| Issue #44 |
The
ULTRA Timer Report
|
Jan
30, 2005
|
SPX Technical Price Analysis
Down to 1140
A small Head-and-Shoulders Top (HST) was confirmed last week with the break of NL. The downside objective of a HST is the distance from the Neckline (NL) to the top of the head. This distance projected downward at the breakout point is pretty much exactly at S1.
As we said last time, "The drop should be symmetrical around the top which implies that the SPX will oscillate down to 1160 and then drop sharply to S1. We believe that this drop will turn almost everybody bearish and will be the low for 2005". This looks to be happening exactly and we still expect one big drop down to S1.
.
We're Still Very Bullish in the Long-Term
As you can see the recent weakness in the SPX did not effect the long-term bullishness of the Huge Head-and-Shoulders Bottom (HSB) in the monthly chart. An intra-month drop to 1140 in February would not effect the bullishness of this chart either. We still expect an eventual move to 1500 possibly setting up the biggest double top in history.
NASDAQ 100 Technical Price Analysis
NDX Still Dropping
S1 was not able to support the NDX and therefore we believe that the NDX has more downside to go. Until the SPX reaches its downside objective, it's dangerous to try to pick the bottom in the NDX.
NDX Relative Strength (NDX-RS=NDX/SPX) (No Change)
The NDX-RS clearly broke down below S4 in December which was a great sell signal for the NDX. We will remain relatively bearish for the NDX until R4 is overcome to the upside.
(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 Dropping
S1 was unable to support the RUT and therefore we expect another leg down for the RUT.
RUT Relative Strength (RUT-RS = RUT/SPX)
With the break of S4 in early January, the RUT became relatively bearish. Since we expect another leg down in the RUT, a downtrend line should set up. Once this occurs it will become easier to set up the criteria that needs to occur for us to consider the RUT relatively bullish.
(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
We remain bullish on the stock market in 2005 due to the Head-and-Shoulders Bottom in the monthly SPX chart. However, in the short-term there is probably more downside yet to come. We believe that the extent of the downside will be around 1140 in the SPX.
With capital not managed by ULTRA mechanical methods:
We are currently 50% invested all of which is in SPX funds. We'll wait until the SPX reaches S1 before considering new long positions.
If the NDX can overcome R4 it will be a bullish sign for the more speculative sectors and we'll move back into thirds: SPX, NDX, RUT.
XAU Technical Price Analysis
Moment of Truth for the XAU
As we said many times in the past, we thought 93 would be the extent of the downside in the XAU. So far the XAU is hanging in there. However, nos we're at the point where either R1 or S1 must be taken out. We still believe that the break will be to the upside. We'll reverse that opinion if S1 were to fail significantly on a weekly closing basis. S1 goes back a few years on the weekly chart and thus we'll require the failure of S1 to show up in the weekly chart before we change our bullish opinion of the XAU..
XAU Relative Strength (XAU-RS = XAU/SPX) (No Change)
We have a minor break to the upside in XAU-RS which is a minor good sign that the XAU is finding support at S1.
Gold Market Summary
We expected
a drop in the XAU to 93 and so far that level is holding. We expect the
break to be to the upside and are therefore holding our XAU positions.
Again, since our XAU positions make up a relatively small amount of our
total capital we can afford to give the XAU a little room.
In hindsight of course, we'd have sold 100% of our XAU positions when we first reported the opinion that the XAU would drop to 93. If we had done that, we'd have now reinvested when the XAU hit 93.
Interest Rate Analysis
US 5-year Treasury Note Yield (TN)
Uptrending Channel
TN remains in its uptrending channel. During the stock market weakness that should occur in the next few weeks we expect TN to touch S1. However, we do not expect TN to break down out of the channel. If TN were to break down out of the S1/R1 channel we'd become worried about our bullish stock market opinion.
ULTRA's Recommended Strategy Risk
We still believe that 2005 is going to be a bullish year and that high-risk strategies, (those that are invested over 60% of the time) can be used for investors willing to take on that risk.
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 at a 33% invested position which is nice considering the recent weakness. However, we expect this weakness to be temporary and the market indices should turn higher.
So far In 2004, our benchmark indexes are sitting at a -5.2% loss while the RECOMMENDED STRATEGIES have lost -2.2%.
Recommended
Strategy Risk = LOW-MED-HIGH
Sincerely,
Steve Hunter, ULTRA Financial Systems Inc.
ULTRA
Financial Systems Inc.
P.O. Box 3938, Breckenridge CO 80424
Phone: 970-453-4956 Fax: 970-453-2467
© 2004 ULTRA Financial Systems, Inc.