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Stocks React Negatively to Cash Neutral Operation Twist

|Includes: DIA, GLD, iShares 20+ Year Treasury Bond ETF (TLT)
We had a tug or war between an overbought NASDAQ 100 (NDX) and overbought Philadelphia Semiconductor Index (SOX) versus negative daily charts for the Dow Transports and Russell 2000. NDX closed just above its 50-day simple moving average at 2246 with the SOX on the cusp of its 50-day at 365.89. These key levels will not hold at today’s open. Transports and Russell 2000 stayed well below their 50-day SMAs at 4750 and 732.64. In-between are the Dow Industrial Average and S&P 500, which are also well below their 50-day simple moving averages at 11,615 and 1221.0. The tech-heavy NASDAQ broke below its 50-day at 2594 in reaction to the Fed’s “Operation Twist” announced Wednesday afternoon. Again the Dow and S&P 500 failed to hold my annual pivots at 11,491 and 1210.7. Seems to me that the Fed’s “Operation Twist” was factored into the recent stock market strength!
 
10-Year Note – (1.952) Daily, semiannual, annual, monthly and quarterly value levels are 2.023, 2.414, 2.690, 2.715 and 3.053 with the September 22nd all time low yield at 1.793, and semiannual and weekly risky levels at 1.672 and 1.460.
 
Courtesy of Thomson / Reuters
 
Comex Gold – ($1788.6) A daily value level is $1752.9 with the 50-day at $1738.6, monthly, quarterly and semiannual value levels are $1702.3, $1655.8 and $1644.8 with weekly risky level at $1970.8.
 
Courtesy of Thomson / Reuters
 
Nymex Crude Oil ($85.20) My weekly value level at $74.97 with the 200-week simple moving average at $83.77, a daily pivot at $87.73, the 50-day at $89.75, my annual pivots at $99.91 and $101.92 and quarterly, semiannual and monthly risky levels at $102.40, $103.92 and $104.23.
 
 
Courtesy of Thomson / Reuters
 
The Euro – (1.3605) No value levels with daily and quarterly pivots at 1.3745 and 1.3728, the 200-day simple moving average at 1.4042, and weekly, semiannual and monthly risky levels at 1.3906, 1.4752 and 1.4872.
 
Courtesy of Thomson / Reuters
 
Daily Dow - (11,125) My weekly value level is 10,032 with the 200-week and 120-month simple moving averages at 10,678 and 10,595, my annual pivot at 11,491, and daily and monthly risky levels at 11,545 and 12,779. Semiannual value levels are 9,635 and 8,468 with the 50-day and 200-day SMA death cross at 11,615 and 12,002.
 
Courtesy of Thomson / Reuters
 
S&P 500 (1166.8) Weekly and semiannual value levels are 1039.6, 981.3 and 855.7 with my annual pivot at 1210.7, the 50-day at 1221.0 and daily and monthly risky levels at 1221.0 and 1342.1.
 
NASDAQ (2538) Annual, weekly, and semiannual value levels are 2335, 2210, 2199 and 2049 with the 50-day at 2594, and daily and monthly risky levels at 2667 and 2827.
 
NASDAQ 100 (NDX) (2258) Weekly, semiannual and annual value levels are 1989.0, 1951, 1861 and 1723 with the 50-day at 2246, and daily and monthly risky levels at 2365 and 2431.
 
Dow Transports (4281) Weekly value levels are 3868 and 3755 with m y semiannual pivot at 4335, a daily risky level at 4625, the 50-day at 4750, and annual and monthly risky levels at 5179 and 5190.
 
Russell 2000 (664.58) Weekly and semiannual value levels are 566.76, 577.47 and 530.04 with a daily risky level at 709.32, the 50-day at 732.64, and annual and monthly risky levels at 784.16 and 825.19.
 
The SOX– (365.37) Weekly, annual and semiannual value levels at 306.68, 270.98, 258.97 and 204.67 with the 50-day SMA at 365.89, and daily and monthly risky levels at 394.90 and 418.07.
 
Equity Fundamentals – Stocks are extremely undervalued.
  • 88.6% of all stocks are undervalued / 11.4% of all stocks are overvalued. In March 2009, 91.1% of all stocks were undervalued. Stocks are cheaper given lower prices and lower 30-Year bond yield.
  • All sixteen sectors are undervalued by double-digit percentages, fifteen by 20.3% to 33.0%%. Back in March 2009 the sectors were undervalued by 33% to 45%. – Check out and subscribe to www.ValuEngine.com.
 
VE Morning Briefing – If you want expanded analysis of the US Capital Markets including a Fearless Prediction of the Week and a Stock of the Day go to this link and sign up: http://www.valuengine.com/nl/mainnl?nl=D
 
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ValuTrader Performance - At the market lows on Monday, September 12th we added six stocks to the model portfolio bringing the total to twenty portfolio members. This increased the long positions to 29 for a hypothetical 36.25% allocation to stocks. This was up from a 27.5% allocation to the long side of the market, which was an aggressive call. We booked some gains on September 14th and 15th ending last week with 24 long positions in 17 stocks, which is a hypothetical investment of a 30.0% allocation to the long side of the market. Yesterday another long was removed at the open so we reduced the allocation to 28.75%. We continue to have 8 short positions in 3 ETFs; three shorts in Diamonds (NYSEARCA:DIA), two in NASDAQ 100 Shares (QQQQ) and three in S&P 500 Sector SPDRs (NYSEARCA:SPY). We have a 10.0% allocation to the short side of the market. This is what “Buy and Trade” is all about!
 
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ValuEngine FDIC Evaluation Report – In this report I slice and dice the FDIC Quarterly Banking Profile. We publish a ValuEngine List of Problem Banks in this publication: http://www.valuengine.com/nl/mainnl?nl=C
 
Definition of MOJO – This is my term for technical momentum. I use what’s called “12x3x3 slow stochastic readings” from daily, weekly and monthly charts. The scale is zero to 10.0 where above 8.0 is overbought and below 2.0 is oversold.
 
Buy and Trade Strategies for Long Positions
  • Value Level – The price at which you establish an additional long position on share price weakness. This is done on a GTC Limit Order to buy weakness to the Value Level.
  • Risky Level – The price at which you remove a single long position or reduce a multiple long position on share price strength. This is done on a GTC Limit Order to sell strength to the Risky Level.
 
Buy and Trade Strategies for Short Positions
  • Value Level – The price at which you remove a single short position or reduce a multiple short position on share price weakness. This is done on a GTC Limit Order to buy weakness to the Value Level.
  • Risky Level – The price at which you establish an addition short position on share price strength. This is done on a GTC Limit Order to sell strength to the Risky Level.
 
Richard Suttmeier
Chief Market Strategist
ValuEngine.com
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As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters as well as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the ValuTrader Model Portfolio newsletter. You can go to http://www.valuengine.com/nl/mainnl to review sample issues and find out more about my research.
 
“I Hold No Positions in the Stocks I Cover.”