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Cheap Fundamentals Trumped Bearish Technicals on Tuesday

|Includes: DIA, GLD, QQQ, SPY, iShares 20+ Year Treasury Bond ETF (TLT)
Tuesday’s turnaround for stocks illustrates why ‘buy and trade’ beats ‘buy and hold’. With ‘buy and trade’ there are three elements to an investment decision; 79.7% of all stocks were undervalued at Monday’s close, which is a signal to buy weakness. The Dow Industrial Average was below both 50-day and 200-day SMAs, and quickly moved above both at 11,834 and 11,936. Most importantly, there were value levels at which to buy stocks on Monday’s weakness. Lessons learned - With cheap valuations but negative technicals you still have value levels at which to buy on weakness. Tuesday’s reversal does not mean we’re in a new bull market, it just means that the trading ranges continue. The NASDAQ for example lags and remains below 50-day and 200-day SMAs at 2617 and 2663. The yield on the 10-Year US Treasury is below its 50-day SMA at 2.052, but my weekly pivot at 1.826 provided resistance. Gold returned to its 200-day simple moving average at $1617.1, and is above that milestone this morning. Crude oil popped back above its 50-day and 200-day SMAs at $94.90 and $95.79 on Tuesday. The euro is trying to alleviate an oversold condition on its daily chart as a higher euro helps US stocks.
 
10-Year Note – (1.927) Semiannual, quarterly and annual value levels are 2.414, 2.669 and 2.690 with the 50-day simple moving average at 2.052, daily and weekly risky levels at 1.885 and 1.826, and semiannual and monthly risky levels at 1.672 and 1.602.
 
 
Courtesy of Thomson / Reuters
 
Comex Gold – ($1616.4) Daily, semiannual and annual value levels are $1532.0, $1469.9 and $1,356.5 with the 200-day at $1617.1, my semiannual pivot at $1644.8, and quarterly, weekly and monthly risky levels at $1738.4, $1773.6 and $1873.8, 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 ($97.22) The October 4th year-to-date low is $74.95 with daily and monthly value levels at $95.06 and $86.20, the 200-day simple moving average at $95.79, the 50-day at $94.90, quarterly, monthly and annual pivots at $100.34, $99.91 and $101.92, and weekly, semiannual risky levels at $105.58, $103.93 and $107.90. 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 – (1.3079) Daily and quarterly value levels are 1.2824 and 1.2598 with a weekly pivot at 1.3054, the 50-day simple moving average at 1.3551, and monthly and semiannual risky levels at 1.3953, 1.4752 and 1.4872.
 
Courtesy of Thomson / Reuters
 
Daily Dow: (12,103) The 200-day simple moving average is 11,936 with the 50-day at 11,834. Weekly, daily, annual, and semiannual value levels are 11,934, 11,784, 11,491, 9,635 and 8,468 with a weekly pivot at 12,043, 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.
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Courtesy of Thomson / Reuters
 
S&P 500 (1241.3) The October 4th YTD low is 1074.77 with a daily value level at 1221.8, annual and monthly pivots at 1210.7 and 1211.8, a weekly pivot at 1231.8, semiannual value levels at 981.3 and 855.7, and quarterly and annual risky levels at 1303.7 and 1562.9. The YTD high is 1370.58.
 
NASDAQ (2604) The October 4th YTD low is 2298.89 with a daily value level at 2560 weekly and monthly pivots at 2585 and 2588, and annual value level at 2335, semiannual value levels at 2199 and 2049, and quarterly risky level at 2807, and the YTD high at 2887.75. My annual risky level is 3243.
 
NASDAQ 100 (NDX) (2282) The YTD low is 2034.92 with a daily value level at 2411, a monthly pivot at 2282, semiannual value levels at 1951 and 1861, a weekly pivot at 2245, a quarterly risky level at 2440, the YTD high at 2437.42, and my annual risky level at 2590.
 
Dow Transports (4956) The October 4th YTD low is 3950.66 with daily, monthly and semiannual value levels at 4890, 4752, 4335 and 3868, a weekly pivot at 4962, and annual, weekly and quarterly risky levels at 5179 and 5359, and the YTD high / all time high at 5627.85 set on July 7th.
 
Russell 2000 (738.10) The October 4th YTD low is 601.71 with daily and monthly value levels at 727.94 and 695.30, semiannual value levels at 577.47 and 530.04, a weekly risky level at 745.86, and annual and quarterly risky levels at 784.16 and 802.96, and the YTD high / all time high at 868.57 set on May 2nd.
 
The SOX– (358.70) The October 4th YTD low is 322.24 with daily and monthly value levels at 342.58, an annual value levels at 270.98, a weekly risky level at 372.49, and quarterly risky level at 417.63, and the YTD high at 450.79.
 
Equity Fundamentals – Stocks remain fundamentally cheap.
  • 74.5% of all stocks are undervalued / 25.5% of all stocks are overvalued. On October 4th 93.5% of all stocks were undervalued.
  • Nine sectors are undervalued and seven sectors are overvalued in a range from 16.7% undervalued to 10.3% overvalued. 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
 
ValuTrader Model Portfolio – If you want to learn how to “Buy and Trade” use this link and sign up: http://www.valuengine.com/nl/mainnl?nl=V
 
On Monday we added Marvell Technologies (MVRL) to the model portfolio at $13.50 and Advanced Micro Devices (NASDAQ:AMD) at $5.01. In addition we added to positions in Expeditors International (NASDAQ:EXPD) at $39.77, Nokia (NYSE:NOK) at $4.57, Schlumberger (NYSE:SLB) at $65.94, and S&P 500 Sector SPDRs (NYSEARCA:SPY) at $121.28.
 
On Tuesday we sold Expeditors Inter’l (EXPD) at $40.80 for +2.6%, Nokia (NOK) at $4.80 for 5.0%, Schlumberger (SLB) at $68.00 for 3.1%, and S&P 500 Sector SPDRs (SPY) at $123.15 for 1.5%.
 
ETF Weekly – If you want my Value Levels and Risky Levels for 30 Electronically Traded Funds use this link and sign up: http://www.valuengine.com/nl/mainnl?nl=U
 
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 The December FDIC report with complete analysis of the Q3 Quarterly Banking Profile is now available. I track the continuing slow improvement to the housing market and banking system, but recognize that we are not out of the war.
 
ValuEngine Capital Management - Over the years many of my readers have asked for investment help based upon ValuEngine and my technical analysis expertise. This is now possible through VE Capital Management LLC. If you are a Registered Investment Advisor looking for new products to offer to your clients, let me know. If you have any questions, please respond to this email.
 
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
(800) 381-5576
 
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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.”