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October 15, 2009 – No Break-out or Fake-out yet

It’s frustrating but Wednesday was not a Break-out or a Fake-out. No clear signal from
copper or crude oil, despite new dollar low. Fed minutes show Fed’s concern. Charts
courtesy of Thomson / Reuters

New highs for the Dow, S&P 500 and the NASDAQ, but not a decisive breakout
For the Dow my annual resistance was tested at 10,012 with a close just slightly above. Even
if the Dow stays above 10K near term the 10,012 level will be a magnet for the remainder of
2009.
Back in 2007 the Dow first tested 14,000 on July 17, 2007, then in October 2007 hit 14,198 on
October 11, and lost 14K on October 17. The Dow should have similar difficulties with 10K in
2009.
The S&P 500 should have tested 1100. The down trend that goes back to October 2007
comes in at 1130 at the end of October. Investors should use this strength to raise cash.

The NASDAQ reached a new high but stayed below monthly resistance at 2183.
Not all major averages traded to new highs for the year
Dow Utilities lack the energy to power to new highs and has been moving sideways since July
24th.
Dow Transports did not see a new high and has entered my zone of annual resistances at
2037 and 4199.
The Russell 2000 did not see a new high as stayed shy of weekly resistance at 625.50.
Most important is the SOX, which stayed shy of semiannual and weekly resistances at 337.39
and 338.79 despite the great quarter from Intel. Intel stayed below my monthly risky level at
$21.44.
Without follow through from Intel there’s a double top to worry about on the daily chart for the
SOX.
Comex copper and Nymex crude oil are on the cusp of their 200-week simple moving
average even as the dollar hits a new low for the move.
The 200-week simple moving average for Comex copper is 292.64. The September 28th high
is 296.60. This morning copper faded back below my weekly pivot at 280.57.
Crude oil is trying to achieve a weekly close above its 200-week simple moving average at
$75.16. Oil has been attempting this feat since mid-June.
A breakout above indicates strength to monthly and quarterly resistances at $82.98 and
$83.16. Otherwise, look for a fake-out back to annual pivots at $68.81 and $66.51 once again.
If copper and crude oil can’t get above their 200-week averages the global growth story is
bogus.
Concerns from the minutes of the September 22 / 23 FOMC meeting
Most FOMC members are concerned that labor remained weak. The NBER will not time
stamp the end of Recession until labor conditions improve. My contention is that
Americans must adjust to a lower standard of living.
The Committee agreed to maintain its target range for the federal funds rate at 0 to 1/4
percent and to reiterate its view that economic conditions were likely to warrant an
exceptionally low level of the federal funds rate for an extended period. This is a lack of
confidence that Fed policy is working.
Some members thought that an increase in purchases of agency MBS could help to reduce
economic slack more quickly than in the baseline outlook. You can’t as Fannie and Freddie
need to start to unwind portfolios by law in 2010.
Send me your comments and questions to Rsuttmeier@Gmail.com. For more information on
our products and services visit www.ValuEngine.com
That’s today’s Four in Four. Have a great day.

Richard Suttmeier
Chief Market Strategist
ValuEngine.com
(800) 381-5576

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website
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