The yield on the 10-Year note is between my monthly pivot at 2.555 and my quarterly and semiannual risky levels at 2.265 and 2.249. Gold is trading around my monthly pivot at $1343.7 between my quarterly value level at $1306.4 and weekly risky level at $1373.6. Crude oil is just above my weekly pivot at $82.38 with semiannual and monthly risky levels at $83.94 and $84.74. The euro is trying to rally to this week’s risky level at 1.4074. The major equity averages remain overbought with overhead risky levels. For the Dow my weekly risky level is 11,229, my annual risky level is 11,235, and my semiannual risky level is 11,296. I answer readers’ questions on the Dow Theory Buy Signal. I comment on the Fed’s Beige Book.
10-Year Note – (2.475) Weekly, annual and annual value levels are 2.620, 2.813 and 2.999 with monthly and daily pivots at 2.555 and 2.539, and quarterly and semiannual risky levels at 2.265 and 2.249.
click to enlarge
Courtesy of Thomson / Reuters
Comex Gold – ($1344.2) Quarterly, semiannual and annual value levels are $1306.4, $1260.8, $1218.7 and $1115.2 with my monthly pivot at $1343.7, and daily and weekly risky levels at $1369.0 and $1373.6.
Courtesy of Thomson / Reuters
Nymex Crude Oil – ($82.54) My annual value level is $77.05 with daily and weekly pivots at $81.41 and $82.38, and semiannual and monthly risky levels at $83.94 and $84.74.
Courtesy of Thomson / Reuters
The Euro – (1.3964) My quarterly value level is 1.3318 with daily and weekly risky levels at 1.3948 and 1.4060. My monthly value level is 1.2342 with semiannual risky level at 1.4733.
Courtesy of Thomson / Reuters
Daily Dow: (11,108) Monthly, semiannual, annual and quarterly value levels are 10,857, 10,558, 10,379 and 8,523 with daily, weekly, annual and semiannual risky levels at 11,132, 11,229, 11,235, 11,290 and 11,296. My annual risky level at 11,235 was tested at the April 26th high of 11,258.01.
Courtesy of Thomson / Reuters
Reader Questions about Dow Theory
Do you think the Dow will close above 11,205.03 triggering a Dow Theory Buy Signal? First of all Dow Transports must also close above 4,806.1 to confirm a Dow Theory Buy. I am not betting that such a signal will occur, as my longer term forecast is “Dow 8,500 before Dow 11,500”.
If the get a Dow Theory Buy signal what is the upside target? If the Dow does not have a monthly close above 11,296 the Dow Theory Buy could become a false signal. I do not have a specific target above 11,296 as there are no higher risky levels. This happens when a market goes parabolic, in stocks called a “melt-up” as all shorts are forced to cover.
What would negate a Dow Theory Buy Signal? I will track the weekly chart as the Dow is overbought. A weekly close below the five-week modified moving average with declining MOJO would be the sell signal. The five-week modified moving average is at 10,727 this week and will move higher each week.
In sum, I still forecast “Dow 8,500 before Dow 11,500” unless there’s a Dow Theory Buy Signal. Near Term I have been projecting Dow 11,235 by Election Day on a Republican victory and QE2 by the Fed. A Dow Theory Buy Signal occurs with Dow Transports closing above its May 3rd closing high at 4,806.1, and then the Dow Industrials closing above its April 26th closing high at 11,205.03.
The Beige Book Reflects Modest Economic Growth, but Let’s Focus on the Headwinds
Housing markets remain weak with most Districts reporting sales below year-ago levels. Reports on prices suggested stability, however. Conditions in the commercial real estate sector were subdued, and construction was expected to remain weak. Lending activity was stable in most Districts.
Bernanke is worried about deflation but that’s not evident in the Beige Book. Input costs, most notably for agricultural commodities and industrial metals, rose further. Shipping rates increased, and retailers in some Districts noted rising wholesale prices.
Demand for transportation services appears to have slowed.
What’s Ahead for the Foreclosure Mess?
The big banks are saying their paperwork is accurate so foreclosures should commence soon.
The attorneys general in all states are investigating whether lenders violated state laws.
Evicted homeowners are hiring lawyers for suits against the major lenders.
Judges will scrutinize foreclosure documents with skepticism.
Congress will hold hearings.
All of this remains the fall-out of the Subprime Crisis.
Disclosure: No positions
