The ULTRA Timer Report

Issue #60

The ULTRA Timer Report

Jun 12, 2006 PM

SPX Technical Price Analysis

SPX Testing very Important Support

The SPX is on or slightly below S1 which is where we expect a significant bottom to occur. In order for S1 to be broken we'd need to see a close at the end of this week around 1225. If S1 does fail we'd expect to see an additional drop of about the width of the S1/R1 uptrending channel which is down to about 1150 which is the level of the Head-and-Shoulders neckline (see below). If the SPX drops back to retest this neckline it should find extremely strong support.

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 Head-and-Shoulders Top (HST) Objective Fulfilled

The HST in the NDX has now fulfilled its downside objective which is the distance from the top of the Head to the Neckline projected downward at the breakout point. Admittedly, this objective is just the minimum that the NDX should have fallen due to the confirmed HST. But that still makes 1575 the area where at least a short-term bottom should occur.

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

Last time we said, "NDX-RS rose above R3 indicating that its downturn in relative strength is probably over. We'd like to see a new uptrend line develop before we can regain confidence in the NDX. " That obviously did not happen and in fact the temporary upmove in NDX-RS did not last and the relative weakness in the NDX has accelerated. We'll require a break of R4 to the upside before we even remotely consider NDX positions.

(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 Testing Support

Last time we said, "If S1 were to fail we'd recommend selling RUT positions immediately expecting a drop to under 700." That happened exactly

Now the RUT is at the level of the Aug05, Sep05, and Dec05 highs (S2). Old highs often provide support to failling prices and the RUT is at that support today.

Important Support at 675

As you can see from the weekly chart above, S3 is at around 675 which should provide important support to the RUT as well.

RUT Relative Strength (RUT-RS = RUT/SPX) (No Change)

Last time we said, "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."

The recent RUT-RS support line failure has resulted in a 9.8% drop as of today.

We won't consider RUT positions until R4 is overcome to the upside.

(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 and we expect nearing new highs in the SPX in early 2007. Obviously, the extremely low volatility we'd experienced in 2006 is now over and the market is correcting.

For our funds not controlled by mechanical methods, we're currently 100% invested in SPX funds purchased at 1259.84. We're sitting on a 2% drawdown which considering what's happen in the rest of the market looks pretty good..

We'll be watching the market closely into the end of the week and will sell to cash if S1 fails to support the SPX on a weekly closing basis.

We'll also be watching R4 in the NDX and RUT charts in case the bottom is in and we want to take on more risk.

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

XAU Technical Price Analysis

XAU nearing very Important Support

As we said last time, we expected a drop to 135 which has been fulfilled. During that drop, support S1 was taken out implying a further drop.

The S1/R1 uptrending channel was very well-defined and therefore our first clue to where a possible bottom may set up would be after a drop of the width of that channel projected downward at the breakout point. That level is around 110. However, the level of the top of the old horizontal channel should provide very strong support a little higher at about 115. We expect these levels of support to hold.

Therefore, we'll buy back into gold related funds at the first XAU close under 118.

Interest Rate Analysis

US 5-year Treasury Note Yield (TN)

Rates Continue to Rise (no change)

TN is still being supported by S1. However, the lows have failed to reach S1 creating a steeper uptrend line S2. R2 has also been overcome. Therefore, we expect rates to continue rising supported by S2.

Ultra's Recommended Strategy Risk

We still believe that 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 outperforming their benchmarks so far in 2006 by about 5% while reducing drawdowns to only 2.6% compared to 10%. These strategies are currently only 0% invested. As we've said before, these strategies are extremely conservative and we believe investors should be more aggressive considering the bullish long-term chart patterns that are dictating this market..

Recommended Strategy Risk = LOW-MED-HIGH

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

ULTRA's "EASY STRATEGIES"

Our "EASY STRATEGIES" are currently 0% invested and performing very well up +4.5% for the year while the SPX is down -1.0%. Our maximum drawdown is under 2%.

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