| Issue #35 |
The
ULTRA Timer Report
|
Sep
25, 2004
|
SPX Technical Price Analysis
SPX on its way down to Bottom of Channel (S1)
The stock market is repetitive. It pays to assume that recent history will repeat unless you are proven otherwise. As you can see above the last three uptrend lines that were over a month in duration all resulted in significant sell-offs upon their failure. Their are no guarantees in this business but it seems very likely that the SPX will drop to S1 in October as the presidential race tightens and the fear of a pre-election terrorist event overcomes buyers.
This could set up a tremendous buying opportunity in late October. We believe that the stock market desperately wants Bush to be reelected. Which party's policies are actually better for the economy long-term is really not even relevant. Investors think Bush will be better for the market and that is what matters. As Bush's lead disappears the market should correct downward. If the correction gets down to S1 in Late October call options become very attractive betting against a pre-election terrorist event. We believe that the market will rally after the election into year-end regardless of who wins as long as there are no attacks. The rally could be explosive.
NASDAQ 100 Technical Price Analysis
NDX Falters...
The NDX was unable to remain above S1 which destroys its non-bearish case. We now believe that the NDX will be at 1300 in October.
NDX Relative Strength (NDX-RS=NDX/SPX) (No change)
The NDX is contained in a downtrending channel bound by R2 and S2. As you can see the NDX-RS is only in the middle of its channel (as compared to RUT-RS which is at the top). Even though the NDX has been very strong in recent days it is still relatively weak compared to the other indexes and that probably explains why it's been "catching up" recently.
RUT Technical Price Analysis
RUT Falters...
Last time we said, "The RUT is now exactly where it should
turn downward". Obviously that downward move has now begun.
We expect continued weakness into October.
RUT Relative Strength (RUT-RS = RUT/SPX)(No Change)
RUT-RS is still bound by the R3/S3 downtrending channel. A breakout above R3 would be a bullish sign for the RUT but we do not expect it until late October or November. RUT-RS is at R3 where we expect it to reverse downward..
Stock Market Summary
All segments of the stock market now have very bearish looking
charts. We believe that the market is going to be very news driven
during October. We believe that the market wants Bush to be reelected.
We expect the presidential polls to tighten as the election approaches.
In the near future Bush will be battered by negative news from
Iraq and by Kerry's criticism of Iraq policy. This is not going
to be good for the stock market.
We do not foresee taking any long positions in accounts managed by non-mechanical methods in the next 2-3 weeks.
XAU Technical Price Analysis
Will the XAU Retest S1 Again?
S1 is an uptrend line that dates back to Oct2000. The bottoms labeled 1,2,3 on S1 are those we picked perfectly.
We've been long-term bullish for the XAU for a long time and remain so. However, it looks as though the XAU is losing some momentum which could cause S2 to fail. If that occurs we'd expect another drop to S1 and another great buying opportunity.
However, these channels obviously can fail as we saw occur in Apr2004. But S1 is a VERY important support line. Much more so than the line that failed in Apr2004 so we do expect it to hold.
Interest Rate Analysis
US 5-year Treasury Note Yield (TN)
Uptrending Channel (no change)
This is an interesting point for US 5-year Treasury Note Yield (TN). Before the channel was actually in place, we predicted that TN would turn downward at R1 in May04 and retest S1. Now we are nearing S1 where we should get a reversal to the upside in yields. We always assume a well-defined channel will remain in effect until proven otherwise.
However, if the stock market becomes VERY weak into the election, we would not be surprised to see S1 fail which would make a retest of the 2003 low very likely. Needless-to-say we will be watching S1 very closely in the next few weeks.
ULTRA's Recommended Strategies
We feel very good about the 2004 YTD performance of our "Recommended Strategies". While the Stock market is at the top of a significant up cycle, we are still outperforming the markets while taking almost no risk. While we are only up +0.7% for the year, our benchmark indexes are down -2.1%.
On a risk-adjusted basis we are doing fantastically. Our maximum drawdown has only been -4.7% while our benchmark indexes were recently down -11.6%. Keeping drawdowns as low as possible is crucial to being able to stick with strategic investing.
Our strategies are positioned very well for the anticipated down cycle. We expect our benchmarks indexes to be down around -10% in the coming days while we remain slightly positive.
Recommended
Strategy Risk = LOW
Sincerely,
Steve Hunter, ULTRA Financial Systems Inc.
ULTRA
Financial Systems Inc.
P.O. Box 3938, Breckenridge CO 80424
Phone: 970-453-4956 Fax: 970-453-2467
© 2004 ULTRA Financial Systems, Inc.