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Breakout or Fake-out that is the question?

|Includes: DIA, GLD, QQQ, SPY, iShares 20+ Year Treasury Bond ETF (TLT)
When crude oil moved above its 200-day simple moving average at $94.95 the Dow Industrial Average and NASDAQ moved above their 200-day SMAs at 11,976 and 2690 respectively. These markets need to hold these levels and be followed by the other major averages breaking out above their 200-day SMAs. SPX accomplished this on Tuesday with a close above 1272.9. What’s interesting is that Dow Transports and Russell 2000 lag their 200-day SMAs at 5015 and 777.55, and these two averages set new all time highs in 2011; Russell 200 at 868.57 on May 2nd and Dow Transports at 5627.85 on July 7th. If crude oil, the Dow Industrials, NASDAQ and SPX fail to hold their 200-day SMAs we have a fake-out instead of a breakout. The 10-Year US Treasury yield trades around its 50-day at 2.045. Gold traded above $1800 the Troy ounce but stayed shy of my monthly risky level at $1821.5. The euro versus the dollar is between its 50-day and 200-day at 1.3756 and 1.4104.
 
10-Year Note – (2.079) Weekly, semiannual, quarterly and annual value levels are 2.243, 2.414, 2.669 and 2.690 with my monthly pivot at 1.963, and daily and semiannual risky levels at 1.764 and 1.672. The range since ‘operation twist” has been between my semiannual value level at 2.414 tested on October 28th and my semiannual risky level at 1.672 tested on September 23rd.
 
Courtesy of Thomson / Reuters
 
Comex Gold – ($1785.1) Quarterly, semiannual, weekly, semiannual and annual value levels are $1738.4, $1644.8, $1543.5, $1469.9 and $1,356.5 with a daily pivot at $1770.7 and monthly risky level at $1821.50, and the September 6th all time high at $1923.7. The year’s low was $1535.0 set on September 26th.
 
Courtesy of Thomson / Reuters
 
Nymex Crude Oil ($96.98) The October 4th year-to-date low is $74.95 with my weekly value level at $87.64, daily and monthly pivots at $94.65 and $95.67, and quarterly and annual risky levels at $100.34, $99.91 and $101.92. The high and low for oil happened on the same days as the Dow with the high at $114.83 per barrel on May 2nd.
 
 
Courtesy of Thomson / Reuters
 
The Euro – (1.3838) Daily and quarterly value levels are 1.3473 and 1.2598 with a weekly pivot at 1.3789, and monthly and semiannual risky levels at 1.4568, 1.4752 and 1.4872.
 
Courtesy of Thomson / Reuters
 
Daily Dow: (12,170) Daily and annual value levels are 11,817 and 11,491 with my monthly pivot at 11,928, my weekly pivot at 12,108, and quarterly and annual risky levels at 12,507 and 13,890. The October 4th low was 10,404.49 with the May 2nd high at 12,876.00.
 
Courtesy of Thomson / Reuters
 
S&P 500 (1275.9) The October 4th YTD low is 1074.77 with my annual value level at 1210.7, my monthly and daily value levels at 1229.3 and 1231.4, a weekly pivot at 1266.6, and quarterly and annual risky levels at 1303.7 and 1562.9. The YTD high is 1370.58. My annual risky level is 1562.9.
 
NASDAQ (2727) The October 4th YTD low is 2298.89 with my annual value level at 2335, my monthly and daily value levels at 2636 and 2640, and weekly risky level at 2735, and quarterly risky level at 2807, and the YTD high at 2887.75. My annual risky level is 3243.
 
NASDAQ 100 (NDX) (2400) - The YTD low is 2034.92 with daily and monthly value levels at 2328 and 2294, and weekly, and quarterly risky levels at 2431 and 2440, the YTD high at 2437.42 and annual risky level at 2590.
 
Dow Transports (4969) The October 4th YTD low is 3950.66 with a daily value level at 4794, my weekly pivot at 4914, my monthly risky level at 5034, and annual and quarterly risky levels at 5179 and 5359, and the YTD high / all time high at 5627.85 on July 7th.
 
Russell 2000 (755.27) The October 4th YTD low is 601.71 with a daily value level at 724.17, weekly and monthly pivots at 736.24 and 739.80, and annual and quarterly risky levels at 784.16 and 802.96, and the YTD high / all time high at 868.57 on May 2nd.
 
The SOX– (393.22) The October 4th YTD low is 322.24 with daily and monthly value levels at 379.53 and 339.47, and weekly and quarterly risky levels at 400.41, 417.63, and the YTD high at 450.79.
 
Equity Fundamentals – Stocks are extremely undervalued.
  • 74.2% of all stocks are undervalued / 25.8% of all stocks are overvalued. On October 4th 93.5% of all stocks were undervalued.
  • All sixteen sectors are undervalued, thirteen by double-digit percentages. Two are undervalued by 21.0% to 21.6%. Back in March 2009 the sectors were undervalued by 33% to 45%. – Check out and subscribe to www.ValuEngine.com.
 
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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
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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.
 
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