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September 16, 2010 – The Dow - Overbought but above semiannual pivot at 10,558

The 10-Year US Treasury yield is still between my annual pivot at 2.813 and this week’s risky
level at 2.609. Gold is above this month’s pivot at $1263.8 after a new all time high at $1276.5.
Crude oil failed to stay above annual and weekly pivots at $77.05 and $77.69 as expected. The
euro is between its 50-day simple moving average at 1.2876 and its 200-day at 1.3240. The Dow
has become overbought and holding my semiannual pivot at 10,558 targets daily and weekly
risky levels at 10,629 and 10,699. The Fannie and Freddie debate continues.
10-Year Note – (2.715) Daily, annual and annual value levels are 2.786, 2.813 and 2.999 with weekly,
monthly, quarterly and semiannual risky levels at 2.609, 2.562, 2.495 and 2.249. The rise in yields is
nearly overdone.

Courtesy of Thomson / Reuters

Comex Gold – ($1269.3) Semiannual, quarterly and annual value levels are $1218.7, $1140.9 and
$1115.2 with daily, weekly, semiannual and monthly pivots at $1260.3, $1252.7, $1260.8 and $1263.8.
Note that gold is no longer overbought on its daily chart.

Courtesy of Thomson / Reuters

Nymex Crude Oil – ($75.73) Monthly and quarterly value levels are $74.45 and $56.63 with a daily
pivot at $75.80, and annual and weekly pivots at $77.05 and $77.69 and semiannual risky level at
$83.94. Oil prices are nearly overbought.

Courtesy of Thomson / Reuters

The Euro – (1.3007) Daily and weekly value levels are 1.2868 and 1.2792. Quarterly and monthly
value levels are 1.2167, 1.1721 and 1.1424 with semiannual risky level at 1.4733. Note that MOJO is
rising again on the daily chart.

Courtesy of Thomson / Reuters

Daily Dow: (10,526) Monthly and quarterly value levels are 10,164 and 7,812 with annual and
semiannual pivots at 10,379 and 10,558, and daily, weekly and annual risky levels at 10,629, 10,699
and 11,235. My annual risky level at 11,235 was tested at the April 26th high of 11,258.01. The
Dow has become overbought.

Courtesy of Thomson / Reuters

The Future of Fannie Mae and Freddie Mac - The Federal Housing Finance Agency (FHFA) the
regulator of Fannie Mae and Freddie Mac thinks that the nation’s largest banks should pay for some of
the cost of bailing out the GSEs. It seems like the “too big to fail” banks do not want to take back $11
billion in bad loans sold to Fannie and Freddie, which they have a legal obligation to do.
Fannie and Freddie were rescued by Conservatorship two years ago and the cost to tax payers is
about $148 billion and counting at least through 2012.
In a recent report Fitch Ratings indicated that the four largest US banks could book losses of $42
billion if Fannie Mae and Freddie Mac force them to take back troubled mortgages they issued. Fitch
also estimated that JP Morgan (JPM), Citigroup (C), Bank of America (BAC) and Wells Fargo (WFC)
could record $17 billion in losses if they had to repurchase 25% the GSEs’ seriously delinquent loans.
Here’s the latest data from the FHFA with regard to Serious Delinquencies – Delinquency rates
have declined recently, but in my judgment it’s just a pause caused by the home buyer tax credits, and
mortgage modification limbo. Mortgage applications for home loan refinancing fell for a second
consecutive week, falling to the lowest level since early August, as record low mortgage rates failed to
boost demand. Meanwhile, 26% of all home sellers reduced their asking prices in August, the third
monthly decline in a row.
That’s today’s Four in Four. Have a great day.

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

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