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Today I present the monthly charts for the US capital markets to show how Federal Reserve policy began speculation in gold and crude oil and US stocks, while yields began a longer term trend higher. We have the first step towards a Dow Theory Buy Signal, but fundamentally stocks are trading under a ValuEngine Valuation Watch.
Tracking Dow Theory - The Dow Transports ended March with a daily close above its February 17th closing high at 5298.10. This is just a fractionally higher close at 5299.89, so the Dow Industrial Average needs to follow with a close above its February 18th closing high at 12,391.25 today to confirm a Dow Theory Buy Signal. The other major averages that remain below their February highs are; S&P 500 by 1.4%, NASDAQ by 2.1%, NASDAQ 100 by 2.7% and the SOX by 7.8%. The Russell 2000 is 0.7% above its February high.
Click charts to enlarge
Courtesy of Thomson / Reuters
The Trading Range Scenario – The Dow Industrial Average remains in a trading range between its March 16th low at 11,555.48 and its February 18th high at 12,391.29. Strength can stretch to my new monthly risky level at 12,481, which would still be a high below 12,600. The downside risk remains my annual value level at 11,491.
Stocks Remain Overvalued Fundamentally – We are operating under a ValuEngine Valuation Watch with more than 60% of all stocks overvalued. At Thursday’s close 62.1% of all stocks were overvalued. In addition all 16 sectors are overvalued with 11 by double-digit percentages. A ValuEngine Valuation Warning occurs when more than 65% of all stocks are overvalued. This last occurred at the mid-February highs.
10-Year Note – (3.454) Daily, weekly, annual and quarterly value levels are 3.530, 3.641, 3.796 and 4.016 with monthly, annual, and semiannual risky levels at, 3.181, 2.690, 2.441, and 2.322. The monthly chart favors an up trend for yields beginning with the December 2008 low yield at 2.016. This corresponds to when the Federal Reserve cut the funds rate to zero to 0.25%. The up trend goes through the low yield at 2.334 set in October 2010 in the midst of the QE2 hype.
Courtesy of Thomson / Reuters
Comex Gold – ($1434.60) Annual, semiannual and annual value levels are $1356.5, $1300.6 and $1187.2 with a daily pivot at 1429.1, and semiannual, weekly, quarterly and monthly risky levels at $1452.6, $1469.8, 1523.7 and 1559.9. The monthly chart is overbought and the price pattern looks like a parabolic rise that accelerated as the Fed cut the funds rate to zero in mid-December 2008.
Courtesy of Thomson / Reuters
Nymex Crude Oil ($106.65) My annual and monthly value levels are $101.92, $101.09 and $99.91 with a weekly pivot at $105.31, and semiannual, daily and quarterly risky levels at $107.14, $108.20, $114.27 and $120.52. The semiannual level at $107.14 was tested overnight and is now a pivot. The monthly chart is overbought and oil was as low as $33.20 per barrel just after the Fed cut the funds rate to zero percent. A zero percent funds rate was clearly a license for traders to speculate.
Courtesy of Thomson / Reuters
The Euro – (1.4167) My quarterly value level is 1.3401 with daily, weekly and monthly pivots at 1.4051, 1.4119 and 1.4190 with quarterly and semiannual risky levels at 1.4308 and 1.4624. The euro tested its 120-month simple moving average at 1.2085 in June 2010.
Courtesy of Thomson / Reuters
Monthly Dow: (12,320) Annual and semiannual value levels are 11,491, 10,959, and 9,449 with monthly, quarterly and annual risky levels at 12,481, 13,774 and 13,890. We show overbought MOJO with the 120-month simple moving average as support at 10,500.
Courtesy of Thomson / Reuters

Key Levels for the Other Major Equity Averages
S&P 500 (1325.8) My quarterly and annual value levels are 1277.7 and 1210.7 with daily, weekly and monthly risky levels at 1329.2, 1353.7 and 1360.0. Semiannual value levels are 1151.1 and 967.3 with quarterly and annual risky levels at 1500.4 and 1562.9.
NASDAQ (2781) Semiannual and annual value levels are 2363 and 2335 with daily, weekly and monthly risky levels at 2794, 2830 and 2898. My semiannual value level is 2172 with quarterly and annual risky levels at 3209 and 3243.
NASDAQ 100 (2339) Semiannual, and annual value levels are 2006, 1928 and 1723 with daily, weekly, monthly, annual and quarterly risky levels at 2359, 2389, 2477, 2590 and 2685.
Dow Utilities (413.06) My semiannual value level is 397.84 with daily and weekly pivots at 412.49 and 411.78 and monthly and quarterly risky levels at 423.25 and 448.17. Semiannual and annual risky levels are 452.17, 458.28 and 579.22.
Dow Transports (5300) Quarterly and semiannual value levels are 4714, 4264 and 3774 with annual, daily, weekly and monthly pivots at 5179, 5264, 5295 and 5371, and annual and quarterly risky levels at 6131 and 6148.
Russell 2000 (843.55) Annual and quarterly value levels are 784.16 and 778.81 with a daily pivot at 840.22, and monthly and weekly risky levels at 856.67 and 857.75. Semiannual value levels are 631.62 and 567.74 with quarterly and annual risky levels at 949.02 and 978.58.
The SOX– (437.36) Semiannual and annual value levels are 296.89, 270.98 and 259.30 with daily, monthly, weekly, quarterly and annual risky levels at 443.74, 452.34, 459.29, 498.75 and 531.14.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: What the Monthly Charts Are Telling Us Now