The Unwinding of Proprietary Trading Positions

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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.

July 2, 2010 The Unwinding of Proprietary Trading Positions

The popular trades at mid-year; to be short US Treasuries, to be long gold and crude oil, and tobe short the euro. These trades seemed to be unwinding over the past two days. On Thursday,the ValuTrader Model Portfolio triggered nine buys on weakness to value levels as all sectorsbecome undervalued by more than 10%. New lows for the move were seen for all of the majorequity averages, but the S&P 500 held my annual support at 1014.2. My call for the Dow remainsDow 8,500 Before Dow 11,500 but some stability appears likely for the holiday weekend.Freddie Mac 30-Year fixed rate mortgage hits a record low of 4.58%, but it should be lower.

US Treasury Yields Was it quarter ending window undressing that took the yield on the 10-Year to2.879 on Thursday, or was it simply Wall Street throwing in the towel on short positions. Investors weretold by Wall Street analysts to avoid US Treasuries for the past six months. Investors who listened tomy Risk Aversion trade bought at the 10-Year note at 4% on April 5th and sold this week between 2.999and 2.813. New semiannual and quarterly supports are 3.479 and 3.486 with my annual pivot at 2.999,

and weekly, annual, quarterly and semiannual resistances at 2.843, 2.813, 2.495 and 2.249. Yieldsshould stop their decline between 2.999 and 2.813.

Chart Courtesy of Thomson / Reuters


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Comex Gold Being long gold was another popular strategy, but I warned that the high of $1266.5 inJune was a failed test of monthly resistance. Quarterly support is $1140.9 with my semiannual pivot at$1218.7, and semiannual, weekly and monthly resistances at $1260.8, $1275.9 and $1279.3. Gold

closed below its 21-day and 50-day simple moving averages at $1235.0 and $1212.1 on Thursday.

Courtesy of Thomson / Reuters

Nymex Crude Oil Being long Crude Oil with supply disruptions in the Gulf of Mexico and the

beginning of Hurricane Season was the favored trade. I said no to that trade as crude oil remains underthe influence of my annual pivot at $77.05, which was a magnet numerous times in the first half of2010. Weekly and quarterly supports are $63.22 and $56.63 with my annual pivot at $77.05, andmonthly and semiannual resistances at $79.36 and $83.94.



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The Euro The most crowded trade was being short the euro and I started to see limited downside forthe euro about a week ago. Quarterly support is 1.1424 with a monthly pivot at 1.2035 and monthlyresistance at 1.2670.


Daily Dow:Daily and weekly supports are 9,588 and 9,483 with the 21-day, 50-day and 200-daysimple moving averages at 10,141, 10,419 and 10,361, and my annual pivot at 10,379. MOJO isdeclining with new semiannual and monthly resistances at 10,558 and 10,891 after my annual

resistance at 11,235 was tested at the April 26

th

high at 11,258, which marked the end of the bearmarket rally that began in March 2009. We are in the second leg of the multi-year bear market thatbegan in October 2007.



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The Unwinding of Proprietary Trading Positions