headed for trouble

Here are three charts which tell me that the technical condition of the US stock market is weakening and that a drop of at least 10% will start within a few weeks from somewhat higher prices than currently prevail.

The two bottom charts both say that the best part of the rally from the November 2012 low point is behind us. The bottom chart shows the 20 day moving average of the number of stocks in the S&P 500 which are trading above their own 50 day moving averages. You can see that this indicator recently reached levels from which extended down moves have begun during the past 4 years. Normally the S&P 500 continues to rally for a number of weeks even as this 20 day moving average declines so this tells us that the top of the market probably still lies ahead of us.

The middle chart tells a similar story. It shows the 20 day moving average of the daily count of the number of issues on the NYSE making 12 month highs. Normally this moving average starts declining well in advance of important tops. I think it has made its high, probably for the current bull market, but the top in the averages is almost certainly at least several weeks ahead of us.

The top chart is a daily chart of the Dow Industrials. On this chart I have illustrated two methods for trying to anticipate the stopping points of market swings.The blue rectangles show that the rally in the Dow from its November 2012 low has now matched the size of the June-September 2012 rally. The red arrows show that the Dow has exceeded its September 2012 top by an amount which equals the distance by which the May 2012 top exceeded the May 2011 top. Both calculations suggest that some sort of top in the Dow is at hand.

In my judgement any top in the Dow which develops over the next month or so will not be the top which ends the current bull market. The bottom two charts suggest that the big top is still months ahead of us and is not imminent.

Instead a top near current levels will probably produce a drop which carries the Dow below its November 2012  low and possibly below its June 2012 low. This would be a drop of 10-15%. However I think any such break will be brief, lasting only a few weeks at most, and will be followed by a rally to new bull market highs later this year.

Guesstimates on February 28, 2013

March S&P E-mini Futures: Today's day session range estimate is 11512-1527. Yesterday's strong rally completely retraced Monday's fast move down. This means that the market is headed up into the long term resistance zone of 1540-1587. From there I think the ES will start a break of at least 10 %.

 QQQ:  The Q's are now headed for 73.00.

TNX (ten year note yield): Bond yields are going much higher as the market begins to anticipate stronger economic growth. The first upside yield target for the 10 year is 2.50%.

Euro-US Dollar: The has broken well below 1.3150 support so I think it is now headed down to 1.2700.

Dollar-Yen: I think this bull market has further to go, at least to 96 or so and probably to 99-100.

April Crude:  The September 2012 top is just above 100 and unless the market starts accepting prices above that level I will stick with my view that it is headed for 70 and lower. Resistance above the market is now at 101.

April Gold:  Gold is likely to find support near its last two lows in the 1530-40 range.

March Silver: Silver should find support near the 26.00 level.

Google: Google has traded above the 800 level and  is on its way to 950.

Apple:  During the current rally in the averages AAPL has underperformed the market and GOOG. Longer term downside target is 350 and near term support is 435. Meantime resistance above the market is at 525.

Guesstimates on February 27, 2013

March S&P E-mini Futures: Today's day session range estimate is 1484-1499. This break should carry the ES down to 1467 and probably down to 1420-30. There is strong long term resistance in the 1540-87 range and I think that once the current correction is over the market will rally into that zone before a drop of as much as 10% begins.

QQQ:  The Q's are now headed for 63.50.

TNX (ten year note yield): Bond yields are going much higher as the market begins to anticipate stronger economic growth. The first upside yield target for the 10 year is 2.50%.

Euro-US Dollar: The has broken well below 1.3150 support  so I think it is now headed down to 1.2700.

Dollar-Yen: I think this bull market has further to go, at least to 96 or so and probably to 99-100.

April Crude:  The September 2012 top is just above 100 and unless the market starts accepting prices above that level I will stick with my view that it is headed for 70 and lower. Resistance above the market is now at 101.

April Gold:  Gold is likely to find support near its last two lows in the 1530-40 range.

March Silver: Silver should find support near the 26.00 level.

Google: Google has traded above the 800 level and  is on its way to 950.

Apple:  During the current rally in the averages AAPL has underperformed the market and GOOG. Longer term downside target is 350 and near term support is 435. Meantime resistance above the market is at 525.

Guesstimates on February 26, 2013

March S&P E-mini Futures: Today's day session range estimate is 1475-1495. This break should carry the ES down to 1467 and probably down to 1420-30. There is strong long term resistance in the 1540-87 range and I think that the market will rally into that zone before a drop of as much as 10% begins.

QQQ:  The Q's are now headed for 63.50.

TNX (ten year note yield): Bond yields are going much higher as the market begins to anticipate stronger economic growth. The first upside yield target for the 10 year is 2.50%.

Euro-US Dollar: The broke well below 1.3150 support yesterday so I think it is now headed down to 1.2700.

Dollar-Yen: I think this bull market has further to go, at least to 96 or so and probably to 99-100.

April Crude:  The September 2012 top is just above 100 and unless the market starts accepting prices above that level I will stick with my view that it is headed for 70 and lower. Resistance above the market is now at 101.

April Gold:  Gold is likely to find support near its last two lows in the 1530-40 range.

March Silver: Silver should find support near the 26.00 level.

Google: There are several old tops in the 640-670 range which should be strong support for a move up to 800 and higher.

Apple:  During the current rally in the averages AAPL has underperformed the market and GOOG. Longer term downside target is 350 and near term support is 435. Meantime resistance above the market is at 525.

Guesstimates on February 25, 2013

March S&P E-mini Futures: Today's day session range estimate is 1516-1528. It looks like the drop from 1530 ended at 1495 and that the ES is now headed for 1540 or so. There is strong long term resistance in the 1540-87 range. It is likely that a drop of 100 or more points will begin from a top in that resistance zone.

QQQ:  The Q's are now headed for 73. The 65.50 level is support.

TNX (ten year note yield): Bond yields are going much higher as the market begins to anticipate stronger economic growth. The first upside yield target for the 10 year is 2.50%.

Euro-US Dollar: The September 2012 top was about 1.3150 so any weakness below 1.3100 will mean that the market is headed back to the 1.27-1.28 zone. However the market has bounced strongly off of that support level and now appears headed for resistance near 1.3800.

Dollar-Yen: I think this bull market has further to go, at least to 96 or so and probably to 99-100.

April Crude:  The September 2012 top is just above 100 and unless the market starts accepting prices above that level I will stick with my view that it is headed for 70 and lower. Resistance above the market is now at 101.

April Gold:  Gold is likely to find support near its last two lows in the 1530-40 range.

March Silver: Silver should find support near the 26.00 level.

Google: There are several old tops in the 640-670 range which should be strong support for a move up to 800 and higher.

Apple:  During the current rally in the averages AAPL has underperformed the market and GOOG. Longer term downside target is 350 and near term support is 435. Meantime resistance above the market is at 525.

Hyperinflation ahead?

Here is my latest post on the Art of Contrarian Trading.

Guesstimates on February 22, 2013

March S&P E-mini Futures: Today's day session range estimate is 1501-1511. Short term support is in the 1490-95 zone but I think it is likely that this reaction will carry the ES down to 1470 or so. There is strong long term resistance in the 1540-87 range. It is likely that a drop of 100 or more points will begin from a top in that resistance zone and that top probably is still ahead of us.

QQQ:  The Q's are now headed for 73. The 65.50 level is now support.

TNX (ten year note yield): Bond yields are going much higher as the market begins to anticipate stronger economic growth. The first upside yield target for the 10 year is 2.50%.

Euro-US Dollar: The market has broken below the first two support levels I calculated and now has retraced about half of its rally from the 1.2700 low last November. The September 2012 top was about 1.3150 so any weakness below 1.3100 will mean that the market is headed back to the 1.27-1.28 zone.

Dollar-Yen: I think this bull market has further to go, at least to 96 or so.

April Crude:  The September 2012 top is just above 100 and unless the market starts accepting prices above that level I will stick with my view that it is headed for 70 and lower. Resistance above the market is now at 101.

April Gold:  Gold is likely to find support near its last two lows in the 1530-40 range.

March Silver: Silver should find support near the 26.00 level.

Google: There are several old tops in the 640-670 range which should be strong support for a move up to 800 and higher.

Apple:  During the current rally in the averages AAPL has underperformed the market and GOOG. Longer term downside target is 350 and near term support is 435. Meantime resistance above the market is at 525.