Saturday, August 9, 2008

Stock Market -- Position Overview

Our recent newsletter, dated July 14th, forecasted that the major stock indices could continue to remain under pressure, and projected a DOW trading range for the month between 10,200 and 11,450. The actual result saw the DOW slightly supported, still working off the oversold condition from the large decline in June, producing a trading range for the month between 10,827 and 11,698. The stock market will routinely consolidate within a supported and elevated range before resuming its primary trend, which was the case this past month.

We stated that the uncertainty of Fannies and Freddie's ability to guarantee the various mortgages could cause US treasuries to decline in price, inversely making yields rise, but in the near-term, felt that they would be price-supported, with a peak-yield for the month of 4.00%. The US treasuries, during the course of the month, were price-supported as a safe-heaven through a declining stock market, as well pressured with the uncertainties still existing with Fannie and Freddie, resulting in an actual yield-range of between 3.81% and 4.14%.

The US dollar was anticipated to resume the downtrend, after a period of consolidation, and we projected a euro fx equivalent trading range for the month between $1.56 and $1.60. We further stated that there was significant support for the US dollar at euro fx equivalent at $1.60, and it would be interesting to see how the currency would perform at that key level -- hold and be price-supported or breaking-through and continue to decline even further. The actual result saw the US dollar decline as projected, with a euro fx equivalent trading range for the month between $1.5486 and $1.5955. This proved to be a very accurate forecast, and it was interesting to watch the US dollar decline very closely to, but not touching, the euro fx equivalent key level of $1.60 before reversing course and being price-supported.