the dow remains oversold on its daily chart after friday’s rally

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  • 8/9/2019 The Dow remains oversold on its daily chart after Fridays rally.

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    Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com . ValuEngine is a fundamentally-based quant research firm in Newtown, PA. ValuEnginecovers over 7,000 stocks every day.

    A variety of newsletters and portfolios containing Suttmeier's detailed research, stockpicks, and commentary can be found HERE.

    Augus t 30 , 2010 The Dow rema ins ove r so ld on i t s da i ly c ha r t a f t e r F r iday s r a l ly.

    The decline in the yield on the 10-Year US Treasury is no longer overdone on its daily chart.Gold remains overbought on its daily chart. Crude oil is not longer oversold on its daily chart.The euro is no longer oversold on its daily chart, but the 50-day simple moving average at1.2774 remains resistance. The Dow remains oversold on its daily chart.

    10-Year Note (2.646) My annual pivots are 2.813 and 2.999 with a weekly pivot at 2.648, and daily,quarterly and semiannual risky levels at 2.527, 2.495 and 2.249 versus last weeks low yield at 2.419.Note that the decline in yield is no longer overdone on the daily chart.

    Courtesy of Thomson / Reuters

    Comex Gold ($1240.0) Semiannual, weekly, quarterly, monthly, and annual value levels are$1218.7, $1211.5, $1140.9, $1133.2 and $1115.2 with a daily pivot at $1242.5, and semiannual riskylevel at $1260.8. Note that gold is still overbought on its daily chart.

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    Courtesy of Thomson / Reuters

    Nymex Crude Oil ($75.43) My daily value level is $72.02 with annual, monthly, weekly andsemiannual risky levels at $77.05, $80.02, $81.35 and $83.94. Note crude oil remains oversold on the daily chart profile.

    Courtesy of Thomson / Reuters

    The Euro (1.2733) Daily, quarterly and monthly value levels are 1.2579, 1.2167, 1.1486 and 1.1424with weekly and semiannual risky levels at 1.3170 and 1.4733. Note that the euro is still oversold on its daily chart.

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    Courtesy of Thomson / Reuters

    Daily Dow: (10,151) Daily and quarterly value levels are 9,919 and 7,812 with my annual pivot at10,379, and monthly, semiannual, weekly and annual risky levels at 10,439, 10,558, 10,904 and11,235. My annual risky level at 11,235 was tested at the April 26 th high of 11,258.01. Note that the daily chart remains oversold with the 21-day, 50-day and 200-day simple moving averages at 10,338, 10,278 and 10,454.

    Courtesy of Thomson / Reuters

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    Why we are not in a Bond Bubble - As long as Team Bernanke insists on a zero funds rate policy theUnited States risks at least another decade of extremely low interest rates with the 10-Year yield

    trading between 4% and 2%. In December 2008 the 10-Year yield approached 2% and 4% was testedin June 2009 and April 2010.

    The reason why Treasury yields have declined to 2.5% recently is the Feds move to buy long maturityUS Treasuries to replace the maturing Fannie Mae and Freddie Mac debt and mortgage securities,which totals about $1.5 trillion. The unintended consequence is lower savings rates for all Americans.

    Community and regional banks are not lending and they are seeing increasing deposits fromAmericans given that the FDIC protection has been increased to $250,000 per bank permanently.Since Banks are not lending, they buy US Treasuries to lock-in the spread versus what they pay fordeposits. Thus they must pay a lot less for deposits since the last Fed meeting. This drains moneyfrom consumers coffers causing the economy to slow. The FDIC releases its Quarterly

    Banking Profile on August 31st

    at 10:00 AM.In my daily blogging I have repeatedly said the funds rate should have never have been taken below3% because it takes money out of consumers pockets by reducing income on money market funds,CDs and other bank deposits. This ridiculous Fed policy has our country "Turning Japanese, Ireally Think so"! If the Federal Reserve cuts the rate on Bank Reserves held at the Fed to zero from0.25%, banks will buy more US Treasuries.

    Stocks rallied on Friday on the Bernanke Pledge to do whatever it takes to get the economy movingagain. That requires a 3% federal funds rate, which he will not do!

    Watch the Dow Transportation Average A bearish cross-over is likely this week with the 50-day

    simple moving average at 4252 falling below the 200-day simple moving average at 4243. Closes below 10,188 Dow and 4174 Transports would be below the five-month modified moving

    averages which shift the monthly chart profiles to negative. Closes this week below 10,284 Dow and 4258 Transports would be below the five-week

    modified moving averages which shift the weekly chart profiles to negative.

    Thats todays Four in Four. Have a great day.

    Richard SuttmeierChief Market StrategistValuEngine.com(800) 381-5576

    Send your comments and questions to [email protected] . For more information on our productsand services visit www.ValuEngine.com

    As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.comI have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters aswell as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as theValuTrader Model Portfolio newsletter. You can go HERE to review sample issues and find out more about my research.

    I Hold No Positions in the Stocks I Cover.