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Messages from the Weekly Charts

|Includes: GLD, SPY, iShares 20+ Year Treasury Bond ETF (TLT)
ValuEngine’s “Four In Four”
Featuring Richard Suttmeier, Chief Market Strategist
Welcome to ValuEngine’s “Four In Four”. I’m Richard Suttmeier, Chief Market Strategist.
I end the week looking at the weekly charts for the US Capital Markets.
I lead off with the yield on the 10-Year note
The weekly chart is neutral, but a close today below its five-week modified moving average at 3.60 favors a return to a modest flight to quality with my monthly resistance at 3.25.
Without a positive weekly close the risk is to semiannual supports at 4.000 and 4.176, as the US Treasury will announce another $112 billion in auctions for the last week of August next Thursday.
The FOMC is allowing quantitative easing to unwind at the end of October. This policy was a failed effort to keep Treasury yields down. When they announced the program in March the 10-Year yield dipped to 2.46.
The 30-Year fixed rate mortgage dipped well below 5%, but its now back to 5.5% higher than it should be.
The Conservatorship of Fannie and Freddie continues to cost taxpayer money. On Thursday, Fannie Mae priced $3 billion in new Five Year Reference notes at 43.5 basis points above the yield on US Treasuries. This is an incremental cost to taxpayers, and provides no help to struggling homeowners.
Comex gold is in a range, copper trades too high and Nymex crude oil stays below its 200-week.
Gold remains below the down trend that goes back to March 2008. The 200-week simple moving average is major support at 747.9. My annual pivot has held at 891 and my semiannual resistance is 991.7.
Copper is overbought on its weekly chart and attempting to end the week above its 200-week simple moving average at 288.71. My annual pivot is 240.20 with semiannual resistances at 383 and 394. The FOMC should be worried that increasing commodities prices will hurt the so-called economic recovery.
Crude oil has tried to move above its 200-week simple moving average at 74.65 since mid-June, but my annual pivots at $68.81 and $66.51 have been strong magnets. My monthly support at $59.36 has held at the low end of the range preventing a breakdown. The FOMC must realize that Main Street was helped by gasoline at $1.40 the gallon as 2009 began. Now at $2.50 and above motorists are driving less. Higher gasoline prices are a drag for consumers on Main Street.
The Housing Market and Community and Regional Banks
The Housing Market Index (HGX) has had a positive weekly chart for the past four weeks, but I show chart resistance at 117.50. The homebuilding stocks are 11.5% overvalued. Next Monday we will see that the NAHB Housing Market Index remains well below 50 and should be below 20.
The America’s Community Bankers Index (ABAQ) has been positive on its weekly chart for three weeks and its key chart resistance is the 160 area. The banking industry is 24.6% overvalued, and 500 to 800 community banks should fail between the end of 2007 and 2012 and we are at 97 failures now.
The Regional Banking Index (BKX) has been positive on its weekly chart for three weeks and its chart resistance range is 46.60 to 50.50. The long term down trend that goes back to Feb 2007 remains in tact.
Nine BKX components (about half the group) are rated a SELL or have no rating according to ValuEngine.
Toxic assets have been out of sight, out of mind the past two quarters, and that should change when FASB rules revert to mark to market accounting towards the end of the year. There are still several banks that must raise capital to meet the guidelines of the Stress Tests. If “The Great Credit Crunch” continues as I suspect additional Stress Tests may be needed to take the banking system beyond 2010.
The weekly chart for the S&P 500 still shows overbought MOJO with a reading of to 8.4.. Note the Ascending Wedge pattern that points up to the down trend that goes back to October 2007. Over my years of seeing this type of pattern it typically gets broken to the downside. Last Friday’s high was 1018.
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That’s today’s Four in Four. Have a great day.
As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website Daily, Weekly, Monthly, and Quarterly newsletters are available to track a variety of equity and other data parameters, as well as my interpretation of what is going on in world markets. An ETF and ValuTrader portfolio Newsletters are the newest offerings. I hope that you take a look and review some of the sample issues."
My Policy is to have No Positions in stocks that I cover.