The ULTRA Timer Report

Honestly the strength of this rally caught us by surprise. However, we now think that the short-term move in the SPX should be just about over because:

It would be EXTREMELY RARE for a major bottom to have occured in August. However, nothing is impossible with the stock market. If a major bottom is actually in place we would expect a retest that would run out of downward momentum around S2. This drop would also be a retest of the downtrend line (R4) that was overtaken to the upside. If the SPX were to drop to S2 and reverse above R3 a bullish Head-and-Shoulders Bottom would be in place that would imply a move to around 1160.

If the SPX continues upward without a correction we expect a significant top to occur at R1 or R2 if a bullish news event were to drive the market a bit higher.

It is difficult to imagine the market rallying during September but it's certainly not impossible. We think the SPX is nearing a short-term top so we will not buy this market at highs. We will watch the SPX closely as it corrects and possibly try to pick the bottom with call options especially if we are near S2 at Thursday's close.

Nasdaq 100 Technical Price Analysis

NDX Neckline Retest

The NDX has perfectly retested its Head-and-Shoulders Top (HST) Neckine (NL). Do not be mislead by the recent rally. This is still a very bearish looking chart.

Keep in mind, the NDX is NOISY. Patterns, such as HSTs are usually not perfect but still end up being fullfilled eventually. An example of this noise is that NL could be drawn a number of ways across bottoms. Some of those ways would show the recent rally going higher than NL. Unless the NDX moves significantly higher we consider this noise relatively unimportant to the long term implications of the NDX chart.

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

NDX-RS overcame R3 which is a relatively bullish sign. However, we still believe that the NDX-RS is in a long-term downtrend bound by R2 and S2.

Summary

We still think that the NDX is going much lower and most likely taking the SPX down with it.

RUT Technical Price Analysis

RUT at Resistance

If the market correction scenario we predict is at hand we should see the RUT drop handily to S2 where it should find some support.

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

RUT-RS broke up above R4 but is still bound by R3/S3 in a downtrending channel.

Summary (No Change)

The RUT charts are almost exactly like those of the SPX. At this point if we decided to take long market positions we would utilize the RUT to some degree.

XAU Technical Price Analysis

XAU Remains Bullish

Catching bottoms in the XAU has just been too easy in the last few months. This rally should have further to go as the stock market turns lower, bonds rally and the risk of another interest rate increase drops. We will contine to buy XAU calls anytime the XAU approaches S1.

In the short-term we should be nearing a top at R1 and possibly another chance to buy at S1.

ULTRA's DUALB gold system that has been spectacular in real-time for ten years has just closed out another winning trade in the XAU. While we do feel that the XAU will again drop into the lower 80s, we think this DUALB sell signal is premature on a long-term basis (no change since last report).

Interest Rate Analysis

Uptrending Channel (No change)

As expected the US 5-year Treasury Note Yield above (TN) was turned downward by R1 forming an uptrending channel. We expect rates to fall further to S1. If S1 fails to support TN we expect a retest of the 2003 lows. This event would probably correspond with a very weak stock market into the November election.

ULTRA's Recommended Strategies

Recommended Strategy Risk = LOW-MEDIUM

Recommended Index = SP500.
Strategy Positions are HERE .
Strategy Descriptions are HERE.

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