Bond Timers are Bullish

Here is a weekly chart of the yield on the 10 year treasury note. Remember that yields move inversely with bond prices, so when the yield is low the price is high and vice-versa.

Mark Hulbert today observed that the bond market timers he follows are as bullish today as they were back at the yield lows in 2006 around the 4.40% level. In other words, at that time in 2006 bond timers expected yields to drop still further and prices to rise, but exactly the opposite happened.

I think we are about to see history repeat itself here. Bond timers are very bullish but I think the 10 year yield is about to rally back near the 5.00% level. The economy is going to get stronger and stocks will rally as will the US dollar.

Bears Abound

Here is a chart of the American Association of Individual Investors bullish (green) and bearish (red) weekly sentiment reading. The chart comes courtesy of DecisionPoint.com (subscription required, but I think it is worth it!)

The latest bearish % is 56%, a level which has only been equaled or surpassed over the past 4 years by the bearish % at the June 2006 low and the March 2003 low. Both of these instances were followed by strong advances as you can see on the S&P bar chart above the sentiment bars.

This makes me even more confident that new bull market highs lay ahead.

Guesstimates on November 30, 8:30 am ET

Spiders - December S&P E-mini Futures: The trend has turned upward and it is now likely that 1406 marked the low of the drop which began from the October 11 top at 1587. This first swing up will probably make it into the 1490-95 zone. From there at 30-50 point break is likely.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The bonds have resistance at 118-12 and I think that a drop of 7-10 points is underway. Next downside target is 115-16. TLT has strong resistance at 94-95 and I think a 7-10 point drop is imminent.

December 10 Year Notes: Resistance is now at 115-00. I think the notes have started a drop of about 5 points. Next downside target is 111-28.

Euro-US Dollar: I think the euro is establishing a long-lasting top. The short term trend is still upward and will reverse only if support at 146.50 is broken decisively.

Dollar-Yen: The yen broke below support at 109.00 and this is a potentially bearish indication. However, the market traded below that level for only a couple of days and I think that a multi-month rally is now underway.

XLE - OIH - USO – January Crude: Crude traded within a dollar of the $100 dollar level and I think a lot of sellers are coming into this market and that crude has begun a substantial drop. The market has broken below support at 90.00 and the next downside target is 87.00. I expect to see crude trade near 74.00 before a multi-week rally can start. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - February Gold: I still think gold futures still have a good shot at the 873 level but a drop below support at 780 will mean that an extended decline has started.

SLV - March Silver: I think is now is likely that the 1627 high in December silver will hold and that an extended decline has begun. Support is at 1420.

Google: GOOG has support is at 640. I think the next step up will carry the market to 730.

Guesstimates on November 29, 8:30 am ET

Spiders - December S&P E-mini Futures: The trend has turned upward and it is now likely that 1406 marked the low of the drop which began from the October 11 top at 1587. This first swing up will probably make it into the 1490-95 zone. Support today is at 1445.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The bonds have resistance at 118-12 and I think that a drop of 7-10 points is underway. TLT has strong resistance at 94-95 and I think a 7-10 point drop is imminent.

December 10 Year Notes: Resistance is now at 115-00. I think the notes have started a drop of about 5 points.

Euro-US Dollar: I think the euro is about to establish a long-lasting top. The short term trend is still upward and will reverse only if support at 146.50 is broken decisively.

Dollar-Yen: The yen broke below support at 109.00 and this is a potentially bearish indication. However, the market has traded below that level for only a couple of days and I think that a multi-month rally is now underway.

XLE - OIH - USO – December Crude: Crude traded within a dollar of the $100 dollar level and I think a lot of sellers are coming into this market and that crude has begun a substantial drop. Resistance above the market is at 97.00 while short term support is at 90.00. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I still think gold futures still have a good shot at the 873 level but a drop below support at 780 will mean that an extended decline has started.

SLV - December Silver: I think is now is likely that the 1627 high in December silver will hold and that an extended decline has begun.

Google: GOOG has support is at 640. I think the next step up will carry the market to It looks like GOOG will rally to 730.

Uptrend Has Started

Here are four charts which I think have a lot to say about the trend in the stock market indexes.

The first chart is a weekly chart of the cash S&P 500. You can see that today's big rally has moved this week's price range outside the range of last week. If the average close in the upper half of this week's range on Friday I think we shall have an example of a bullish reversal bar.

There are three good reasons to think this bullish reversal bar will mark the start of a rally to new highs.

The first one is illustrated on the second chart above this post. This is a compressed weekly chart of the cash S&P 500. On it I have drawn the price boxes which have controlled the 5 year old bull market. These boxes are 185 points wide. (I last commented on this chart here. )Notice that the most recent drop has ended at the 1/2 division point of the current box and is nearly as big as the July-August drop. So the rally which started yesterday started from what should prove to be strong support in the 1395-1416 range.

The second reason is shown on the third and fourth charts above this post. These show the 5 and the 10 day moving averages (in purple and red respectively) of the daily count of the number of issues which advance each day on the New York Stock Exchange. (I last commented on this indicator here. ) The low early this week was accompanied by bullish divergences in both moving averages which failed to make new lows when the S&P did. A similar divergence shows in the daily count of advancing issues itself. Moreover, the daily count today is the highest in more than two months and this suggests that today is the kick-off day of a big rally.

Finally, sentiment is very bearish; the newspapers and magazines I read are filled with gloomy reports about the US dollar, the sub-prime crisis, the credit crunch, and the collapse in the housing market. If the averages can hold above their August lows as they appear to be doing in the face of such bearish news I think we can fairly conclude that they are headed much higher.

For these reasons I think the S&P 500 is on its way to new bull market highs. The top of the next box is near 1700 and I think the market can reach that level during the next 3 or four months.

Guesstimates on November 28, 8:25 am ET

Spiders - December S&P E-mini Futures: I still think I’ll have a chance to buy the e-minis at 1396, probably tomorrow or Friday. Today resistance above the market is at 1443. There are very bullish divergences showing up in the 5 and 10 day moving averages of advancing issues and I think this means that a long lasting low is imminent.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The bonds have rallied much more than I expected. Resistance is at 119-12 and support at 116-24 today. I think a break of 7-10 points will start soon. TLT has strong resistance at 94-95 and I think a 7-10 point drop is imminent.

December 10 Year Notes: Resistance is now at 115-20. From there the notes will probably drop about 5 points. .

Euro-US Dollar: I think the euro is about to establish a long-lasting top. The short term trend is still upward and will reverse only if support at 146.50 is broken decisively.

Dollar-Yen: The yen broke below support at 109.00 and this is a potentially bearish indication. However, I want to see how long the market trades below that level before I abandon my 130 long term target. I am expecting a powerful rally from current levels even if it does not carry the market above 124.

XLE - OIH - USO – December Crude: Crude has traded within a dollar of the $100 dollar level and I think a lot of sellers are about to come into this market and that crude will soon begin a substantial drop. Resistance above the market is at 99.50. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I still think gold futures still have a good shot at the 873 level but the failure of the market to rally in line with crude oil is not a bullish development. Support is still at 780.

SLV - December Silver: Silver and gold have failed so far to rally in line with crude oil and I am starting to have doubts about the market’s ability to reach the 1650 level. Support is still at 1435.

Google: GOOG has support is at 640. I think the next step up will carry the market to It looks like GOOG will rally to 730.

Guesstimates on November 27, 8:20 am ET

Spiders - December S&P E-mini Futures: Today I shall be a buyer of the e-mini’s at 1396 using a 25 point stop. I think the drop from the October 11 top is just about over. There are significant bullish divergences in the daily advances moving averages and at 1395 the drop will be as long as the July-August decline.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The bonds have rallied much more than I expected. Resistance is at 118-12 today. I think a break of 7-10 points will start soon. TLT has strong resistance at 94-95 and I think a 7-10 point drop is imminent.

December 10 Year Notes: Resistance is now at 115-20. From there the notes will probably drop about 5 points. .

Euro-US Dollar: I think the euro is about to establish a long-lasting top. The short term trend is still upward and will reverse only if support at 146.50 is broken decisively.

Dollar-Yen: The yen broke below support at 109.00 and this is a potentially bearish indication. However, I want to see how long the market trades below that level before I abandon my 130 long term target. I am expecting a powerful rally from current levels even if it does not carry the market above 124.

XLE - OIH - USO – December Crude: Crude has traded within a dollar of the $100 dollar level and I think a lot of sellers are about to come into this market and that crude will soon begin a substantial drop. Resistance above the market is at 99.50. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I still think gold futures still have a good shot at the 873 level but the failure of the market to rally in line with crude oil is not a bullish development. Support is still at 780.

SLV - December Silver: Silver and gold have failed so far to rally in line with crude oil and I am starting to have doubts about the market’s ability to reach the 1650 level. Support is still at 1435.

Google: GOOG reached the 685 level yesterday and support is at 640. I think the next step up will carry the market to It looks like GOOG will rally to 730.

E-mini Update

I was stopped out of my long position at 1421, break even, this afternoon. Tomorrow I plan to be a buyer below the 1400 level but I want to see how the market trades overnight before I select my buy spot.

Guesstimates on November 26, 8:20 am ET

Spiders - December S&P E-mini Futures: Long the e-minis from 1421 but I am bringing the stop up to breakeven today. This entry was only 4 points from the low so I plan to stick with this trade for a few days and see what develops. Resistance above the market today is in the 1475-80 range. I think Wednesday’s low ended the break from the October 11 top and that the market is headed for new bull market highs.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The market has reached 116-28 and I think a break of at least 5 points is imminent. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is now at 114-08. From there the notes will probably drop about 5 points. .

Euro-US Dollar: I think the euro is about to establish a long-lasting top. The short term trend is still upward and will reverse only if support at 146.50 is broken decisively.

Dollar-Yen: The yen broke below support at 109.00 and this is a potentially bearish indication. However, I want to see how long the market trades below that level before I abandon my 130 long term target. I am expecting a powerful rally from current levels even if it does not carry the market above 124.

XLE - OIH - USO – December Crude: Crude has traded within a dollar of the $100 dollar level and I think a lot of sellers are about to come into this market and that crude will soon begin a substantial drop. Resistance above the market is at 99.50. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I still think gold futures still have a good shot at the 873 level but the failure of the market to rally in line with crude oil is not a bullish development. Support is still at 780.

SLV - December Silver: Silver and gold have failed so far to rally in line with crude oil and I am starting to have doubts about the market’s ability to reach the 1650 level. Support is still at 1435.

Google: It looks like GOOG will rally to 685 and higher. Support is at 620.

Guesstimates on November 23, 8:55 am ET

Spiders - December S&P E-mini Futures: Long the e-minis from 1421 and using a 1392 stop. I still believe that the market will rally to 1600 or higher, but the advance would take at least a couple of months and probably more to complete.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The market has reached 116-28 and I think a break of at least 5 points is imminent. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is now at 114-08. From there the notes will probably drop about 5 points. .

Euro-US Dollar: The market has reached the 148.00 target and I think the euro is very close to a long-lasting top. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: The yen broke below support at 109.00 and this is a potentially bearish indication. However, I want to see how long the market trades below that level before I abandon my 130 long term target. I am expecting a powerful rally from current levels even if it does not carry the market above 125.

XLE - OIH - USO – December Crude: Crude has traded within a dollar of the $100 dollar level and I think a lot of sellers are about to come into this market and that crude will soon begin a substantial drop. Resistance above the market is at 99.50. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I still think gold futures still have a good shot at the 873 level but the failure of the market to rally in line with crude oil is not a bullish development. Support is still at 780.

SLV - December Silver: Silver and gold have failed so far to rally in line with crude oil and I am starting to have doubts about the market’s ability to reach the 1650 level. Support is still at 1435.

Google: It looks like GOOG will rally to 685 and higher. Support is at 620.

Comment on Comments

If you look carefully you will discover that every time the stock market tanks the number of comments posted to this blog increases sharply. On the other hand, after the market has rallied for a while the number of comments drops close to zero.

Another interesting fact is that as the market drops lower the abusive comments rise to 30-50% of the total; in fact the percentage is larger because I do not post the most abusive ones. I find this "abusive percentage" a wonderful contrary indicator, and on that basis I think the market is due for a very big rally.

I post the abusive comments which are not too extreme because I want everyone to see how ignorant people think near low points: they drive with their eyes firmly fixed on the rear view mirror.

Economy Headed For Recession ?

Here are images of the latest covers of The Economist and Business Week. As you can see both cover stories are about what is presumed by many to be an imminent slide of the US economy into a recession. The usual explanations for this prediction are the credit "crunch" brought about by the sub-prime lending mess coupled with the high price of oil and a dollar that I am constantly being told has nowhere to go but down.

Well, maybe so. But I should point out that this would be the first time in my memory that a recession was announced by cover stories in major magazines before it even started. In fact, I keep reading the major media in search of any positive story about the US economy and I can't find any.

This is a very unusual state of affairs with the major market averages just 6 weeks after and about 10% off their bull market peaks. Generally speaking, the media and the investing public remain quite bullish during the initial leg of a bear market, turning bearish only much later on subsequent drops to new lows.

I think that these covers and the associated bad economic news being highlighted by the media will prove to be false alarms. I think the stock market averages are near or at their lows. I think the bond market is at a temporary high and will drop once economic strength becomes recognized. Finally, I think the US dollar is making a multi-year low near the 75 level in the dollar index and that a dollar bull market is about to start.

E-mini Update

The market dropped to 1418, a point above my limit buy at 1417, but now it is rallying and I don't want to be left behind in this sort of situation. So I am long from 1421 using a 1392 stop.

Guesstimates on November 21, 8:45 am ET

Spiders - December S&P E-mini Futures: The market missed my buy price at 1422 by a point yesterday but the subsequent rally has failed to hold so I have to believe the e-minis are headed a bit lower. Today I will be a buyer at 1417 using a 25 point stop. I still believe that the market will rally to 1600 or higher, but the advance would take at least a couple of months and probably more to complete.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The market has reached 116-28 and I think a break of at least 5 points is imminent. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is now at 114-08. From there the notes will probably drop about 5 points. .

Euro-US Dollar: The market has reached the 148.00 target and I think the euro is very close to a long-lasting top. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: The yen should soon begin a substantial rally. Support is at 109.00.

XLE - OIH - USO – December Crude: Crude has rallied to a new high, contrary to my expectation. This morning it has traded within a dollar of the $100 dollar level and I think a lot of sellers are about to come into this market and that crude will soon begin a substantial drop. Resistance above the market is at 99.50. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I still think gold futures still have a good shot at the 873 level but the failure of the market to rally in line with crude oil is not a bullish development. Support is still at 780.

SLV - December Silver: Silver and gold have failed so far to rally in line with crude oil and I am starting to have doubts about the market’s ability to reach the 1650 level. Support is still at 1435.

Google: It looks like GOOG will rally to 685 and higher. Support is at 620.

E-minis

I have entered an order to buy the E-minis at 1421 using a 25 point stop.

Guesstimates on November 20, 8:25 am ET

Spiders - December S&P E-mini Futures: At the moment there is no sign that the drop from the October top is over, but there is good support near 1420 and I think the decline will end near there. I have no open orders because the market is 30 points from my buy level. I might enter an order later in the day but I’ll tell you if I do. I still believe that the market will rally to 1600 or higher, but the advance would take at least a couple of months and probably more to complete.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The bonds have been much stronger than I expected as the stock market has been weaker than I expected. The market will probably rally to 116-28 but after that I will be looking for a break of at least 5 points. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is now at 114-08. From there the notes will probably drop about 5 points. .

Euro-US Dollar: The market is getting close to the 148.00 target and I think that will be it for the euro. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: The yen should soon begin a substantial rally. Support is at 109.00.

XLE - OIH - USO – December Crude: I think crude has begun a substantial drop. Resistance above the market is at 96.00. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I still think gold futures still have a good shot at the 873 level which is the front month high reached in 1980. Support is at 780.

SLV - December Silver: Silver will probably reach the 1650 level. Support is at 1435.

Google: It looks like GOOG will rally to 685 and higher. Support is at 620.

E-mini early afternoon update

The market only managed a rally to 1445 after I was stopped out of my long position. This doesn't show much support so I think we will bounce briefly from 1430 but that a much more important and lasting low will develop near 1420.

E-mini Update

My stop at 1438 was filled a short while ago. The fact that the market dropped below 1440 means that it is headed still lower. Resistance right now is in the 1445-50 range and I expect to be a buyer again near 1430. At the moment I have no orders in because I first want to see whether or not this drop accelerates downward.

Guesstimates on November 19, 8:45 am ET

Spiders - December S&P E-mini Futures: Still long the e-minis from 1463 and still using a 1438 stop. Since the market has traded sideways for several days now I think that an rally will carry above the 1500 level so I have no profit taking target for the moment. I still think that Tuesday’s low at 1437 in the e-minis will hold and that the market is headed for 1600 by year end.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The bonds now have resistance at 115-20 but I still think that the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 112-16 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: The market will probably rally to 148.00 but I think that will be it for the euro. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: The yen should soon begin a substantial rally. Support is at 109.00.

XLE - OIH - USO – December Crude: I think crude has begun a substantial drop. Resistance above the market is at 96.00. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I still think gold futures still have a good shot at the 873 level which is the front month high reached in 1980. Support is at 780.

SLV - December Silver: Silver will probably reach the 1650 level. Support is at 1435.

Google: It looks like GOOG will rally to 685 and higher. Support is at 620.

Guesstimates on November 16, 8:25 am ET

Spiders - December S&P E-mini Futures: Still long the e-minis from 1463 and still using a 1438 stop. If the market hits 1485 today I shall sell my long position. I think that Tuesday’s low at 1437 in the e-minis will hold and that the market is headed for 1600 by year end.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: The bonds now have resistance at 115-20 but I still think that the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 112-16 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: The market will probably rally to 148.50 but I think that will be it for the euro. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: The yen should soon begin a substantial rally. Support is at 109.00.

XLE - OIH - USO – December Crude: I think crude has begun a substantial drop. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I still think gold futures still have a good shot at the 873 level which is the front month high reached in 1980. Support is at 790.

SLV - December Silver: Silver will probably reach the 1650 level. Support is at 1435.

Google: It looks like GOOG will rally to 685 and higher. Support is at 626.

E-mini Update

The market has dropped as low as 1446.75 so far today and I am long from 1463. I am very confident that the 1437.25 low will hold so I shall stay long and maintain my 1438 stop. I expect tomorrow to be a generally bullish day.

Guesstimates on November 15, 8:25 am ET

Spiders - December S&P E-mini Futures: Today I will again be a buyer at 1463 using a 25 point stop. I think that Thursday’s low at 1437 in the e-minis will hold and that the market is headed for 1600 by year end.

QQQQ: The Q’s are headed for 56.00. Support is 48.85.

TLT - December Bonds: Resistance is at 114-24 and I think that the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-28 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: The market will probably rally to 148.50 but I think that will be it for the euro. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: The yen should soon begin a substantial rally. Support is at 109.00.

XLE - OIH - USO – December Crude: I think crude has begun a substantial drop. Initial downside target is 74.00. USO should drop to 56, OIH to 160 and XLE to 60.

GLD - December Gold: I think gold futures still have a good shot at the 873 level which is the front month high reached in 1980. Support today is at 790.

SLV - December Silver: Silver will probably reach the 1650 level. Support is at 1435.

Google: It looks like GOOG will rally to 685. Support is at 626.

Guesstimates on November 14, 8:45 am ET

Spiders - December S&P E-mini Futures: Today I will be a buyer at 1463 using a 25 point stop. The rally from yesterday’s low in the futures has already carried into the 1492-1500 zone which is resistance because of the several temporary lows which formed in that zone between October 22 and November 5. A reaction of 25-35 points would be normal at this juncture. Yesterday’s low will hold and I think the market is headed for 1600 by year end.

QQQQ: The Q’s are headed for 56.00.

TLT - December Bonds: Resistance is at 114-24 and I think that the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-28 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: The market will probably rally to 148.50 but I think that will be it for the euro. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: The yen should soon begin a substantial rally. Support is at 109.00.

XLE - OIH - USO – December Crude: I think crude has begun a substantial drop. Initial downside target is 74.00. USO has resistance at 77.50. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: I think gold futures still have a good shot at the 873 level which is the front month high reached in 1980. Support today is at 790.

SLV - December Silver: Silver will probably reach the 1650 level before any stall develops. Support today is at 1435.

Google: It looks like GOOG will rally to 685. Support is at 626.

Advancing Issues

Here is a daily line chart of the number of issues traded on the New York Stock Exchange which advance in price (black line) and the 5 day moving average of this number (purple line). I last commented on this indicator here.

Notice the bullish divergence shown by the 5 day moving average and by the daily numbers during the past three days. Neither made new lows when the market averages did. Since the 10 and 20 day moving averages of the advancing issues number are both well into oversold territory and since this morning's low was above the mid-August low I conclude that the drop from the October 11 high is over.

Note that today's daily count of the number of advancing issues is higher than any of the past two months. I think this means that today's "outside day" is the kick-off for an extended advance which will carry the cash S&P above the 1600 level.

E-mini Update

For the first time in a week the market has traded above a previous day's high. I think the low at 1437.25 which was reached late yesterday will hold and that this initial rally will carry up into the 1485-90 range. From there I would expect a break of about 25 points or so. I have canceled my orders and will be looking to be a buyer after this expected reaction develops.

Guesstimates on November 13, 8:20 am ET

Spiders - December S&P E-mini Futures: Today I will be a buyer at 1443 using a 25 point stop. I think the next rally will send the market initially to 1495 and to 1600 by the end of the year.

QQQQ: Support in the Q’s is at 49.00 and the next upside target is 56.00.

TLT - December Bonds: Resistance is at 114-24 and the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-28 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: The market has reached resistance near 147.50 but the trend is still upward. Support is now at 143.90. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: The yen should soon begin a substantial rally.

XLE - OIH - USO – December Crude: The magic 100.00 level is nearby and I think it will trigger enough selling to send crude back down to 75.00. USO has resistance at 77.50. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: Gold has traded at 848 and is in the midst of a “parabolic” upward phase which will end without any warning. The first danger point is the 873 front month high of 1980. Support today is at 790.

SLV - December Silver: Silver will probably reach the 1650 level before any stall develops. Support today is at 1435.

Google: It looks like GOOG will now rally to 685. Support is at 626.

E-mini Update

I have just canceled all my orders in the e-minis. I expect to be a buyer tomorrow but want to wait for the early morning trading before I decide where to place my orders.

We have seen four consecutive days with lower highs and this makes me believe that the market will drop at least to 1440 before it can start a big rally.

Guesstimates on November 12, 8:20 am ET

Spiders - December S&P E-mini Futures: Today I will be a buyer at 1441 using a 25 point stop. I think the next rally will send the market initially to 1495 and to 1600 by the end of the year.

QQQQ: Support in the Q’s is at 49.00 and the next upside target is 56.00.

TLT - December Bonds: Resistance is at 114-24 and the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-28 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: The market has reached resistance near 147.50 but the trend is still upward. Support is now at 143.90. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: The yen has reached support at 109.50 and will probably drop a little more to 108.80 before a substantial up move starts.

XLE - OIH - USO – December Crude: The magic 100.00 level is nearby and I think it will trigger enough selling to send crude back down to 75.00. USO has resistance at 77.50. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: Gold has traded at 848 and is in the midst of a “parabolic” upward phase which will end without any warning. The first danger point is the 873 front month high of 1980. Support today is at 810.

SLV - December Silver: Silver will probably reach the 1650 level before any stall develops. Support today is at 1490.

Google: It looks like GOOG will continue down to 640 before a rally begins.

E-mini Update

Not much has happened today. In particular my buy orders haven't been filled. I have just canceled all my orders and will again try to be a buyer on Monday.

Guesstimates on November 12, 8:20 am ET

Spiders - December S&P E-mini Futures: Yesterday the e-mini futures dropped well below what I thought would be a strong support zone of 1470-80. This morning the market is again trading below that range so I suspect yesterday’s 1454 low will not hold. Today I will be a buyer at 1448 ( Spiders: 144.30) using a 25 point stop. I believe that a move to new bull market highs is about to begin.

QQQQ: Support in the Q’s is at 50.00 and the next upside target is 56.00.

TLT - December Bonds: Resistance is at 114-24 and the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-28 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: The market has reached resistance near 147.50 but the trend is still upward. Support is now at 143.90. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: Support at 112.40 was broken this morning so I think the yen will drop to 109.50 before a big rally can begin.

XLE - OIH - USO – December Crude: The magic 100.00 is nearby and I think it will trigger enough selling to send crude back down to 75.00. USO has resistance at 77.50. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: Gold has traded at 848 and is in the midst of a “parabolic” upward phase which will end without any warning. The first danger point is the 873 front month high of 1980.

SLV - December Silver: Silver will probably reach the 1650 level before any stall develops.

Google: Support is at 665.

E-mini Afternoon Update

I just go out of my 1474 long at 1473 and canceled my stop order. This trade illustrates why I use wide stops. The market went against me much more than I expected but still my stop was not hit and I had a chance to get out with a small loss on the subsequent rally.

I expect to be a buyer again tomorrow.

E-mini Update

The market traded 1472 a minute ago but I didn't get filled so I went long at 1474. I still am using a 1452 stop.

Trifecta from the New York Times

Here is an image of today's front page of The New York Times.

It is very unusual for the stock market or any other market to achieve headline status in a major metropolitan newspaper, especially the NYT. This headline hits the trifecta. It says that the stock market is sinking as is the US dollar. It attributes this in part to the fact that oil prices are at record highs (unadjusted for inflation) and that the housing market is in trouble (I guess that's four, not just three markets covered in one headline!)

I think this means that the stock market is at a low as is the dollar. Moreover, it suggests that oil prices are near the end of their run up and that the housing market as well and the financial sector has seen the worst.

Guesstimates on November 8, 8:15 am ET

Spiders - December S&P E-mini Futures: The e-mini futures dropped as low as 1466.75 after yesterday’s regular hours trading session. This morning the market has rallied to 1491. Today I will be a buyer during regular hours trading at 1472 or lower (Spiders 146.70) using a 20 point stop. For the moment I have no profit taking target but I do think the drop from 1587 in the futures (157.52 in the Spiders) is ending and that a move to new bull market highs is about to start.

QQQQ: Support in the Q’s is at 52.50 and the next upside target is 56.00.

TLT - December Bonds: Resistance is at 114-24 and the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-12 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: The market has reached resistance near 147.50 but the trend is still upward. Support is now at 143.90. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: I think the 112.40 level will hold. Looking ahead several months I expect to see the 130 level during the next 12 months.

XLE - OIH - USO – December Crude: The magic 100.00 is nearby and I think it will trigger enough selling to send crude back down to 75.00. USO has resistance at 77.50. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: Gold has traded at 848 and is in the midst of a “parabolic” upward phase which will end without any warning. The first danger point is the 873 front month high of 1980.

SLV - December Silver: Silver will probably reach the 1650 level before any stall develops.

Google: Support is at 710 and the next upside target is 760.

E-mini Update

The last hour of regular hours trading will begin in 10 minutes. My buy order at 1477 still has not been reached, and I wouldn't want to fade late day weakness today. I have canceled all my orders and will try to be a buyer tomorrow.

US Dollar

Here is a point and figure chart of the US Dollar Index. I last commented on the dollar here.

As you know I have been bullish on the dollar and wrong (so far). But the bearish consensus on the dollar is so overwhelming that I am determined to stick with my view even if I go down with the ship.

I do think that the dollar has pretty much exhausted its potential for the down leg which began from the 92 top which was established in December 2005. The market has dropped almost 2 years and about 18% from there. Moreover, the point and figure count across the top formation which I have illustrated here projects a low at 75.00, a level which was nearly hit today. I think we shall soon see the start of a multi-month rally which will carry the index at least up to the 85 level.

Oil and the Stock Market

Here is a link to Mark Hulbert's latest piece on MarketWatch.com.

Hulbert makes the following thought- provoking observation, one that is new to me: "The nearly universal consensus among the nearly 200 newsletters monitored by the Hulbert Financial Digest, as well as from investment-oriented blogs I read: Stock investors are in denial right now. Investors in the oil market, in contrast, are on solid ground." By this Hulbert means that the advisory and blogging community think the stock market is about to head much lower, while the record oil prices we are seeing just reflect solid supply-demand fundamentals, and that oil is headed higher.

I think this is a particularly interesting observation in light of market action. Oil, gold, and silver have been accelerating upward in what appears to be a parabolic rise. Such rallies can be very profitable for the longs but the problem is that they end without warning and are followed by a very bad drop. Along these lines I want to mention a couple of price levels that I think will prove to be signficant.

The first is the magic $100 per barrel mark in crude. I never believed we would see this level but I was wrong. However, I am willing to bet that the market will take just a peek above $100 and then collapse, probably all the way down to $75. I think $100 per barrel will attract many sellers and will scare off many buyers. Once the market starts downward few people will be willing to step in front of it.

The second interesting level is $850 in spot gold and $873 in December gold. These were the top prices in spot and in the front month contract at the January 1980 top in gold which was followed by a 19 year bear market all the way down to $252. I think the market will take a peek above these levels and then have a big break.

The stock market is interesting for a different reason. Over the past three months it has been battered by lots of bad news from the mortgage and credit markets. Yet it is still trading well above the level of its August 16 low (1370 in the cash S&P and 12,518 in the Dow industrials) and only about 5% below its peak level (so far) reached on October 11 at 1576 in the S&P and at 14,198 in the Dow. This resilience in the face of bad news is a sure sign that the stock market is headed much higher.

Guesstimates on November 7, 8:30 am ET

Spiders - December S&P E-mini Futures: The e-mini futures are still trading in a 1495-1520 range despite yesterday’s brief move above 1520. I want to be a buyer but I am lowering my order to 1477 with a 15 point stop (147.00 in the Spiders) because the extensive sideways action of the past three days has enticed many long positions which will exit on a break below 1494. I think the rally from the 1470-80 range will carry the market to new bull market highs.

QQQQ: Support in the Q’s is at 53.30 and the next upside target is 56.00.

TLT - December Bonds: Resistance is at 114-24 and the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-12 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: The market has reached resistance near 147.50 but the trend is still upward. Support is now at 143.90. My best guess is that the market will soon stall and then begin a multi-month drop.

Dollar-Yen: Support in the yen at 113.80 was broken this morning but I think there is a good chance that the 112.40 level will hold. Looking ahead several months I expect to see the 130 level during the next 12 months.

XLE - OIH - USO – December Crude: Crude has reached the 96.50 target. The magic 100.00 is close and I think it will trigger enough selling to send crude back down to 75.00. USO has resistance at 77.50. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: Gold has traded at 848 this morning and the market has entered a “parabolic” upward phase which will end without any warning. The first danger point is the 873 front month high of 1980.

SLV - December Silver: Silver will probably reach the 1650 level before any stall develops.

Google: Support is at 710 and the next upside target is 760.

E-mini Update

There is only a little more than an hour to go in regular hours trading and not much has happened yet today. I have just canceled my e-mini orders and will try to be a buyer tomorrow.

Guesstimates on November 6, 8:30 am ET

Spiders - December S&P E-mini Futures: The e-mini futures are still buy at 1488 (Spiders at 148.00) using a 15 point stop. The market is trading in a 1495-1520 range and I suspect that the breakout from this range will be a brief downside shakeout. If I am wrong I will have to chase the market upward because I think the next big rally will carry to new bull market highs.

QQQQ: Support in the Q’s is at 53.30 and the next upside target is 56.00.

TLT - December Bonds: The market rallied strongly in response to the stock market break but I think the rally will stop at 114-18 and that the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-12 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: Support beneath the market stands at 142.50. The historical high in the euro is 145.75 which was reached in 1992. My best guess is that the market will reach resistance at 147.50 and that this will be followed by a multi-month drop.

Dollar-Yen: Support in the yen is at 113.80. Looking ahead several months I expect to see the 130 level during the next 12 months.

XLE - OIH - USO – December Crude: Crude has nearly reached the 96.50 target. Short term support is at 91.00. USO has resistance at 73.00. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: Gold will probably rally into the 830-870 range before a significant break develops. The 1980 front month top was 873. Meantime support stands at 785.

SLV - December Silver: Silver has reached 1500 but the trend is still upward and should carry the market at least to 1565.

Google: GOOG nearly reached the 735 target yesterday. Support is at 700 and the next upside target is 760.

E-mini Update

With a little more than an hour to go in regular hours trading the market is still 10 points above my buy order at 1488. I have just canceled it could only be filled late in today's trading session after downside breakout from a well defined trading range, and I wouldn't want to hold this sort of trade overnight. I expect to reenter my buy orders tomorrow, perhaps with some adjustment of the entry price.

Three Peaks and a Domed House

This is an update on the status of two examples of George Lindsay's Three Peaks and a Domed House formation. I last commented on this subject here. All of my George Lindsay posts can be found here.

The first chart you see above this post shows my interpretation of a minor formation. The numbers correspond to the Lindsay's numbering of the ideal formation which you can see here.
I think that the drop from the October 11 top is the decline to point 22, with the peak of the domed house, point 23, still ahead of us. I now am estimating January 15 as the date for point 23. This is 7 months and 10 days from point 16.

The second chart shows a mini-formation. Here I think we are in the middle of the "five reversals" part of the domed house, points 15-20. Once point 20 is reached we should begin a rally to point 23 which again I see as developing in mid-January. This coincides with one of Lindsay's top-to-top counts which he asserted nearly always will be found timing the bull market top.

Guesstimates on November 5, 8:15 am ET

Spiders - December S&P E-mini Futures: The e-mini futures are a buy at 1488 (Spiders at 148.00) using a 15 point stop. Profit taking target is 1510 resistance (Spiders : 150.20). When the drop from the October 11 top at 1587 is complete I expect a move to new highs for the bull market.

QQQQ: Support in the Q’s is at 53.30 and the next upside target is 56.00.

TLT - December Bonds: The market rallied strongly in response to the stock market break but I think the rally will stop at 114-18 and that the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-12 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: Support beneath the market stands at 142.50. The historical high in the euro is 145.75 which was reached in 1992. My best guess is that the market will reach resistance at 147.50 and that this will be followed by a multi-month drop.

Dollar-Yen: Support in the yen is at 113.80. Looking ahead several months I expect to see the 130 level during the next 12 months.

XLE - OIH - USO – December Crude: Crude has nearly reached the 96.50 target. Short term support is at 91.00. USO has resistance at 73.00. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: Gold will probably rally into the 830-870 range before a significant break develops. The 1980 front month top was 873. Meantime support stands at 785.

SLV - December Silver: It looks like silver will reach 1500; meantime support is at 1375.

Google: GOOG has reached its 705 target but the trend is still upward and the next upside target is 735. Support stands at 685.

E-mini Update

I just got out of my long at 1507.50. I don't like the fact that the market has spent almost two hours trading below 1509 and dropped 11 points below that level. I have no open orders now but expect to be a buyer on Monday.

Guesstimates on November 2, 8:35 am ET

Spiders - December S&P E-mini Futures: The e-mini futures are a buy at 1509 (Spiders at 150.30) using a 15 point stop. Profit taking target is 1529 resistance (Spiders : 152.30). If the market should open below 1509 then set the stop 15 points beneath the open. I think there is a good chance that the drop from the 1559 level reached after the Fed news Wednesday will end today and that a rally to new bull market highs is about to start.

QQQQ: Support in the Q’s is at 53.70 and the next upside target is 56.00.

TLT - December Bonds: The market rallied strongly in response to the stock market break but I think the rally will stop at 114-18 and that the next big swing will be a drop to 110 and below. TLT is headed for 85 once this rally is over.

December 10 Year Notes: Resistance is at 111-12 and the next big swing should be downward to 108 or lower. The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: Support beneath the market stands at 140.50. The historical high in the euro is 145.75 which was reached in 1992. My best guess is that the market will reach resistance at 147.50 and that this will be followed by a multi-month drop.

Dollar-Yen: Support in the yen is at 113.00. Looking ahead several months I expect to see the 130 level during the next 12 months.

XLE - OIH - USO – December Crude: Crude has nearly reached the 96.50 target. Short term support is at 91.00. USO has resistance at 73.00. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: Gold has reached the 800 target but the trend is still upward with support at 775.

SLV - December Silver: It looks like silver will reach 1500; meantime support is at 1330.

Google: GOOG has reached its 705 target but the trend is still upward. Support stands at 670.

E-mini Update

The market has proven even weaker than I had expected and is now trading near the 1510 level. I think we shall see a bounce tomorrow which should start from near 1505 and carry up to 1530 or so. Weakness below the 1500 level will mean that the 1492 low will be broken and that the market will drop into the 1465-80 range ( 145.50 - 147.00 in the Spiders) before a rally to new bull market highs can begin.

E-mini Update

So far today the e-minis have dropped to 1526, about 9 points below my support level at 1535. For what its worth I have been hearing rumors that Citibank has sustained multibillion dollar losses on its mortgage portfolio.

In any case I am guessing that today's low will develop near 1520 and that the market will close in the 1520-1535 range. If this guess is right I would expect a continuation of the reaction down to 1500-1510 over the next few days.

Guesstimates on November 1, 8:30 am ET

Spiders - December S&P E-mini Futures: I was hoping to sell this market at 1564 in the futures (155.70 in the Spiders) anticipating a 25 point break but in London this morning the e-minis broke to 1543. Since I think that support stands at 1535 (152.80 Spiders) there does not seem to be much left on the short side. From the bullish point of view I generally like to give the market a chance to break at least a full day before I am willing to take a long position. So I don’t plan to do anything today unless the market shows signs of holding 1535 support late in the day. Longer term I am sticking with my view that the 1492 low will hold and that the next upside target is 1595.

QQQQ: Support in the Q’s is at 54.20 and the next upside target is 56.00.

TLT - December Bonds: Yesterday’s action convinced me that the trend has turned downward in the bonds and that the futures are heading at least to 110 and probably lower. TLT is headed for 85.

December 10 Year Notes: The notes are on the way down to 108-00 and probably lower.

Euro-US Dollar: Support beneath the market stands at 140.50. The historical high in the euro is 145.75 which was reached in 1992. My best guess is that the market will take a peek above there, probably hitting 146.00 and that this will be followed by a multi-month drop.

Dollar-Yen: Support in the yen is at 113.00. Looking ahead several months I expect to see the 130 level during the next 12 months.

XLE - OIH - USO – December Crude: Crude traded as high as 96.24 overnight, near the 96.50 target. Short term support is at 91.00. USO has resistance at 73.00. The 200-205 target for OIH has been reached and I think the next big move will be downward. The 80 target for XLE was not reached but I don’t think the market will make it there now.

GLD - December Gold: Gold has reached the 800 target but the trend is still upward with support at 775.

SLV - December Silver: It looks like silver will reach 1500; meantime support is at 1330.

Google: GOOG has reached its 705 target but the trend is still upward. Support stands at 670.