friday, it looked like it could easily breach the previouslow (again) and change back to a buy!


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Figure 3: S&P 500Ratio Chart: Tech v SPXThe Ratio between tech stocks (market leaders) and the SPX has broken out and may be tellingus the bounce is still intact.

Figure 4; Ratio S&P Tech Index/ S&P 500

McClellan OscillatorWe are also seeing the positive divergence we were looking for prior to a bottom.


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Figure 5: McClellan Oscillator, S&P 500

Foreign EquitiesNikkeiThe Nikkei triggered a buy-signal on Thursday and with stochastics and MACD both turning upthis looks like a buy. Fib resistance zone starts at 10,100 and gets intense just under 10,200.10,200 is the 38.2% retracement of the April decline.

Figure 6: Nikkei 225

FTSE/Xinhua 25, FXI

Sell signal on Friday. We see a Fibonacci zone surrounding the 50% retracement (40.80) of theApr10 decline. We see support at 35 and 31.50.


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Figure 7: FTSE/Xinhua25, FXI

U.S. Treasuries30-Year TreasuryThe long-bond and TLT moved into their buy-modes and triggered buy-signals last Friday.We feel treasuries could grind in the 126-128 area for a few months (see 3 peaks, June 1st, 2010Market Update) before breaking out to a final top. TLT Fib zone at 100-100.50.

Figure 8: iShares +20-year Treasury Index, TLT3 Peaks and a DomeTypically, the time required from the April low to the dome is 7 months. That would take us toOctober just after equities are expected to have made their 40 and 80-week cycle bottoms. Areturn to the bottom of the formation could send prices below the neckline of the head-and-shoulders which will trigger a massive fall in bonds lasting for years.

CurrenciesUS DollarAfter triggering a buy-signal last Tuesday, the Dollars bandwidth indicator slipped into a sell-mode on Thursday. The Dollar is firmly into the Fib zone surrounding 88.50 and it may be thislevel, rather than our previously stated target of 90, is the top for the Greenback. Last Thursdaywas a 107-day cycle top target.


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Figure 9: US Dollar

EuroWhile you certainly wouldnt know it from price action, the Euro is in a buy-mode, but has yet to

trigger a buy-signal. We dont see any real support until 116-117. Our Fibonacci trendlinemodel points to a possible bottom this Wednesday at 117.

Figure 10: Euro

Japanese YenThe Yen popped last Friday putting in its exact intraday low on non-farm payrolls yet again andtriggering a CCM buy-signal. We see Fib zone resistance at 118 and 126-127. A trianglemeasures to 127.


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Figure 11: Japanese Yen

CommoditiesContinuous Commodity Index, CCI3-day RSI made two attempts to break over 80 in May and failed on both attempts. Itsbandwidth indicator is in a buy mode but 14-day RSI is headed down. Stochastics and MACDhave turned down again. Some support at 448 but better support at 443 and 435. CCI is tradingbelow its 200-day moving average.

Figure 12: CCI, Continuous Commodity Index

Crude OilFriday morning we reported that 14-day RSI had exceeded its upper Bollinger band and that ifCrude was truly in a sell-mode then this would be a sell signal. During Fridays trading 14-dayRSI breached its advancing anti-trendline so this is a reiteration of the CCM sell-signal.There exist several minor Fibonacci confluence zones until Crude gets below 59. The zone at 67stopped the decline in May and we may see some hesitation there again. For now we are focused


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on zones at 67 and 53. Last week we mentioned that We see resistance from Fridays close to76.50. and that is where the advance stopped. Long-term target: $43.

Figure 13: Crude Oil

Figure 14: Crude Oil

GoldGolds bandwidth indicator is close to breaching a previous low and taking us back to a buy modebut weve seen this one get close before and then turn back upwards. For now well stick withlast Wednesdays sell signal. Stochastics and MACD are pointed down. The 21-week cycle is notdue to bottom until July 1. Fibonacci confluence zones at 1160 and 1145-1155. Long-term; head-and-shoulders points to 1300. Last week we speculated that GLD maybe ready to kiss theadvancing trendline goodbye. It appears to have done just that.


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Figure 15: Gold

sta market update 6-7-10 corrected copy

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