Issue #58
The ULTRA Timer Report
Mar 07, 2006 AM

SPX Technical Price Analysis

SPX at Nearing Support

The SPX has corrected a bit and should find strong support at or above S1 around 1265. However, if S1 were to fail we'd expect a significant drop down to S2 around 1200.

Long Term Bullish (no change)

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 Nearing Important Support

The NDX has formed a Head-and-Shoulders top that would be confirmed with a drop below the neckline (NL). NL also corresponds with important support S1.

We expect these supports lines to hold but if they do fail we'd recommend all remaining NDX (or similar) positions be sold immediately.

NDX Relative Strength (NDX-RS=NDX/SPX)

NDX-RS fell out of its important uptrending channel (S2) on 02/02/06 signaling future weakness in the NDX compared to the SPX. In the last few days NDX-RS has broken up above a down-trending line (R2) which indicates that the relative weakness in the NDX should abate in the short-term.

(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 Nearing Support

The RUT has bounced off S1 many times and we are nearing S1 again. We expect S1 to hold and for the RUT to continue upward. If S1 were to fail we'd recommend selling RUT positions immediately expecting a drop to under 700 (S2).

RUT Relative Strength (RUT-RS = RUT/SPX)

RUT-RS is in an obvious uptrending supported by S3 and the recent strength is indicated by S4. Support S4 is probably not sustainable. The last time similar RUT-RS support failed (08/04/06), the RUT dropped 7.5%. Therefore, if S4 fails we will recommend selling RUT positions hoping to buy back in at lower levels.

Having said that, the long-term bull market in the RUT should remain in effect as long as S3 continues to support.

(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 still believe that 2006 is going to be a banner year for the stock market. But we must admit that we're worried about the NDX Head-and-shoulders top and S1 support failing. If that occurs we'll be forced to consider that a more serious correction taking the SPX down to 1200 is more likely.

We're currently 100% invested with 67% in SPX funds and 33% in RUT funds purchased at:

SPX average price= ~1270
RUT= 707.82

Per our 01/20/06 update, our foray in the NDX only lasted a few days buying on 01/23/06 at 1676.30 and selling upon the NDX-RS support failure on 02/02/06 at 1685.77.

We'll sell our RUT position if/when S2 and/or S4 in the RUT charts fail to support. The proceeds will be moved into SPX funds.

We'll sell all our SPX funds if S1 in the SPX chart fails to support.

At this point we do not see a scenario that would put us back into the NDX in the near future..

Any changes to that plan will be posted on the updates page that is here.

XAU Technical Price Analysis

XAU Testing Important Support

Last time we said, "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"

Sure enough we exited the XAU at 137.64 and it did top out over 150.

But the XAU is now testing important S1. If S1 were to fail, we'd expect a drop back to the top of the old channel (S2 at around 115) whose breakout launched the XAU rally to over 150.

This now seems very likely considering that the confirmed Head-and-Shoulders breakout in the XAU (below) that also calls for a downside objective of 115.

Therefore, we'll wait for this drop and then be heavy buyers at 115.

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Interest Rate Analysis

US 5-year Treasury Note Yield (TN)

Uptrending Channel Still has Turned into a Rising Wedge

TN is still being supported by S1. However, the up phases have been getting weaker and weaker creating a wedge. We are currently at the top of this wedge. This is generally a bearish pattern that indicates we are nearing the end of a bear market rally in yields. However, if R2 is overcome to the upside we'd expect yields to continue to rise back up to the top of the channel R1.

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 slightly underperformed their benchmarks so far in 2006 while reducing drawdowns by 50%. We are currently 33% invested.

Recommended Strategy Risk = LOW-MED-HIGH

URS Strategy Positions are HERE .
URS Strategy Descriptions are HERE.

ULTRA's "EASY STRATEGIES"

Our "EASY STRATEGIES" are slightly underperformed their benchmarks so far in 2006 while reducing drawdowns by 50%. We are currently 33% invested.

EASY Strategy Positions are HERE
EASY Strategy Descriptions are HERE.


Last Report

 

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