Next Two Weeks Key to First-Quarter Trends
Price action for yields, commodities, currencies, and stocks will give direction.
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.
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