Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.

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October 21, 2010 – Wednesday’s Rebound Does Not Alter My Markets Outlook

The yield on the 10-Year note is between my monthly pivot at 2.555 and my quarterly and
semiannual risky levels at 2.265 and 2.249. Gold is trading around my monthly pivot at $1343.7
between my quarterly value level at $1306.4 and weekly risky level at $1373.6. Crude oil is just
above my weekly pivot at $82.38 with semiannual and monthly risky levels at $83.94 and
$84.74. The euro is trying to rally to this week’s risky level at 1.4074. The major equity averages
remain overbought with overhead risky levels. For the Dow my weekly risky level is 11,229, my
annual risky level is 11,235, and my semiannual risky level is 11,296. I answer readers’
questions on the Dow Theory Buy Signal. I comment on the Fed’s Beige Book.
10-Year Note – (2.475) Weekly, annual and annual value levels are 2.620, 2.813 and 2.999 with
monthly and daily pivots at 2.555 and 2.539, and quarterly and semiannual risky levels at 2.265 and
2.249.

Courtesy of Thomson / Reuters

Comex Gold – ($1344.2) Quarterly, semiannual and annual value levels are $1306.4, $1260.8,
$1218.7 and $1115.2 with my monthly pivot at $1343.7, and daily and weekly risky levels at $1369.0
and $1373.6.

Courtesy of Thomson / Reuters

Nymex Crude Oil – ($82.54) My annual value level is $77.05 with daily and weekly pivots at $81.41
and $82.38, and semiannual and monthly risky levels at $83.94 and $84.74.

Courtesy of Thomson / Reuters

The Euro – (1.3964) My quarterly value level is 1.3318 with daily and weekly risky levels at 1.3948
and 1.4060. My monthly value level is 1.2342 with semiannual risky level at 1.4733.

Courtesy of Thomson / Reuters

Daily Dow: (11,108) Monthly, semiannual, annual and quarterly value levels are 10,857, 10,558,
10,379 and 8,523 with daily, weekly, annual and semiannual risky levels at 11,132, 11,229, 11,235,
11,290 and 11,296. My annual risky level at 11,235 was tested at the April 26th high of 11,258.01.

Courtesy of Thomson / Reuters

Reader Questions about Dow Theory
1. Do you think the Dow will close above 11,205.03 triggering a Dow Theory Buy Signal? First of
all Dow Transports must also close above 4,806.1 to confirm a Dow Theory Buy. I am not
betting that such a signal will occur, as my longer term forecast is “Dow 8,500 before Dow
11,500”.
2. If the get a Dow Theory Buy signal what is the upside target? If the Dow does not have a
monthly close above 11,296 the Dow Theory Buy could become a false signal. I do not
have a specific target above 11,296 as there are no higher risky levels. This happens when a
market goes parabolic, in stocks called a “melt-up” as all shorts are forced to cover.
3. What would negate a Dow Theory Buy Signal? I will track the weekly chart as the Dow is
overbought. A weekly close below the five-week modified moving average with declining
MOJO would be the sell signal. The five-week modified moving average is at 10,727 this
week and will move higher each week.
In sum, I still forecast “Dow 8,500 before Dow 11,500” unless there’s a Dow Theory Buy Signal. Near
Term I have been projecting Dow 11,235 by Election Day on a Republican victory and QE2 by the Fed.
A Dow Theory Buy Signal occurs with Dow Transports closing above its May 3rd closing high at
4,806.1, and then the Dow Industrials closing above its April 26th closing high at 11,205.03.
The Beige Book Reflects Modest Economic Growth, but Let’s Focus on the Headwinds
• Housing markets remain weak with most Districts reporting sales below year-ago levels.
Reports on prices suggested stability, however. Conditions in the commercial real estate sector
were subdued, and construction was expected to remain weak. Lending activity was stable in
most Districts.
• Bernanke is worried about deflation but that’s not evident in the Beige Book. Input costs,
most notably for agricultural commodities and industrial metals, rose further. Shipping rates
increased, and retailers in some Districts noted rising wholesale prices.
• Demand for transportation services appears to have slowed.
What’s Ahead for the Foreclosure Mess?
• The big banks are saying their paperwork is accurate so foreclosures should commence soon.
• The attorneys general in all states are investigating whether lenders violated state laws.
• Evicted homeowners are hiring lawyers for suits against the major lenders.
• Judges will scrutinize foreclosure documents with skepticism.
• Congress will hold hearings.
• All of this remains the fall-out of the Subprime Crisis.
That’s today’s Four in Four. Have a great day.
Richard Suttmeier
Chief Market Strategist
ValuEngine.com
(800) 381-5576
Send your comments and questions to Rsuttmeier@Gmail.com. For more information on our products and services visit
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As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I have daily, weekly, monthly, and
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“I Hold No Positions in the Stocks I Cover.”