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

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October 14, 2009 – Break-out or Fake-out

Break-out or Fake-out from several market angles. Obviously earnings from the most
important tech stock, Intel and the most important “too big to fail” bank, JP Morgan
should be the catalyst for Dow 10,000 and break-outs for Comex copper and Nymex
crude oil. Without a break-out there could be a fake-out on warnings found the minutes
from the September 22 / 23 FOMC meeting.
Intel beat earnings estimates and shares traded above my monthly risky level at
$21.44.
As I stated yesterday, Intel has a BUY rating according to ValuEngine with fair value at
$26.81. I do not expect fair value to be challenged any time soon. ValuEngine shows risk to
$19.14 over the next twelve months. The stock is below my monthly risky level at $21.44 so
far today and a close below would indicate that the great earnings report was built into
strength going into the earnings release.
JP Morgan also beat earnings estimates and traded to $47.50 pre-market this morning.
Yesterday I stated that the big banks had the camouflage paint to cover up increasing bad
real estate and consumer loans. I saw nothing in the JP Morgan report with regard to their
industry leading $70 trillion exposure to notional amount of derivative contracts held off
balance sheet. ValuEngine rates JP Morgan a HOLD and the stock opened well above fair
value at $40.84. The prior intraday high was $46.49 set on the first day of the September 22 /
23 FOMC meeting.
Bonuses on Wall Street will be a record in 2009 because of the Fed gift of a near zero cost of
funds. Let’s get back to banking reality. FASB should bring back mark-to-market accounting in
2010, which banks should easily handle if you believe the hype from Bank CEOs.
As I said on Monday, the Congressional Oversight Panel warns that the “too big to fail” banks
are bigger, small banks will continue to fail, and troubled assets are more troubled today. The
year ago banking problems remain problems today.
The minutes from the September 22 / 23 FOMC meeting
The Fed will recognize that growth remains constrained by ongoing job losses, sluggish
income growth, and tight credit. Businesses are still cutting back as evidenced in the rise is
empty office space.
The Fed will indicate that policy actions in place will gradually contribute to a resumption of
sustainable economic growth in a contest of price stability. The Fed will re-iterate the need to
leave the federal funds rate at zero to 0.25% for an extended period.
The quantitative easing in place will be allowed to sunset at the end of Q1 2010. Fed is in the
midst of purchasing up to $1.25 trillion of mortgage-backed securities and $200 billion of
Fannie and Freddie debt.
So far the tally is $862 billion of MBS and $125 billion of agency debt. The purchase od US
Treasury will total $300 billion when this program ends at the end of October.
Comex copper and Nymex crude oil remain are at the cusp of 200-week simple moving
averages.
The 200-week simple moving average for Comex copper is 292.67. The September 28th high
is 296.60.
The 200-week simple moving average at $75.16 for Nymex crude oil was tested this morning.
A breakout above indicates strength to monthly and quarterly resistances at $82.98 and
$83.16. Otherwise, look for a fake-out back to annual pivots at $68.81 and $66.51 once again.
The Dow opens at a new high for the year at 9,977.24 and within striking distance of
10,000.
A fake-out would keep the Dow below weekly, daily and annual resistances at 9,967, 10,007
and 10,012. Tuesday’s low is support at 9,815.
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
www.ValuEngine.com. I have daily, weekly, monthly, and quarterly newsletters available that track a variety of
equity and other data parameters as well as my most up-to-date analysis of world markets. My newest products
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“I Hold No Positions in the Stocks I Cover.”