| Issue #50 |
The
ULTRA Timer Report
|
June
13, 2005
|
SPX Technical Price Analysis
SPX About Halfway to Resistance
The SPX continues to be well supported by S1 and is about halfway to R1 where it should find strong resistance. As long as S1 supports the SPX, the likely long-term direction of the stock market remains upward.
NASDAQ 100 Technical Price Analysis
NDX Unlikely to reach down to 1460
The NDX rallied easily past 1500 making it very unlikely we'd be able to take positions upon a correction to 1460.
The NDX bounced today off support S1 which is the level of bottoms in early 2005 and a top in April 2005. We believe that it's likely that this will be the extent of the current NDX correction.
We would not be surprised to see the NDX bounce between S1 and R1 for a few weeks. If that occurs and the NDX then moves up above R1, a bullish Head-and-shoulders Bottom in the NDX will be confirmed predicting a move above 1700.
NDX Relative Strength (NDX-RS=NDX/SPX) (No Change)
NDX-RS broke out above an important downtrend line R2 providing a tremendous buying opportunity. In the last few days NDX-RS has corrected and we expect it to bottom soon (maybe today). When this bottom forms it will provide us with an uptrend line that will serve as a guideline for the NDX's relative strength (or lack thereof).
(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 Threatening to Break out above R2
Last time we said, "A break of R1 would indicate that the 570 is the bottom in the RUT. We expect this to occur." R1 was overcome and the RUT has rallied significantly since. Now the RUT is threatening to breakout above R2. This would be a very bullish sign which we think is likely as long as S1 remains intact.
RUT Relative Strength (RUT-RS = RUT/SPX) (No Change)
Last time we said, "RUT-RS was contained in a downtrending channel bound by R3/S3. A break out of this channel would be a bullish sign for the RUT."
This breakout has now occurred and the RUT has rallied significantly.
As long as S4 continues to support the RUT-RS we'll remain bullish on the RUT. Considering that the RUT is testing important resistance (R1), we think that a test of S4 in RUT-RS is likely in the next few days. This would also be a perfect retest of the R3 breakout point and a good RUT buying opportunity.
(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 (HSB) in the monthly SPX chart.
With capital not managed by ULTRA mechanical methods:
We are currently 100% invested (as of the 3/29/05 close) with 67% in SPX related funds and 33% in RUT funds due to the R1 breakout (entered on 05/18/05 at 607.88).
We'll move one-third into NDX funds at today's close as we believe the NDX correction should be about done.
Updates will be posted here.
XAU Technical Price Analysis
XAU Rallies Despite Breaking Very Important Support
Last time, even though the XAU had broken down below a multi-year monthly uptrend line we said, "We believe that the drop in the XAU is nearing its end and we will therefore hold our XAU positions."
Admitting that technical analysis is not (even close) to perfect and not acting upon its recommendations, is difficult. But it paid off big for us.
We said, "We do not believe that our bullish stock market scenario can remain intact with a plummeting XAU. Therefore we believe the XAU will find support at S2 around 76 which is not much lower than today's close."
We still believe that if the stock market rally is to continue that the XAU must also move higher. Having said that, nothing moves straight up and there is big resistance (R1) overhead around 96 which is where we expect this rally to stop, at least temporarily.
Gold Market Summary
We will sell our XAU position at any close above 95 hoping to reenter at a lower price. We will also sell upon any close below S1.
Interest Rate Analysis
US 5-year Treasury Note Yield (TN)
Uptrending Channel Seems to have Failed
Wow. The uptrending channel that we predicted would form in 2003 has now seemed to fail. In the past we've said, "TN breaks down out of the channel we'd become worried about our bullish stock market opinion": which we must admit is concerning. However, technical analysis is imperfect and we are not terribly worried yet.
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 slightly their benchmarks so far in 2005 and have kept drawdowns to -2.7% as compared to -9.8% for the benchmark indexes. We are currently only 14% invested all of which is in the NDX.
Our mechanical strategy positions are in opposition of our bullish discretionary opinion. But we follow the strategies mechanically so as to benefit from the diversity of differing logical techniques.
Recommended
Strategy Risk = LOW-MED-HIGH
Sincerely,
Steve Hunter, ULTRA Financial Systems Inc.
ULTRA
Financial Systems Inc.
PO Box 3938, Breckenridge CO 80424
Phone: 970-453-4956 Fax: 970-453-2467
© 2005 ULTRA Financial Systems, Inc.