Guesstimates on December 31, 2010

March S&P E-mini Futures: Today's range estimate is 1246-1254. Short term support is now at 1237. I think a top building process is underway and will be followed by a drop of 50-75 points. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 30, 2010

March S&P E-mini Futures: Today's range estimate is 1252-1258. Short term support is now at 1237. I think a top building process is underway and will be followed by a drop of 50-75 points. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 29, 2010

March S&P E-mini Futures: Today's range estimate is 1251-1257. Short term support is now at 1237. I think a top building process is underway and will be followed by a drop of 50-75 points. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Update

Here is a 30 minute bar chart showing day session e-mini trading for the past two weeks.

I think the market is in the process of building a short term top near 1253 resistance defined by the March 2008 low. The next development in this topping process should be a break of 15-20 points down to 1240 or so. Such a drop would match the size of the last reaction (blue rectangle). It would also put the market at support defined by the last minor top (red dash line) and the lower trend channel line (green dash line).

I expect this topping process to be completed early in January. It should be followed by a break of 50-75 points. In a bull market reactions typically end at or a little below the 50 day moving average. In the cash S&P 500 this moving average currently stands at 1209, equivalent to 1205 in the futures.

After this 50-75 point drop is complete the market should resume its rally to 1300 and higher.

Guesstimates on December 28, 2010

March S&P E-mini Futures: Today's range estimate is 1249-1258. Short term support is now at 1237. I think a top building process is underway and will be followed by a drop of 50-75 points. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 27, 2010

March S&P E-mini Futures: Today's range estimate is 1241-1250. Short term support is now at 1237. I think a top building process is underway and will be followed by a drop of 50-75 points. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 23, 2010

March S&P E-mini Futures: Today's range estimate is 1249-1253. Short term support is now at 1235. I think a top building process is underway and will be followed by a drop of 50-75 points. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 22, 2010

March S&P E-mini Futures: Today's range estimate is 1246-1254. Short term support is now at 1235. I think a top building process is underway and will be followed by a drop of 50-75 points. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

update

Here is a 30 minute bar chart showing the past two weeks of day session e-mini trading. I think the 1253 level is strong resistance because the March 2008 low was 1253 and was followed by a 200 point rally in the S&P.

This chart illustrates two other reasons for expecting resistance at 1253. First, the upper channel line of the rising, green dash trend channel I have drawn now stands at 1252. Secondly, a rally from the December 16 low which matches the size of the rally from the December 8 low (blue dash rectangles) would stop at 1256. So these shorter term calculations also suggest a top near 1253.

I think the drop from 1253 will be 20-25 points and that it will be followed by another rally to or a little above that top. But I also think that a drop of 50-75 points from the 1250-60 zone will start in January.

The S&P is likely to trade above the 1300 level by the beginning of April.

Guesstimates on December 21, 2010

March S&P E-mini Futures: Today's range estimate is 1242-1252. Support remains at 1225 and 1250 is strong resistance. I think a drop of 50-75 points is imminent. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 20, 2010

March S&P E-mini Futures: Today's range estimate is 1238-1250. I think the short term trend is still upward. Support remains at 1225 and the next upside target is 1250 which is strong resistance. I think a drop of 50-75 points is imminent. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 17, 2010

March S&P E-mini Futures: Today's range estimate for the March '11 contract is 1234-1246. I think the short term trend is still upward. Support remains at 1225 and the next upside target is 1250 which is strong resistance. I think a drop of 50-75 points is imminent. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Update

Here is a 30 minute bar chart showing day session e-mini trading for the past two weeks. As you know I think the market is building a top below 1250 resistance. When it is complete I expect a break of 50-75 points.

However I think there will be a couple of short term buying opportunities while this top is being built. The first one is upon us. The early November top in the December '10 contract was 1224.75 (red dash line) and I think this level will prove to be support. The last reaction was nearly 18 points measured by 24 hour trading and a reaction of that size now would end also at 1225 (blue dash rectangles). I have drawn a green dash trend channel on this chart. Yesterday's low occurred right on the lower channel line but I am guessing that the market will drop a little more into the green oval target zone before this reaction ends.

The next upswing should carry the ES to 1250 or so. From there I think another 20 point drop will develop within the context of the top building process.

Guesstimates on December 16, 2010

March S&P E-mini Futures: Today's range estimate for the March '11 contract is 1225-1235. I think the short term trend is still upward. Support is at 1225 and the next upside target is 1250 which is strong resistance. I think a drop of 50-75 points is imminent. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 15, 2010

March S&P E-mini Futures: Today's range estimate for the March '11 contract is 1226-1238. I think the short term trend is still upward. Support is at 1225 and the next upside target is 1250 which is strong resistance. I think a drop of 50-75 points is imminent. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 14, 2010

March S&P E-mini Futures: Today's range estimate for the March '11 contract is 1227-1240. I think the short term trend is still upward. Support is at 1225 and the next upside target is 1250 which is strong resistance. I think a drop of 50-75 points is imminent. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

February Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

three peaks and a domed house - update

As you know I think the stock market's action during the past year has been following George Lindsay's Three Peaks and a Domed House pattern. I last commented on this phenomenon in this post.

Above you will see a schematic of the typical three peaks and a domed house pattern. I think the April 2010 top in the Dow was point 7, the third peak. The July 2010 low was point 10, the bottom of the reaction which separates the three peaks from the domed house. Point 14 was the August 25, 2010 low. The importance of point 14 is that in a typical formation the top of the domed house, point 23, develops about 7 months and 10 days after point 14. This projects a top in early April, 2011.

At the moment I think the market is in the midst of the "five reversals" part of the domed house, points 16-20. This is typically an extended trading range with a slight upward slope. I am guessing that the early November top was point 15, the November 16 low was point 16, and that a top is developing now which will be point 17.

My best guess is that point 23 will develop near or above the Dow 12000 and the S&P 1300 levels. If this is a classic 3PDH formation then the subsequent drop will be a full fledged bear market, but should only carry down to the start of the whole formation. This would take both averages a little below their July 2010 lows, a drop of 30% or so and will probably last about 8 months.

Guesstimates on December 13, 2010

March S&P E-mini Futures: Today's range estimate for the March '11 contract is 1233-1244. I think the short term trend is still upward. Next upside target is 1250 which is strong resistance. I think a drop of 50-75 points is imminent. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

Februaryy Crude: I still think crude oil is headed for 50.00.

GLD – February Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - March Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 10, 2010

March S&P E-mini Futures: Today's range estimate for the March '11 contract is 1225-1238. I think the short term trend is still upward. Next upside target is 1250 which is strong resistance. I think a drop of 50-75 points is imminent. Once it is complete the market will resume its advance to 1300.

QQQQ: Next upside target is at 55.00 and has nearly been reached.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

January Crude: I still think crude oil is headed for 50.00.

GLD – December Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - December Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

a 50-75 point drop is imminent

Here are two charts which are conveying an important message. The bottom chart shows the cumulative total of the difference between the number of advancing and the number of declining issues traded on the New York Stock Exchange each day. The top chart shows my favorite oscillator, the 10 day moving average of advancing issues.

Both these indicators warn of impending weakness in the averages. The cumulative advance-decline line is still visibly below its November 8 top while the S&P 500 is visibly above that same top. This is a real change in behavior because the advance-decline line has generally been much stronger than the averages during the past 18 months. This bearish divergence between the AD line and the S&P tells me that the market will soon drop 50-75 points before the bull market can resume.

The top chart of the 10 day moving average of advancing issues shows a series of bearish divergences going back to early September. This is again a bearish message.

Normally, divergences like these don't worry me too much. But the market is trading near 1250 resistance (the March 2008 low on the Bear Stearns failure) and has advanced with little corrective activity for nearly 4 months to a new bull market high.

All in all I think we shall see a 50-75 point drop before the S&P can move much if at all above 1250.

Guesstimates on December 9, 2010

December S&P E-mini Futures: Today's range estimate is 1225-1238. I think the short term trend is upward. Next upside target is 1250. The market is on its way to 1300 over the next few months.

QQQQ: Next upside target is 55.00.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

January Crude: I still think crude oil is headed for 50.00.

GLD – December Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - December Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.

Guesstimates on December 8, 2010

December S&P E-mini Futures: Today's range estimate is 1221-1235. I think the short term trend is upward. Next upside target is 1250. The market is on its way to 1300 over the next few months.

QQQQ: Next upside target is 55.00.

TYX (thirty year bond yield): The 30 year bond yield is on its way to 5.40%.

TNX (ten year note yield): The 10 year yield is headed for 4.50%.

Euro-US Dollar: I think the euro will be supported near 130 and from there will move up to 145.00.

Dollar-Yen: A drop into the 78.00 - 79.00 range is underway and I think an important low will form in that zone.

January Crude: I still think crude oil is headed for 50.00.

GLD – December Gold: A move to new highs is underway. 1450 is the next upside target.

SLV - December Silver: A move to new highs is underway. 31.00 is the upside target.

Google: The 540 level is support. A move that should take GOOG above 700 is underway.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 265.