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January 28, 2010 – The FOMC Ignores Weak Housing

Fed Statement has contradictions, as the FOMC does not comment on housing. The daily charts
for the US Capital Markets.
The Fed says that economic activity continues to strengthen and that is viewed as a positive by
traders around the world. Then they say that the deterioration in the labor market is abating when 43
states say that unemployment is rising. The Fed claims that household spending is expanding, but is
constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.
Why can’t the FOMC say what they really think instead of this double-talk?
How strong can the economy be when bank lending is contracting, and with this situation how can
they predict that there will be a gradual return to higher levels of resource utilization in a context of price
stability. With gasoline prices higher than all of 2009, with defaults and foreclosures rising, the Fed is
turning its back to Main Street USA.
If the Fed believed that the US economy is coming out of Recession why do they feel compelled to
keep the federal funds at 0 to 0.25% when we know that this giveaway is the fuel Wall Street is using to
keep their proprietary desks in a speculative mode. A 3% funds rate can help Main Street and the Fed
would still be accommodative. The Fed continues to lack confidence that their policy will work.
Noticeably Absent was comments that the housing sector continues to show signs of improvement.
How could they with Existing Home Sales down 17% and with New Home Sales down 7.6% to there
lowest level since this series began in 1963? With new home sales down 23% in 2009, the Housing
Market is clearly deteriorating, and bad loans are rising at community and regional banks. These are
the real problems that appear to plague any chance of a gradual economic recovery.
The decline in the 10-Year yield is overdone on its daily chart with the 50-day simple moving average
providing resistance at 3.57. Risk aversion continues with weekly closes richer than my semiannual
pivot at 3.675. Yields are up overnight with the 10-Year on the cusp of 3.675 with the 21-day at 3.73.
The key pivot for today’s $32 billion in 7-Year notes is 3.11, and a continued risk aversion is
signaled by a close today below the 200-day simple moving average at 3.03. The 7-Year is cheaper
than 3.11 overnight, which could be a problem for this auction. The 21-day is support at 3.23.
 Chart Courtesy of Thomson / Reuters

Comex Gold continues to hold a zone of support with quarterly at $1084.9, the December 22nd low at
$1075.2 and weekly support at $1062.0. My annual pivot is $1115.2.
Nymex Crude Oil is oversold on its daily chart with the 200-day simple moving average as support at
$69.75 and weekly and annual resistances at $76.22 and $77.05.
The Dollar Index is above its 200-day simple moving average at $78.60 for the first time since May 8th.
My quarterly resistance is $80.23. The support for the euro is the 200-week at 1.3857.

Chart Courtesy of Thomson / Reuters

For the Dow Industrial Average I am tracking the 21-day and 50-day simple moving averages as
resistances at 10,514 and 10,449 as a negative crossover appears on the horizon. That would be the
first negative configuration by this measure since July 2009. Today’s support is 10,037 with my annual
pivot as resistance at 10,379.

Chart Courtesy of Thomson / Reuters

The China 25 Fund (FXI) is well below its 200-day simple moving average at $40.27 and this index
had been above this milestone since April 29th. My annual pivot is $39.25, and a close this week below
the 200-week at $38.64 is the next bearish signal.

Chart Courtesy of Thomson / Reuters

The Housing Sector Index (HGX) is between its 200-day at $96.20 and the 50-day at $102.22.
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
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“I Hold No Positions in the Stocks I Cover.”