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

ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

covers over 5,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks,
and commentary can be found HERE.

Suttmeier's Four in Four video and ForexTV Markets Review can be watched on the web
HERE.

December 28, 2009 – Long and Winding Road for Fannie and Freddie

Tax payers are forced to give Fannie and Freddie an unlimited Christmas gift. Stock Market
Strength Put in Context. Equity Valuations suffer as the 30-Year bond yield rises. Gold is ripe for
an oversold rally with crude oil positive on its daily chart.
Long and Winding Road for Fannie and Freddie
The Housing and Economic Recovery Act (HERA) of 2008 set the terms for Conservatorship of Fannie
Mae and Freddie Mac with a wind down date of December 31, 2009. The Enterprise MBS program will
end the year at approximately $220 billion up from $202 billion shown on November 16, 2009. The
GSE Liquidity Facility will end at zero having never been used.
I have been predicting that Conservatorship of Fannie and Freddie will be the largest cost to tax payers
of all of the financial bailout programs, and that will prove to be the case as the GSEs will have
unlimited access to the Senior Preferred Program though 2012, with around $111 billion already spent.
All losses for Fannie and Freddie will be tacked unto the $200 billion lifeline set for each over the next
three years with the lines of credit permanently set to that level on December 31, 2012. Thus the total
lines of credit will be $400 billion plus the losses over the next thirteen quarters.
This Christmas Eve gift to be paid by taxpayers is an admission that the two GSEs are needed as “The
Great Credit Crunch” is expected to continue for another three years at least.
New highs across all Equity Averages on Christmas Eve, as the glass exceeds half full.
If the Dow opens above 10,472 it will be above the down trend that goes back to October 2007. The
50% retracement of the Bear Market was 10,334 with this week’s resistance at 10,988, and the 200-
week simple moving average at 11,187, well below the October 2007 high of 14,198. With the weekly
chart overbought, a close below the five-week modified moving average at 10,267 signals a fake-out
following the breakout. The downside in 2010 appears to be 7,500, which is a troubling risk / reward.

The S&P 500 broke out above its 50% retracement at 1121 with this week’s resistance at 1166, which
is 500 points above the March 6th low of 666. Keep in mind that the October 2007 high is 1576. The
200-week simple moving average is resistance at 1237.
The NASDAQ breakout was above the 200-week simple moving average at 2210, but strength did not
take out my annual resistance at 2296. This week’s resistance is 2340.
The Dow Transports ended last week below my annual pivot at 4199 with the 200-week simple moving
average at 4360. My lower annual pivot is 4037.
The Russell 2000 shows a weekly resistance at 639.54 and the 200-week at 678.00 and the SOX has a
weekly resistance at 364.38 and 200-week at 382.57.
Nine of eleven sectors are overvalued and the 30-Year yield is rising. This is a double-whammy
reason not to chase the rally in stocks. The yield on the 30-Year is headed for my semiannual support
at 4.75. This yield is above the 200-week at 4.52.

Basic Industries is now overvalued by 18.2% with Energy overvalued by 17.7%. Technology is only
1.1% undervalued with Heath Care, the cheapest sector, only 5% undervalued.
Comex Gold has alleviated an oversold on its daily chart with my quarterly pivot at $1094, the 50-day
at $1116 and the 21-day at $1139.

Nymex Crude Oil is above its 50-day at $76.81 on a positive daily chart. The 21-day is support at
$74.18 with the October 21st high at $82.
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.

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Richard Suttmeier
Chief Market Strategist
www.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 include a weekly ETF newsletter as well as the
ValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sample
issues of my research.

“I Hold No Positions in the Stocks I Cover.”