| Issue #61 |
The
ULTRA Timer Report
|
Jun
22, 2006 10:30 AM
|
SPX Technical Price Analysis
SPX Forming Possible Head-and-Shoulders Bottom (HSB)
The SPX has formed a perfect short-term HSB and now just needs to overcome the Neckline to confirm the pattern. If confirmed, a move equal to the distance of the head to the neckline projected upward at the breakout point would be expected. That level is just under 1300.
If the HSB is confirmed and the SPX moves to 1300 it would probably correct downward from there (NL?) setting up another larger HSB. This larger HSB, if confirmed with a break above NL?, would imply a move up to around 1360 (R3).
As you can see from both charts above, a break above Neckline would also break above the downtrend line R2. We believe that this breakout would trigger a series of events taking the SPX eventually to 1360 or higher.
Conversely, a weekly close below S1 would negate the bullish scenario we describe above. It looks like S1 will be around 1245 at this week's close and so a Friday close around 1235 would be a clear weekly breakdown below S1.
NASDAQ 100 Technical Price Analysis
NDX Head-and-Shoulders Top (HST) Objective Fulfilled (No Change)
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)
The NDX-RS broke out above R4 which is a bullish sign for the NDX and the general stock market as well.
(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
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. This is still the area where we'd expect an RUT bottom to occur..
Important Support at 675 (No change)
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.
We expect the bullish scenario we described in the SPX section above to occur. It would not be a surprise for the SPX to recover into today's close and for the upside breakout to occur on Friday with an impressive follow-though on Monday.
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 1% drawdown which considering that we sold at the exact top around 1325, we're pretty happy.
Having said that, we'll still be watching the market closely into the end of this week and will sell to 100% cash at Friday's close if S1 fails to support the SPX.
We'll also be watching R4 in the NDX and RUT charts. If the upside break occurs in the SPX and R4 in the NDX/RUT charts is overcome, we'll split our investment: 1/3 SPX, 1/3 RUT, 1/3 NDX related funds at the close of the breakout day.
Any changes to that plan will be posted on the updates page that is here.
XAU Technical Price Analysis
XAU nearing very Important Support (No Change)
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 3% while reducing drawdowns to only 2.6% compared to 10%. These strategies are currently 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..
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 up -0.3%. Our maximum drawdown is under 2%.
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