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Next Two Weeks Key to First-Quarter Trends

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Price action for yields, commodities, currencies, and stocks will give direction.

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Editor's Note: This article was written by Richard Suttmeier, chief market strategist at ValuEngine.com, which is a fundamentally-based quant research firm in Princeton, New Jersey, that covers more than 5,000 stocks every day.

The yield on the 10-Year is balanced by risk aversion and increasing supply with a touch of inflationary risk from the prices paid component of the national ISM.

The gold bugs are back after taking a two-week holiday. Will the precious metal become the currency of last resort with a re-inflated bubble, or will $1,000 come before $1250?

The energy experts are back calling for $100 crude oil or higher, touting global demand and a US economic recovery. Or, is it just speculation as traders return and reset the dollar carry trade?

The Dollar Index is the wild card, and Monday's greenback fallback was a major focus.

Stocks become move overvalued and more overbought, as the equity bubble continues to inflate.

Friday's closes should set the trends and they are inter-related, but we may need to wait until the closes on Friday, January 15, as it usually takes two to three weeks of a new year to set the trend for the quarter.

The daily chart for the 10-Year Yield shows that the rise in yields is overdone.

My neutral zone is between my monthly pivot at 3.868 and my semiannual pivot at 3.675. A weekly close cheaper than 3.868 targets my semiannual support at 4.250 on supply and inflation concerns. A weekly close richer than 3.675 indicates a return to risk aversion.

The daily chart for Comex Gold shows an alleviation of an oversold condition on a return of the dollar carry trade.

This doesn't mean a return of the parabolic bubble as weekly, monthly, and semiannual resistances are stacked up at $1157.80, $1166.70 and $1186.90. Above is the re-inflated bubble. A close on January 15 below my quarterly support at $1084.90 indicates risk to annual support at $938.70.

(All charts courtesy of Thomson/Reuters.)



The daily chart for Nymex Crude Oil shows an overbought condition as $100 oil is hyped by Wall Street.



The key on January 15 is a close relative to my annual support at $77.05. Above is a potential trend towards annual and semiannual resistances as a 2010 ceiling at $97.29 to $97.29 by hurricane season.

Below $77.05 is the acknowledgment that the economic recovery will be short of expectations with risk to my quarterly support at $67.22.

The daily chart for the Dollar Index shows a trading range between the 50-day simple moving average at $76.30 and the 200-day at $79.18.



We need a close on January 15 above my quarterly resistance at $80.23 to signal an end to the dollar carry trade. The dollar is thus the wild card as semiannual supports are at new lows at $73.54 and $68.74, which will fuel the dollar carry trade.

The daily chart for the Dow shows an overbought condition and ValuEngine Valuations are overvalued.

My new annual pivot is 10,379 and a close below on January 15 signals the fake-out after the breakout, which was my prediction a month ago. There's a cascade of resistances: weekly at 10,746, monthly at 10,997, annual at 11,235, and semiannual at 11,422. Quarterly support lags at 6,705.



Send me your comments and questions to Rsuttmeier@Gmail.com. For more information on our products and services visit www.ValuEngine.com.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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