| Issue #56 |
The
ULTRA Timer Report
|
Nov
15, 2005 AM
|
SPX Technical Price Analysis
SPX at Resistance
We got really surprised by this rally. Looking back it should have obvious as the late October upside move is a perfect example of symmetry almost exactly replicating the previous downside move in early October. Luckily, the mechanical SEAS2 October end-of-month captured a 3.5% gain during the upside move which saved our bacon. It's perfect example of why technical and mechanical strategies are a perfect combination. And why diversity of strategy is of paramount importance.
The SPX is now due for a correction as it has run into stiff resistance R1. The uptrend line S1 is not sustainable and will fail eventually.
Considering:
- The false downside breakout in October
- The SPX's ability to overcome the negative tendency in October to rally strongly
- The very bullish seasonable period we are nearing that starts on the Monday before Thanksgiving (Monday 11/21/05).
we think this correction will be short-lived.
We believe that R2 is a reasonable downside objective as it:
- Is the Level of a couple previous bottoms.
- Represents about a 50% retracement from the early Oct05 low.
- Would keep symmetry intact.
If the SPX could drop to R2, find support there and then rally back above R1 we'd then expect upside objective to be around 1300 by year-end.
The Head-and-Shoulders bottom in the SPX monthly chart remains bullish for the long term calling for a move up to 1500+. We believe that this move could result in a double top in 2006 and a historical shorting opportunity.
NASDAQ 100 Technical Price Analysis
NDX Gap
The NDX gapped above resistance R1. It's very rare for a gap in the NDX to not fill and therefore we believe we'll get an opportunity to buy the NDX around 1610 in the coming days.
NDX Relative Strength (NDX-RS=NDX/SPX)
NDX-RS has been supported by the uptrend line S3 for many months. We expect S3 to fail but it simply didn't happen. As long as the NDX remains above S3, this is a very bullish chart for the NDX going into year-end.
(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 At Strong Resistance
The RUT is at resistance R1 which should turn it back downward for a temporary correction. A reasonable downside objective is S1 at around 640.
RUT Relative Strength (RUT-RS = RUT/SPX)
RUT-RS is in a downtrending channel but as you can see it desperately wants to breakout to the upside. If the markets correct as we expect a test of S2 should occur. However, we do not expect S2 to fail.
(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 got faked out by the false downside breakout in the SPX weekly chart. Now we're looking to position for the expected year-end rally. One of the keys to keeping drawdowns low is to try to avoid chasing markets. Sometimes this results in getting to the party late. However, it's impossible to catch every move and it's actually not necessary for success. We believe the market is due for a correction which will allow us to get on board below the levels at which we sold in early August.
With
capital not managed by ULTRA mechanical methods:
As of 08/03/05
we are currently 0% invested selling our:
SPX related funds at 1245.04
RUT related funds at 683.38
NDX related funds at 1627.19
We'll go 100% long at any SPX close below 1210 at which point we'll split our investment 50% SPX related funds and 50% NDX related funds. If the NDX closes below 1610 (in the gap) we'll make our 50% NDX investment even if the SPX hasn't yet reached 1210. If the RUT gets near 640 and S2 in RUT-RS remains intact we'll move into thirds (SPX, NDX, RUT).
Any changes to that plan will be posted on the updates page that is here.
XAU Technical Price Analysis
XAU At Major Resistance (No Change)
A few weeks ago we said, "We believe that the XAU has now peaked and will enter a down phase possibly dropping as low as 80 (S1) where we will be huge buyers. The first drop should be to S2 at around 100 where the XAU could rally back up to R1."
All of that has now occurred and we expect the XAU to enter a down phase that will be triggered by a weekly close below S2.
If we are wrong and the XAU breaks out of this channel we'll allow it to rise a bit and then drop back to retest R1 before we chase it.
Interest Rate Analysis
US 5-year Treasury Note Yield (TN)
Uptrending Channel Remains Intact
TN is still enclosed in a mult-year uptrending channel. During 2005 TN has not been able to reach the upper boundary (R1). Instead R2 is about all it's been able to muster. We expect TN to continue trending upward in this channel. Any time S1 is touched in the future one should assume an interest rate low has been reached.
ULTRA's Recommended Strategy Risk
We believe the stock market is going to put in a strong rally into year-end. Although a correction is due investors should be looking to position themselves for the ride.
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 now slightly behind our benchmarks for the first time in 2005. However, they have kept drawdowns to -3.2% as compared to -9.8% for the benchmark indexes. We are currently 48% invested..
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.