Positive Signs Needed from Euro, Transports

NEW YORK (TheStreet) -- I have been tracking the trends for the U.S. capital markets in anticipation that the Federal Reserve will institute a third round of quantitative easing, or QE3, after its next Federal Open Market Committee meeting scheduled on Sept. 12.

Four of the five major equity averages are trending up, but, at this stage, the negative divergence in the Dow Transports and lack of a breakout for the euro vs. the dollar could stomp out gains elsewhere.

To shift to positive, the weekly chart for the euro vs. the dollar needs a weekly close above its five-week modified moving average at 1.2441. This would continue the upward momentum in the other markets. The Dow Transports will shift to negative on its weekly chart with a close today below its five-week modified moving average at 5119.

Here's my analysis of the major markets:

Yield on the 10-Year Treasury Note. (1.693) -- The yield on the US Treasury 10-Year note set an all time low at 1.377% on July 25, and the high yield this week was 1.731%. The "flight to quality" bid faded significantly this week and today's close has a high probability of surpassing its five-week modified moving average at 1.588%, indicating that this yield should rise towards my semiannual and quarterly value levels at 1.853% and 1.869%, respectively.

I do not view this as a popping of a bond bubble, as the Federal Reserve has pledged to keep the federal funds rate at zero to 0.25% at least through late 2014. When this yield tested my semiannual risky level at 1.389% on July 25, I recommended that investors long the 10-Year Treasury note book profits. My monthly risky level for August is 1.468%.

Comex Gold ($1617.8) -- Comex gold stabilized around my annual pivot at $1575.8 the Troy ounce in July and has been above that key level since July 25.

A close today above the five-week modified moving average at $1602.0 keeps the weekly chart positive, and indicates upside to my semiannual risky levels at $1643.3 and $1702.5. A weekly close below my annual pivot at $1575.8 indicates risk to my new monthly value level at $1525.3 the Troy ounce.

Nymex Crude Oil ($93.68) -- Nymex crude oil bottomed at $77.28 a barrel on June 28 and has been rising, and this week's high reached $94.72. The weekly chart for crude oil remains positive with a close today above the five-week modified moving average at $89.03. My monthly value level is $90.40 a barrel with upside potential to my annual risky level at $103.58.