The Multi-Year Bear Market: Led by Housing and Community Banks

|
Includes: DIA, DUG, GLD, IYR, KRE, TLT
by: Richard Suttmeier

US Treasuries near resistances as supply test begins. Gold is nearing its May 14th high at $1249.7 as currency of last resort, and as the euro stays above this week’s support at 1.1863. Crude oil is range-bound between $67.15 per barrel and $75.72 balanced by weak demand and risks related to Hurricane season. We are not in a bull market correction; we began the second leg of a multi-year bear market with the April 26th highs. The bear is being led by housing and community banks.

US Treasury Yields – My quarterly support is 3.467 with weekly resistance at 3.010. Supply will be tested beginning today with a $36 billion auction of 3-Year notes. Wednesday $21 billion 10-Year notes are auctioned. On Thursday $13 billion 30-Year bonds are auctioned for a total $70 billion this week. For the 3-Year I have annual pivots at 1.202 and 1.139 with weekly resistance at 0.989.

click to enlarge

Click to enlarge

Chart Courtesy of Thomson / Reuters

Comex Gold – has rising MOJO on its daily chart. My semiannual pivot is $1186.5 with weekly and daily pivots at $1225.8 and $1243.8, and monthly resistances at $1265.9 and $1277.4. I continue to consider Gold as the currency of last resort.

Click to enlarge

Courtesy of Thomson / Reuters

Nymex Crude Oil shows rising MOJO on its daily chart with daily resistance, the 200-day simple moving average and my annual risky level at $75.63, $76.75 and $77.05 as resistances. This week’s support is $67.81. This keeps oil in a trading range between $67.15 and $75.72.

Click to enlarge

Courtesy of Thomson / Reuters

The Euro – shows oversold MOJO on its daily chart despite. This week’s support is 1.1863 with a daily pivot at 1.1938, and quarterly and monthly resistances at 1.2450 and 1.2679.

Click to enlarge

Courtesy of Thomson / Reuters

Daily Dow:shows declining MOJO after failing to take out the 200-day simple moving average at 10,301 last week. We need daily closes above my weekly pivot at 9,986 to signal some stability, but that did not happen on Monday. Without that the downside is significant – Dow 8,500 before 11,500.

Click to enlarge

Courtesy of Thomson / Reuters

Weekly Dow:shows declining MOJO with quarterly support lagging at 7,490. Weekly closes below my annual pivot at 10,379 keeps the weekly chart negative.

Click to enlarge

Chart Courtesy of Thomson / Reuters

The Housing Index (HGX) is now down 6.1% year to date after a decline of 27.3% from its April high to May low, and is down 67.1% from its July 2005 high. The weekly chart is negative. My model shows no nearby support with my monthly pivot at $109.23 with the 200-week simple moving average as strong resistance at $140.53. This average was a strong support from July 2006 through July 2007. My analysis suggests selling strength on housing related stocks.

Click to enlarge

Chart Courtesy of Thomson / Reuters

The America’s Community Bankers Index (ABAQ) is up just 3% year to date following a 17.5% decline since peaking as predicted on April 26th. This puts the index down 51.6% from its December 2006 high. ABAQ has a negative weekly chart profile with semiannual support at $146.67, my monthly pivot at $163.33 and my semiannual resistance at $181.00 which was tested at the April 26th high. This analysis indicates that investors should be selling community banks on strength.

Click to enlarge

Chart Courtesy of Thomson / Reuters

The Regional Bankers Index (BKX) Is still outperforming year to date up 8.9%, but its down 21.0% since peaking as expected at $58.81 on April 21st. Since peaking in February 2007 the BKX is down 61.6%. The weekly chart is negative with my semiannual support at $40.76, a monthly pivot at $48.58 and semiannual resistance at $59.12. Time for investors to sell regional banks on strength.

Click to enlarge

Chart Courtesy of Thomson / Reuters

Disclosure: No positions