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Richard Suttmeier is the Chief Market Strategist at

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November 5, 2010 – QE2 Starts To Re-inflate Bubbles, Risks Stagflation!

I still project that the decline in the 10-Year yield will be limited to my quarterly and semiannual
risky levels at 2.265 and 2.249. The rise in Gold extended the parabolic towards this week’s
risky level at $1396.7. Crude oil traded above its May 3rd high at $87.15 and thanks to QE2 could
rally another $10 per barrel taxing Main Street USA. The euro is trading at a new high for the
move with this week’s risky level at 1.4371. The Dow Theory Buy Signal is the technical reason
for Dow 11,434.84. Helicopter Ben’s Dollar Drop, and answering your questions about Dow
10-Year Note – (2.487) Daily, annual and annual value levels are 2.660, 2.813 and 2.999 with
monthly, quarterly and semiannual risky levels at 2.380, 2.265 and 2.249.

Courtesy of Thomson / Reuters

Comex Gold – ($1391.3) Quarterly, semiannual and annual value levels are $1306.4, $1260.8,
$1218.7 and $1115.2 with my monthly pivot at $1373.0, and weekly risky level at $1396.7.

Courtesy of Thomson / Reuters

Nymex Crude Oil – ($86.72) Monthly and annual value levels are $78.51 and $77.05 with semiannual
and weekly pivots at $83.94 and $85.08, and semiannual and annual risky levels at $96.53 and

Courtesy of Thomson / Reuters

The Euro – (1.4213) Daily, quarterly and monthly value levels are 1.4019, 1.3318 and $1.2709 with
weekly and semiannual risky levels at 1.4371 and 1.4733.

Courtesy of Thomson / Reuters

Daily Dow: (11,435) Monthly, semiannual, annual and quarterly value levels are 10,848, 10,558,
10,379 and 8,523 with daily, annual, semiannual and weekly pivots at 11,263, 11,235, 11,296 and
11,374. I show no risky levels following the Dow Theory Buy Signal.

Courtesy of Thomson / Reuters

Helicopter Ben Starts an Eight Month Dollar Drop – The Fed decision to buy $75 billion longer-
dated US Treasuries in each of the next eight months will total $600 billion by the end of June 2011.
This policy helps Wall Street make money on commodity speculation and staying short the dollar, while
Main Street USA struggles with the higher cost of living resulting from higher energy and food costs.
The Fed says there is no inflation which is hogwash! Just observe the rising Prices Paid components
of the latest ISM readings.
Gentle Ben says he wants higher stock prices and instead of giving retirees a money market rate they
can live with. The Fed wants folks living on a fixed income to take more investment risks. Many on
Main Street lost a bundle on the Fed-induced bubbles of the new millennium. First was the Tech
Bubble in 2000, then the Housing Bubble in 2006, which continues today, and the stock market crash
of October 2007 to March 2009. Now we have a gold bubble and an overvalued stock market. If
Americans were allowed to vote on Fed policy the vote would have been against QE2.
Now we are re-inflating the commodities bubbles as Gold pushes towards a new all time high and as
Crude Oil breaks out to the upside. Please tell me how this helps Main Street USA where jobs are
supposed to be created? Complicating the Main Street problems are rising home foreclosures, fewer
hours worked in addition to higher real inflation. Americans are being forced into a scenario of
accepting a lower standard of living, while the fat cats on Wall Street get a QE2 license to speculate.
With all of the bailouts that have cost tax payer billions, nothing has been done to help end the cause
of “The Great Credit Crunch”, which is the weakening housing market. This is the foundation that must
be fixed before the US economy has a chance to create jobs and grow again.
Questions on Dow Theory - A Dow Theory Buy Signal is a late cycle signal that typically occurs after
about two thirds of the rally has already occurred. The signal fortifies the notion that the market is in a
Buy Weakness mode. One reader asked why am I comparing it to the Thanksgiving 2007 Dow Theory
Sell Signal? The market turned lower after that signal but then staged a rally into Mid-December as a
Sell Strength opportunity. Now that we are operating in a Dow Theory Buy mode you want to know
where to buy on weakness. We know we have semiannual and annual pivots at 11,296 and 11,235.
Below these levels are monthly, semiannual and annual value levels at 10,848, 10,558 and 10,379. A
reader mentioned price gaps, and that gaps are usually filled. I agree with that notion as well.
ValuTrader Question - Subscribers to the ValuTrader newsletter have access to a model portfolio of
longs and shorts. The shorts are Diamonds (DIA), S&P Spiders (SPY) and NASDAQ 100 Shares
(QQQQ). We have existing short positions for each of these ETF’s and we add to shorts using GTC
Limit Orders to sell strength to the levels shown in the weekly report. On Thursday we added to the
short in DIA at $113.77 and to the short in SPY at $121.28, which was Thursday’s open above the
weekly pivot at $120.88.
That’s today’s Four in Four. Have a great day.
Richard Suttmeier
Chief Market Strategist
(800) 381-5576
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As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website I have daily, weekly, monthly, and
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