Weakening Technicals Are the Halloween Trick

NEW YORK (TheStreet) -- With the stock markets closed on Monday and Tuesday, today could provide Halloween trick or treat volatility.

Monthly closes relative to five-month modified moving averages are important as closes below would be the trick indication of weakening technicals. Closes above the five-week MMAs could treat the bulls to a temporary rebound in front of Friday's employment report.

Today's closes are inputs to my proprietary analytics and will provide new monthly value levels, pivots and risky levels. For the Dow Industrial Average, S&P 500 and Nasdaq, which have overbought momentum (12x3x3 monthly slow Stochastic) reading, will likely have tight monthly risky levels when November begins Thursday.

Analysis of the Yield on the 10-Year Treasury Note (1.756) -- The monthly chart shows that the long term down trend for yields is overdone. A close today below the five-month MMA at 1.760% keeps a tight trading range in tact around my semiannual pivot at 1.853%. My prediction is that we have seen the low yield for this cycle, which was 1.377% set in July. This was a test of my semiannual risky level at 1.389%, where investors should have booked profits in U.S. Treasuries. If this yield ends October above 1.760%, and is followed by a weekly close above 1.853%, the risk is to higher yields, my quarterly and annual value levels at 2.109% and 2.502%. The long term down trend is the 120-month simple moving average at 3.670%.

Chart Courtesy of Thomson/Reuters

Analysis of Comex Gold ($1,717.70) -- The monthly chart for gold remains positive with rising momentum with the five-month MMA at $1,677.10 as major chart support. My semiannual and annual value levels are $1,643.30 and $1575.80 with my semiannual pivot at $1,702.50, and quarterly risky levels at $1,844.90 and $1,881.40. My prediction remains that the all-time high at $1,923.70 set in September 2011 is the top of the gold bubble.

Analysis of Nymex Crude Oil ($86.43) -- The monthly chart for crude oil has been negative since the end of May with the five-month MMA at $92.26. The 120-month SMA is a major support at $69.50. The 120-month SMA was a stabilizing force in the first four months of 2009. My semiannual value level is $76.71 with annual and quarterly risky levels at $103.58 and $107.31.

Analysis of the Euro vs. the Dollar (1.3000) -- The monthly chart is neutral with the euro between its five-month MMA at 1.2896 and its 120-month SMA at 1.3101. The euro is also between my semiannual pivot at 1.2917 and my quarterly pivot at 1.3048. These levels were magnets in October. My semiannual value level is 1.1078 with my annual risky level at 1.4239.

Analysis of the Dow Industrial Average (13,107) -- The monthly chart shown below has been overbought since April with the five-month MMA at 12,946 a key chart support. A close below this level downgrades this chart to neutral with risk to the 120-month simple moving average at 10,961, which was last tested in October 2011. My annual and semiannual value levels are 12,312 and 10,738 with annual and quarterly risky levels at 14,032 and 14,192. These risky levels are below the October 2007 high at 14,198.10. When you look at trading since the beginning of January 2000, the Dow Industrial Average is near the high end of a 13-year trading range. This should be a clue to book profits and raise cash.

Analysis of the S&P 500 (1412.0) -- The monthly chart has been overbought since July with the five-month MMA at 1379.1 a key chart support. A close below this level downgrades this chart to neutral with risk to the 120-month SMA at 1198.2, which was last tested in November 2011. My annual and semiannual value levels are 1363.2 and 1059.7 with quarterly and annual risky levels at 1513.3 and 1562.9. Like the Dow, these risky levels are below the October 2007 high at 1576.09.

Analysis of the NASDAQ (2988) -- The monthly chart has been overbought since September with the five-month MMA at 2962 a key chart support. The Nasdaq is only 26 points above this level on this Halloween trading day, so it won't take much for October's close to be below this level. This would downgrade this monthly chart to neutral with risk to the 120-month SMA at 2238, last tested in July 2010. The Nasdaq is above its November 2007 high is 2861.51 with my annual and semiannual value levels at 2698 and 2527, and annual and quarterly risky levels at 3232 and 3295. The Nasdaq set a multi-year high at 3196.93 on Sept. 21.

Analysis of the Dow Transportation Average (5052) -- The monthly chart for the Dow transports shifts to negative on a Halloween close below the five-month MMA at 5054. The risk is to the 120-month SMA at 4107, which was last tested in July 2009. My semiannual value levels are 4449 and 4129 with my quarterly risky level at 5541 and the all time high at 5627.85 set on July 7, 2011.

Analysis of the Russell 2000 (813.25) -- The monthly chart has positive monthly chart with rising momentum, the five-month MMA at 802.96 and the 120-month SMA at 659.79, last tested in October 2011. My semiannual value level is 686.25 with my annual pivot at 836.15 and quarterly risky level at 911.28. The all-time high at 868.57 was set on May 2, 2011.

Analysis of the Semiconductor Index or SOX (365.48) -- The monthly chart shifts to negative given an October close below the five-month MMA at 386.48 and the 120-month SMA at 397.68. My semiannual value level is 326.30 with quarterly risky level at 439.97.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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