Multi-Year Bear Market Tests Key Resistance

Includes: AAPL, DIA, GLD, SPY, TLT
by: Richard Suttmeier

The weekly chart for the S&P 500 is testing “Snake Eyes.”

If the S&P makes a clear move above 1111 it would be above the down trend that connects the highs going back to October 2007.

The risk / reward profile is not favorable as my annual pivot is 967.1 with weekly resistance at 1133.

The Dow remains positive but overbought on its weekly chart with a daily pivot at 10,373 today. The five-week modified moving average is lower support at 10,090. Ascending Wedge Resistance is 10,612 with down trend resistance at 10,581, and weekly and monthly resistances at 10,685 and 11,035.

I do not view the breaking of the down trends as a new bull market as the overall risk / reward is between my quarterly support at 6,550 and semiannual resistance at 11,500.

I can not blindly buy ValuEngine BUY rated stocks because of unfavorable one year price targets.

Take Apple Inc (NASDAQ:AAPL) for example – The stock is rated a BUY according to ValuEngine with fair value at $242.50, which makes the stock 17.6% undervalued versus its fair value price.

Fair Value is where the stock could trade at in an ideal world. However, the ValuEngine Forecast Model shows 7% downside risk over the next twelve months. There are many fine buy rated companies with a similar profile, which indicates that stocks have outrun their projections given economic uncertainties.

When stocks are not cheap you cannot have a new bull market.

The yield on the 10-Year Treasury remains below its 200-day simple moving average.

Risk aversion remains as long as the 10-Year yield stays below its 200-day simple moving average, now at 3.307. This yield was above the 200-day since May 18th until last week. Today’s resistance is 3.217.

Comex gold reached another new all time high at $1218.4 this morning as the parabolic bubble continues to inflate. My weekly pivot is $1200.4. When a market goes parabolic you don’t know how high it can go.

The Dollar Index remains just above this week’s pivot at $74.26. Below is risk to monthly support at $70.62, which would intensify the dollar carry trade and continue inflating the parabolic bubble for gold. If $74.26 holds the upside is to my quarterly resistance at $78.65.

The Totem Pole for Equities remains from the SOX to the Dow.

The SOX is the base of the totem pole being well below a double-top at 337, which was a failed test of my semiannual resistance on September 26th and October 17th. The SOX lead all indices to the upside bottoming in November 2008. Other indices did not bottom until March. This week’s pivot is 317.67.

The Russell 2000 has a double top at 624 / 625 set on September 26th and October 24th. The Transports have failed several tests between annual resistances at 4037 and 4199 since Sept. 19th. The NASDAQ has stayed below its 200-week simple moving average at 2211.

Disclosure: No Positions