| Issue #38 |
The
ULTRA Timer Report
|
Nov
15, 2004
|
SPX Technical Price Analysis
SPX Breakout
The SPX broke out of the downtrending channel that had been in effect for most of 2004. This was a very significant and bullish event for the stock market. This breakout implies much higher prices over the next year.
However, markets do not go straight up. This market is due for a pause but it should be very brief. Buying after the initial massive move through significant resistance usually pays off in the long run but there are usually better slightly buying opportunities as the market corrects just a bit.
We think it's very unlikely that the SPX will drop to S1 anytime soon. A more likely scenario is a drop to the February highs of around 1160.
The Market Loves Bush
This is not really news. Pretty much everyone knew the market strongly preferred Bush over Kerry. Bush's plan to allow young workers to invest part of their social security payroll taxes in the stock market is extremely bullish for the market in the long term. We're talking about a massive amount of money that would be automatically pumped into the market on a regular basis.
NASDAQ 100 Technical Price Analysis
NDX Remains Strong
The NDX has also broken out and will most likely go much higher. If the NDX is ready to correct, a drop to 1500 is about all we're going to get.
NDX Relative Strength (NDX-RS=NDX/SPX)
The NDX-RS remains bullishly above S3. If S3 fails we'd expect a more serious correction. However, considering the bullishness of the recent NDX and SPX breakouts we would not consider a failure of S3 to be a major development for the market as a whole.
RUT Technical Price Analysis
RUT Soars to a new High !
The RUT broke out of its downtrending channel and should move
much higher over the coming months.
RUT Relative Strength (RUT-RS = RUT/SPX)
As long as S2 remains intact we will remain relatively bullish for the RUT.
Stock Market Summary
As we said last time we moved our non-mechanical capital 50% long
split into thirds into the NDX, RUT, and SPX. We are now looking
to move to 100% long at the first sign of weakness. We think the
market is going to move much higher for the rest of 2004. Since
keeping risk low is very high priority for us, we will not chase
this market and risk buying at a significant high.
With our capital managed by non-mechanical methods we will move to 100% long at any close of the SPX near 1160 and/or the NDX near 1500.Again splitting that investment into the SPX, NDX, and RUT. If S3 in NDX-RS fails, we'll sell the NDX positions and move that capital to SPX positions. If S2 in the RUT-RS fails, we'll sell the RUT positions and move that capital to SPX positions.
We'll almost certainly be holding these positions into early January at least.
XAU Technical Price Analysis
XAU to 150 (Eventually)
Last time said, "We expect the XAU rally to pause for a few weeks finding support at around 95 before turning back higher." The XAU did pause but couldn't make it down past 98. We now think it's unlikely the XAU will trade below 100 in the near future.
XAU Relative Strength (XAU-RS = XAU/SPX)
XAU-RS is still contained in a very well defined uptrend channel. As long as this channel remains intact the XAU should be relatively bullish.
Gold Market Summary
We are looking to repurchase our long positions at S1. We no longer believe
we'll get that opportunity to buy the XAU at under 95. We still expect
the XAU to eventually reach 150.
Interest Rate Analysis
US 5-year Treasury Note Yield (TN)
Uptrending Channel
As expected yields have turned higher. We expect this trend to continue for a number of weeks.
ULTRA's Recommended Strategies
Our "Recommended Strategies" are at a 48% invested position which is still defensive. These strategies are very low risk by nature as indicated by our 5% maximum drawdown in 2004. This drawdown is less than half that of our benchmark indexes. Since these strategies are so low-risk it will be tough to get them all long at the same time, but it could occur.
Our c_umrnd2 strategy is likely to go 100% long if we can get a losing week for the SPX causing the incredible COT1 system to generate a buy signal.
Our c_u8ndx1 and c_u8ndx2 trade frequently and will be going in and out of the NDX throughout the rest of the year..
It's going to be tough to outperform our indexes in 2004 because we expect the remainder of 2004 to be up with low downside volatility. That is not a scenario where timing can outperform buy/hold. However, on a risk-adjusted basis we should far outperform the indexes. And that is what matters most to us, decent gains with low-risk.
Recommended
Strategy Risk = LOW-MED-HIGH
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.