| Issue #57 |
The
ULTRA Timer Report
|
Jan
18, 2006 AM
|
SPX Technical Price Analysis
SPX at Minor Support
The SPX has corrected a bit and is now at the level of the old mid-Dec05 top (S2). The last time this occurred in late-Dec05 (S3) the market quickly took off to the upside. If S2 does not support the SPX we expect a drop to S1 around 1260. If S1 fails we'd expect a drop to 1200 (S4) which we believe would be a major bottom.
Long Term Bullish
We've been stating for the last year that we are very bullish for the long term. We remain bullish and would not be surprised if the SPX equals its 2000 high this year or in early 2007. Our main reason for this bullishness is the huge Head-and-shoulders bottom in the SPX chart which implies an eventual run to 1600 or higher.
As we've said before if this all-time high occurs it may set up an extremely major top. Near the top we should see the same kind of speculative fever that occurred in late 1999 with the same extreme earnings based valuation problems.
NASDAQ 100 Technical Price Analysis
NDX Gap Didn't Fill
In the last report we had planned to buy the NDX when the gap formed by the break above 1600 filled. Unfortunately, it just didn't happen due to the late December seasonal bullishness.
The NDX is now at minor support formed by the late 2005 tops (S3). If S3 fails we expect a drop to S2 which has supported the NDX three times in the last year.
NDX Relative Strength (NDX-RS=NDX/SPX)
NDX-RS is in an obvious uptrending channel which is bullish. We are at the top of that channel now which implies that there should be more weakness in the NDX in the next few days.
(The chart above can be produced with ULTRA via the "Graphs" menu item with NDX in the "Database Item or EDF Name:" field and SPX in the "Divided by:" field).
RUT Technical Price Analysis
RUT Starting to Correct
The RUT chart is very similar to that of the NDX. If this correction continues, the RUT should find support at S2 about 680.
RUT Relative Strength (RUT-RS = RUT/SPX)
RUT-RS is in an obvious uptrending channel which is bullish. We are at the top of that channel now which implies that there should be more weakness in the RUT in the next few days.
(The chart above can be produced with ULTRA via the "Graphs" menu item with RUT in the "Database Item or EDF Name:" field and SPX in the "Divided by:" field).
Stock Market Summary
The market has corrected a bit but really should put in a more signficant drop. Markets generally do not go straight up.
We believe that 2006 is going to be a banner year for the stock market. But one of the keys to keeping drawdowns low is to be patient and wait for corrections to get on board. Of course one can only wait so long else they risk being completely left behind.
Therefore, we'll be investing 50% of our non-mechanical, discretionary capital into SPX based funds at today's close. This will allow us to get partially positioned and still leave us room to average down and move into more aggressive funds if the correction deepens (which we think is about 50% likely).
Any changes to that plan will be posted on the updates page that is here.
XAU Technical Price Analysis
XAU Blasts Off
The XAU broke out of its horizontal trading range and rocketed to over 140. There was a retest of the break on 11/30/05 at 114. We said last time, "If we are wrong and the XAU breaks out of this channel we'll allow it to rise a bit and then drop back to retest R1 before we chase it." We were obviosly wrong but were still able to get on board during the retest.
The break out of the channel implies a move to over 150 but considering the exponential move in the last few weeks, the XAU is due to correct back to S2 at 120. Therefore , we will be selling at the close today and plan to repurchase at any close below 122..
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Interest Rate Analysis
US 5-year Treasury Note Yield (TN)
Uptrending Channel Turns into a Rising Wedge
TN is still being supported by S1 and we are testing S1 right now. However, the up phases have been getting weaker and weaker creating a wedge. This is generally a bearish pattern that indicates we are nearing the end of a bear market rally in yields. It's hard to imagine a scenario of a rising stock market and falling yields, but according to this chart S1 should fail, and interest rates should fall during 2006. We will see...
ULTRA's Recommended Strategy Risk
We believe the stock market is going to put in double-digit gains in 2006 and that aggressive strategies designed to capture and improve upon those gains should be utilized by investors willing to take on risk.
However, we continue to believe that as your annual return goals increase, your odds of high drawdowns increase, and your overall odds of attaining those goals decrease. Investors should use great caution when following strategies that seek to return 30% (or more) annually. And NEVER risk all your money on ANY single system or strategy EVER.
ULTRA's "RECOMMENDED STRATEGIES"
Our "RECOMMENDED STRATEGIES" are very conservative in nature which did not pay off in 2005. The market was generally flat and so were our models. The models slightly underperformed their benchmarks but did reduce account drawdowns by 67%.
In early 2006, the market has been strong and our models are just now getting on board currently 62% invested. Which considering how conservative they are, is a high invested position.
Recommended
Strategy Risk = LOW-MED-HIGH
URS
Strategy Positions are HERE
.
URS Strategy
Descriptions are HERE.
ULTRA's "EASY STRATEGIES"
Our "EASY STRATEGIES" beat the market in 2005 and had 42% less drawdown.
In early 2006, they are 67% invested and slightly underperforming the market.
EASY
Strategy Positions are HERE
EASY Strategy Descriptions are HERE.
Sincerely,
Steve Hunter, ULTRA Financial Systems Inc.
ULTRA
Financial Systems
PO Box 3938, Breckenridge CO 80424
Phone: 970-453-4956 Fax: 970-453-2467
© 2006 ULTRA Financial Systems