The open below 10,379 on the Dow gives the Bull the knock-out punch. US Treasuries reflect risk aversion. Gold and crude oil slump on euro weakness, and on weaker economic data. Emerging markets and China, and semiconductors lead stocks lower.

The Dow Industrial Average opened below my annual support at 10,379.

The bulls still say that the strategy is to buy weakness. I began the year in disagreement suggesting to investors on Main Street to sell strength. I decided to track the first three weeks of the year as though it was a Title Bout between the Bull and the Bear. After Thursday’s drubbing of the Bull by the Bear the score became 9 to 4 favoring a wobbly kneed Bull. With today’s open below 10,379 I declare a TKO with the Bear as the victor of the Title Bout.

The daily chart for the Dow is now negative. My nearest support is the five-month modified moving average at 9,631. The downside risk continues given weekly closes below my annual pivot at 10,379. Keep in mind that my quarterly support is 6,705.

The yield on the 10-Year is below my semiannual pivot at 3.675 signaling risk aversion.

The daily chart for the 10-Year yield shows potential to the 50-day and 200-day simple moving averages at 3.56 and 3.45. This yield began the year testing monthly support at 3.868. Next week the Treasury yield curve faces $118 billion in supply, Tuesday, Wednesday and Thursday.

Gold and Crude Oil decline as the Euro Weakens

Gold is below its 21-day and 50-day simple moving averages at $1117 and $1135 with the December 22nd low at $1075. The Gold Bubble has popped and a weekly close below my quarterly support at $1084.9 indicates risk to my annual support at $938.7.

Crude oil is below my annual support at $77.05, and a close today below the 200-week simple moving average at $76.13 indicates risk to quarterly support at $67.22. This would be a sign of a weaker than expected global economy.

The euro is trending below my quarterly pivot at 1.4327, which indicates risk to the 200-week simple moving average at 1.3848.

Emerging Markets, China and Semiconductors provide downside warnings.

The Emerging Markets Index Fund (EEM) shifts to negative on its weekly chart given a close today below $41.18. A weekly close below my annual support at $39.81 indicates risk to quarterly supports at $25.01 and $22.82.

The China 25 Fund (FXI) is below its 200-day simple moving average at $40.11 for the first time since April 28th. A weekly close below my annual support at $39.25 indicates risk to quarterly support at $19.75. Subscribers to the ValuEngine Weekly ETF report could have shorted FXI on strength to my higher annual resistance at $44.53 on January 6th.

The Philadelphia Semiconductor Index (SOX) shifts to negative on its weekly chart on weekly closes below 344.50 this week and next. This would keep last week’s key reversal in tact. The downside risk for the SOX is to semiannual and annual supports at 271.90 and 259.45.

Chart Courtesy of Thomson / Reuters

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That’s today’s Four in Four. Have a great day.

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Richard Suttmeier
Chief Market Strategist
www.ValuEngine.com