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

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October 22, 2009 – Beige Book details cause stock market key reversals

Beige Book details cause stock market key reversals. Fed Policy is re-igniting
commodity speculation. Dollar weakness / higher stock prices are decoupling. The
“Key Reversal Days” for the Dow, NASDAQ and Transports
Beige Book Talks Stabilization, but the devils in the details
The gossip columns from the twelve Fed Districts reports gains in economic activity, but
improvements were described as small or scattered. No surprise to me is that the weakest
sector was commercial real estate, with conditions described as either weak or deteriorating
across all Districts. Labor markets were described as weak or mixed with pockets of
improvement. Consumer spending remained weak as well. General transportation activities
showed declines.
Residential construction activity remained weak in most Districts. Many Districts continued to
report weak or declining loan demand, and many noted further erosion of credit quality. This
tells me that the Recession is not over. Also notable was that there were no comments
about the stimulus creating or saving jobs. Shovels remain ready, but projects are not being
funded.
Fed Policy is re-igniting commodity speculation
Comex copper is forming a new speculative bubble given weekly closes above the 200-week
simple moving average at 293.13. Weekly support is 274.23 with monthly resistance at
321.34.
Nymex crude oil broke out above its 200-week simple moving average at $75.29 last week,
which targets monthly and quarterly resistances at $82.98 and $83.16. My annual pivots at
$68.81 and $66.51 provided stability on weakness last month.
The Federal Reserve is making the same mistake as it did in 2003 and 2004 when they cut
the funds rate to 1% and kept it there for a year. This time the funds rate is zero to 0.25, which
is refueling commodity speculation, which will likely choke off an economic recovery in 2010.
Dollar weakness / higher stock prices are decoupling.
The Dollar Index will stay oversold on its weekly chart this week, as weakness continues
towards up trend support at 74.33. A lower dollar will decouple from higher stock prices, as
the Dow struggles with my annual pivot at 10,012. Other key averages will lag including the
NASDAQ, Transports, Russell 2000 and the SOX. The Dollar Index may be declining, but
there’s an up trend that goes back to April / July 2008. This week’s support on the trend is
74.33. The dollar is extremely oversold.
The daily charts for the Dow, NASDAQ and Dow Transports show “Key Reversal Day’s”
Dow – After a new high for the move at 10,119.47 Wednesday’s close was below the
low of Tuesday, which defines a “Key Reversal Day.” Weekly, annual and monthly
supports are 9,921, 9,750 and 9,306 with my annual pivot at 10,012, and daily resistance at
10,105.
NASDAQ – After a new high for the move at 2190.64 Wednesday’s close was below the
low of Tuesday, which defines a “Key Reversal Day.” Monthly support is 1938 with a
weekly pivot at 2169, and daily and monthly resistances at 2177 and 2183.
Dow Transports – After a new high for the move at 4066.40 Wednesday’s close was
below the low of Tuesday, which defines a “Key Reversal Day.” Monthly and quarterly
supports are 3615 and 3158 with weekly and annual pivots at 3980 and 4037, and daily and
annual resistances at 4094 and 4199.
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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