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US Equity Markets Remain Vulnerable After Monday’s Stability.

|Includes: CLE, DIA, QQQ, SPY, iShares 20+ Year Treasury Bond ETF (TLT)

Markets in Review: Asian stocks plunged on Monday following the election news from Greece and France, but were mixed on Tuesday. The Nikkei 225 ended Tuesday at 9,182 - up 0.69% on the day. The Hang Seng ended Tuesday at 20,493 - down 0.21% on the day. European exchanges opened significantly lower on Monday, but recovered as the sun rose on Wall Street. In Europe, stocks opened lower on Tuesday. The yield on the 10-Year US Treasury traded down to 1.821 percent on Monday in reaction to the European elections then rose to 1.882, still well below its 50-day and 200-day simple moving averages at 2.071 and 2.050. Gold declined to $1625.6 this morning below Monday's range and well below the 50-day and 200-day simple moving averages at $1662.3 and $1699.1. Crude oil traded between $95.34 and $98.24 per barrel on Monday and is within that range this morning, but above its 200.day simple moving average at $96.31. The euro versus the dollar is above my semiannual value level at 1.2980, but below its 50-day at 1.3182.

Today's Four in Four Key Levels:
 

  1. Yields - The yield on the 10-Year US Treasury is between my semiannual pivot at 1.903 and this month's risky level at 1.734.
  2. Commodities - Gold shows a weekly value level is $1590.0 with semiannual pivots at $1635.8 and $1659.4. Crude oil shows a semiannual value level at $79.83 with a weekly pivot at $98.72 and quarterly, semiannual and annual risky levels at $101.55, $104.84 and $103.58.
  3. Currencies - The euro versus the dollar shows a monthly value level at 1.2257 with my semiannual 1.2980 and weekly and quarterly risky levels at 1.3232 and 1.3366.
  4. Equities - Watch the 50-day simple moving averages at 13,062 Dow Industrials, 1386.75 SPX, 3029 NASDAQ, 5233 Dow Transports and 815.17 Russell 2000. Keep in mind that a weekly close on the S&P 500 below my annual pivot at 1363.2 is bearish. The Dow Industrials and Dow Transports need weekly closes below five-week modified moving averages at 13,033 and 5236 for all weekly charts to be negative. The initial downside on Dow Industrials is to quarterly and annual value levels at 12,794 and 12,312. For the NASDAQ quarterly and annual value levels are 2911 and 2698. My prediction remains that Dow Transports and Russell 2000 will not return to their 2011 all time highs at 5627.85 set on July 7th and 868.57 set on May 2nd in 2012.
  5. ValuEngine Valuations - Stocks remains reasonably priced fundamentally after benchmark revisions overnight. 64.8% of all stocks are undervalued with five undervalued sectors and eleven overvalued sectors. Aerospace is 16.1% UV, and Basic Materials is 12.4% UV. There are no sectors more than 10% overvalued.

VE Morning Briefing - If you want expanded analysis of the US Capital Markets go to this link and sign up: http://www.valuengine.com/nl/mainnl?nl=D