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August 30, 2010 – The Dow remains oversold on its daily chart after Friday’s rally.

The decline in the yield on the 10-Year US Treasury is no longer overdone on its daily chart.
Gold remains overbought on its daily chart. Crude oil is not longer oversold on its daily chart.
The euro is no longer oversold on its daily chart, but the 50-day simple moving average at
1.2774 remains resistance. The Dow remains oversold on its daily chart.
10-Year Note – (2.646) My annual pivots are 2.813 and 2.999 with a weekly pivot at 2.648, and daily,
quarterly and semiannual risky levels at 2.527, 2.495 and 2.249 versus last week’s low yield at 2.419.
Note that the decline in yield is no longer overdone on the daily chart.

Courtesy of Thomson / Reuters

Comex Gold – ($1240.0) Semiannual, weekly, quarterly, monthly, and annual value levels are
$1218.7, $1211.5, $1140.9, $1133.2 and $1115.2 with a daily pivot at $1242.5, and semiannual risky
level at $1260.8. Note that gold is still overbought on its daily chart.
 Courtesy of Thomson / Reuters

Nymex Crude Oil – ($75.43) My daily value level is $72.02 with annual, monthly, weekly and
semiannual risky levels at $77.05, $80.02, $81.35 and $83.94. Note crude oil remains oversold on
the daily chart profile.

Courtesy of Thomson / Reuters

The Euro – (1.2733) Daily, quarterly and monthly value levels are 1.2579, 1.2167, 1.1486 and 1.1424
with weekly and semiannual risky levels at 1.3170 and 1.4733. Note that the euro is still oversold
on its daily chart.
 Courtesy of Thomson / Reuters

Daily Dow: (10,151) Daily and quarterly value levels are 9,919 and 7,812 with my annual pivot at
10,379, and monthly, semiannual, weekly and annual risky levels at 10,439, 10,558, 10,904 and
11,235. My annual risky level at 11,235 was tested at the April 26th high of 11,258.01. Note that
the daily chart remains oversold with the 21-day, 50-day and 200-day simple moving averages
at 10,338, 10,278 and 10,454.

Courtesy of Thomson / Reuters

Why we are not in a Bond Bubble - As long as Team Bernanke insists on a zero funds rate policy the
United States risks at least another decade of extremely low interest rates with the 10-Year yield
trading between 4% and 2%. In December 2008 the 10-Year yield approached 2% and 4% was tested
in June 2009 and April 2010.
The reason why Treasury yields have declined to 2.5% recently is the Fed’s move to buy long maturity
US Treasuries to replace the maturing Fannie Mae and Freddie Mac debt and mortgage securities,
which total’s about $1.5 trillion. The unintended consequence is lower savings rates for all Americans.
Community and regional banks are not lending and they are seeing increasing deposits from
Americans given that the FDIC protection has been increased to $250,000 per bank permanently.
Since Banks are not lending, they buy US Treasuries to lock-in the spread versus what they pay for
deposits. Thus they must pay a lot less for deposits since the last Fed meeting. This drains money
from consumers’ coffers causing the economy to slow. The FDIC releases its Quarterly
Banking Profile on August 31st at 10:00 AM.
In my daily blogging I have repeatedly said the funds rate should have never have been taken below
3% because it takes money out of consumers’ pockets by reducing income on money market funds,
CDs and other bank deposits. This ridiculous Fed policy has our country "Turning Japanese, I
really Think so"! If the Federal Reserve cuts the rate on Bank Reserves held at the Fed to zero from
0.25%, banks will buy more US Treasuries.
Stocks rallied on Friday on the Bernanke Pledge to do whatever it takes to get the economy moving
again. That requires a 3% federal funds rate, which he will not do!
Watch the Dow Transportation Average – A bearish cross-over is likely this week with the 50-day
simple moving average at 4252 falling below the 200-day simple moving average at 4243.
• Closes below 10,188 Dow and 4174 Transports would be below the five-month modified moving
averages which shift the monthly chart profiles to negative.
• Closes this week below 10,284 Dow and 4258 Transports would be below the five-week
modified moving averages which shift the weekly chart profiles to negative.
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
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