Wave Chart at 2:20 pm

Here is today's wave chart for the e-minis. Earlier I reshorted one unit at the first blue arrow and I just covered this unit at the second blue arrow. Why? The market had been drifting lower for nearly an hour, made a new low for the day, and then showed a relatively high volume up bar which made the break to the new daily low look like a potential false break out. I decided that I preferred half a loaf to a 50-50 chance between none at all and a whole loaf, so I covered.

I still plan to be a buyer in the 675-78 range if we get there in the next 45 minutes or so. I also think tomorrow will be a generally bullish day.

Out at 686.00

Wave chart at 1:15 pm

Here is today's e-mini wave chart. The market has just rallied about the same number of points as its first rally of the day (purple rectangles). Since it still hasn't reached my range estimate of 678 I shorted a unit at the blue arrow. The red dashed line represents the midpoint of today's day session range. If this market is going lower I don't think it will spend much if any time above this midpoint.

Short one unit at 691.25

Wave Chart at 11:50 am

Here is today's e-mini wave chart. Sellers are still in control as you can see from the fact that the down wave on the chart carried further and lasted longer than the up wave.

I shorted one unit at 697.50 (first blue arrow). The market proceeded to break to new lows for day session trading on a very high volume bar (red arrows). The question in my mind at that point was whether or not this would prove to be the start of a high velocity breakout. The two subsequent bars showed very much reduced volume. I also have observed that around 11:00 to 11:30 am the market's early impulse move typically stops and is followed by a period of two or three hours of indecisive trading. For these two reasons I chose to cover my short position, with the idea of putting it back on later today.

I think any rallies we see from here will be limited in size to 9 points at most, the length of the first up wave of the day (purple rectangles). I still think the day's low will develop near 678 (bottom edge of blue rectangle).

Covered at 687.50

Range estimate at 10:30 am

Here is a 5 minute bar chart covering the past two day session in the e-minis. I think we have seen the day's high at 703.50 (top edge of blue rectangle). I estimate today's daytime range will be about 25 points. This would put the day's low near 678 (lower rectangle edge). Any move to new highs for the day would change the picture completely and make it likely that today will be an up day instead.

Short one unit at 697.50

Guesstimates on March 5, 2009

March S&P  E-mini Futures: I think today’s day session will again show a 25 point range. I estimate the low at 675. I believe this market is stabilizing after a 23% drop in four weeks. It would take a high volume move above the 725 level to indicate that a move to 800 and above is underway.

 QQQ: The 26.00 level is now support and from there I think the Q’s will start a move to 35.00.  

June Bonds: I think the long term trend in the bond market is now definitely downward. Next downside target is 117.  

June 10 Year Notes: I think a bear market in the notes is underway. Next downside target is 118.

Euro-US Dollar: The euro is headed down to 122.50.

Dollar-Yen: The yen has nearly reached the 100.00 level. There is as yet no indication that the move up from 87.00 is over, so I now estimate that the yen will reach 104.00 before a substantial reaction begins.   

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold shows support in the 900-10 zone and should soon resume its move to 1100.

SLV - May Silver: I now think silver is headed for 1750. Support is at 1240.  

Google: I think that its drop from 747 is over. 

Wave Chart at 3:30 pm

Here is the wave chart of today's e-mini day session. I was long from the first horizontal red arrow and I sold my long position at the second horizontal red arrow. Why? The market had rallied close to my range estimate for today (top of blue rectangle). Moreover, I saw what looked like a small volume climax bar (first pair of vertical red arrows). Then on the very next bar the market moved a bit higher on visibly lower volume. Such action coming near estimated resistance was a clue that the move upward was over temporarily at least.

I still think this market has some upside potential. But if it is going above today's high tomorrow I think midpoint support near 710 (purple dotted line) will hold in the meantime.

New Uptrend?

Here is a 30 minute bar chart of e-mini trading over the past two weeks. I am wondering whether we have any evidence of a new short term uptrend yet.

You can see that the rally from yesterday's day session low still has not exceeded the length of the previous rally (blue rectangles). Even more important is the fact that volume on this afternoon's rally is low compared to the volume surges we have seen during the past 10 days (red dashed line). So we are definitely not yet seeing any demand shock.

From this I conclude that the most we can expect on the upside for this rally is the purple dotted line around the 740 level. This is the midpoint resistance for the small rally which developed a few days ago and is also the level of the November 21 low and of the low you see earlier on this chart.

I think the odds right now are 50-50 that the market will hold above 690 on any reaction. But I will become more bullish if I see a high volume surge which carries the market above 725.

Out at 722.50

Wave chart at 1:45 pm

Here is today's e-mini wave chart. I am still sticking with my guess of a 25 point day session range with a low at 699 (blue rectangle). If I am right then the midpoint support (purple dotted line) defined by today's early reactions will hold. On that hypothesis I bought a single e-mini unit near the red arrow.

At this juncture any material weakness below the purple dotted line will probably mean that the day's high is in and that the market is headed down to 690.

Long one unit at 706.75

New Range Estimate

The e-minis have moved above 710 and so I think the day's daytime low has been established at 699.00. I still think we'll see a day session range of about 25 points so that would put the day's high near 724, the top edge of the blue rectangle. If the market is indeed headed higher then the midpoint of this morning's reaction near 705 (purple dotted line) should be support for the rest of the day.

Range Estimate

Here is the five minute bar chart of the e-mini's last two day sessions. I think today's day session will see a range of about 25 points. I expected today to be an up day and on such days the open is generally within 5 or 6 points of the day's low. So I went long at the first red arrow. But the market then dropped nearly 7 points from the open and below 700. Worse, the high for the day was just a tad above yesterday's high. This combination makes me think that we have seen the day's high and that a drop down to 685-90, the lower edge of the blue rectangle, is underway. Consequently I sold my position at the second red arrow.

At this juncture any strength above the 710 level would change the picture completely and make a move to 725 the next likely development.

Out at 699.50

Long one unit at 708.50

Guesstimates on March 4, 2009

March S&P E-mini Futures: I think today will be a bullish day. I expect a day session range of 25 points or so. Market action near the 725 level will provide a clue to the trend direction. Any strength above there will mean that a move to 800 and above is underway.

QQQ: The 26.70 level is still support and from there I think the Q’s will start a move to 35.00.

June Bonds: I think the long term trend in the bond market is now definitely downward. Next downside target is 117.

June 10 Year Notes: I think a bear market in the notes is underway. Next downside target is 118.

Euro-US Dollar: The euro is headed down to 122.50.

Dollar-Yen: I think a rally to 100.00 is underway.

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold shows support in the 900-10 zone and should soon resume its move to 1100.

SLV - May Silver: I now think silver is headed for 1750. Support is at 1240.

Google: I think that its drop from 747 is over.

Update at 3:45 pm

Contrary to my expectation the market has put in a longer down wave and broken below the lower of the two purple dotted lines. This means that it is headed for the bottom edge of the blue rectangle. I think a low will develop in the 685-90 range late today or early tomorrow and that tomorrow will be a bullish day.

Wave Chart at 2:45 pm

Here is today's wave chart for the e-minis. The market has put in a longer up wave after a shorter down wave. This tells me that the bulls are beginning to take control of the market. Volume has been increasing a little as the market has rallied, but still is not very impressive. We should soon see a strong move above the higher dotted line on good volume if my analysis is correct. In the meantime midpoint support at the lower dotted line should hold.

Wave Chart at 12:30 pm

Here is today's e-mini wave chart. I still think the sellers control the market. The first down wave lasted longer and carried farther than the subsequent up wave. Midpoint resistance for the rally from yesterday's low to today's first hour high shows as the dotted purple line. As long as the market stays below there I think it will drop to the lower edge of the blue rectangle which represents my estimate for today's 24 hour trading range.

Range Estimate

Here is the 5 minute bar chart of today's e-mini day session. So far sellers are in control of the market. After a higher open prices have been dropping as volume has increased.

I am estimating a 25-30 point 24 hour range for today. Yesterday's was 35 points and Friday's was 26 points. So far today's high has been 715 and a 27 1/2 point drop from there would put the market at the low edge of the blue rectangle you see on the chart. I plan to be a buyer there. At this juncture I think a move above the 715 level on high volume would mean that the day's low is in place.

Dow on Sale - 50% off

Here are today's front pages from the Chicago Tribune and The New York Times. This is the first time since the January 6, 2009 top at 942 that these papers have had a stock market headline. Headlines like these almost always appear within a couple of days of an important stock market low.

Guesstimates on March 3, 2009

March S&P  E-mini Futures: I think today’s range will be about 25-30 points. The market is set to open higher and initial resistance is at  718. If this holds then the day’s low will probably be near 690.  Strength above 718 will mean that the day’s low is in place at 703 and that the market will reach 730 later in the session. I still think this market is about to begin the biggest rally seen in the last 9 months.

QQQ: The 26.70 level is still support and from there I think the Q’s will start a move to 35.00.  

June Bonds: I think the long term trend in the bond market is now definitely downward. Next downside target is 117.  

June 10 Year Notes: I think a bear market in the notes is underway. Next downside target is 118.

Euro-US Dollar: The euro is headed down to 122.50.

Dollar-Yen: I think a rally to 100.00 is underway.  

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold dropped below 940 support but should stabilize in the 900-10 zone before resuming its move to 1100.

 SLV - May Silver: I now think silver is headed for 1750. Support is at 1240.  

Google: Resistance stands at 375. I think that its drop from 747 is over. 

Update at 3pm

Here is a 5 minute bar chart of today's e-mini day session. I went long at the first red arrow because a modest selling climax developed (green arrows) close to my estimate for the day's low. The market meandered a while and then went lower but on low volume.

Things got interesting when the market developed a wide range up bar (dashed blue arrow) which I thought was a prelude to an upside, high volume breakout above the dashed green line. The very next bar did break above that line, but was narrower than the preceding bar and showed a very obvious volume increase - but closed only unchanged and below the breakout level. This was a warning sign. The subsequent drop retracing much of the range of the very wide range up bar was yet another warning of weakness to come. So I sold my long unit at the second red arrow.

It now looks like the e-minis will drop to 690 or so before a tradeable rally can develop. The market has dropped 10% in only three trading sessions. At this rate it will be below 600 by the end of the week!

Out at 706.00

Update at 1:30 pm

Here is today's day session in the e-minis. I have drawn in blue the lower edge of the rectangle representing equality with Friday's 24 hour range. I went long one unit at 708.00 (red arrow) because the market hit the blue line while showing climactic 5 minute volume (green arrows) and then stabilized for about 30 minutes. After a volume climax the market sometimes runs right away in the opposite direction, but more frequently moves past the climactic price on lower volume before it rallies. So far this is what we have have seen.

I think the e-minis are putting in the day's low here, but if volume should build on the downside below 700 I will get out of my position.

Long one unit at 708.00

10:30 am

Here is the chart of the last two day session in the e-minis. I have drawn blue rectangles of the same height. The first encompasses Friday's 24 hour range. The second encompasses my estimate of today's 24 hour range. I expect to be a buyer near the lower edge of this box and a seller near the upper edge.

So far today volume is running below Friday's which itself was on the moderate to low side in the futures. I still think this is a sign that the sellers are running out of conviction and ammunition. A move above the 750 level on good volume would mean that better times lie ahead.

Guesstimates on March 2, 2009

March S&P  E-mini Futures: I am expecting the range of today’s 24 hour trading session to be about the same as Friday’s 26 points. That would put today’s low around 708 or so. The rally from the day’s low should carry the market up 20-25 points. Any more strength than that would be a sign that the trend is about to turn upward. I still think this market is about to begin the biggest rally seen in the last 9 months.

QQQ: The 26.70 level is now support and from there I think the Q’s will start a move to 35.00.  

June Bonds: I think the long term trend in the bond market is now definitely downward. Next downside target is 117.  

June 10 Year Notes: I think a bear market in the notes is underway. Next downside target is 118.

Euro-US Dollar: The euro is headed down to 122.50.

Dollar-Yen: I think a rally to 100.00 is underway.  

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold is now headed for 1100. Support is at 940.

 SLV - May Silver: I now think silver is headed for 1750.

Google: Resistance stands at 375. I think that its drop from 747 is over. 

Covered at 747.50

Update at 1:45 pm

Here is the e-mini wave chart for the past two days. I am short one unit from 747.50. The market has bounced off of resistance near 750 and should head lower from here. If it doesn't I am working a 747.50 stop that will close my trade. The lowest I can see on the downside for the foreseeable future is725 (green dotted line).

The market has been pretty quiet today. I think this is significant in view of the fact that a new bear market low was established this morning. It makes me think that the bulls are about to take control of this market.

Short one unit at 747.50

Situation at 10 30 am

Here is a 30 minute bar chart of the e-mini day sessions over the past two weeks. This morning the first revision of the fourth quarter GDP estimate was released and turned out to be worse than expected. The e-minis dropped to 729.50 in electronic trading immediately (not shown on this chart) and have rallied since then.

News releases like this give us a test of the market's technical condition. How much selling would come in on bad news, at new bear market lows? So far, the answer is "not much". Volume has been moderate so far today and the market dropped for about two minutes after the news, but has rallied since then. I think this action is telling us that the sellers are running out of ammunition and that the buyers are about to get their turn to run prices upward.

Even so, I think it likely that yesterday's 750 low (purple dotted line) will be a temporary ceiling on the market this morning which explains my 748 rally estimate in this morning's guesstimate. I think it likely that the e-minis will drop as low as 725 later today, but I also think that level will mark the low of the two month drop from 942 (25% !). If I am right about this March should prove to be a very bullish month.

Guesstimates on February 27, 2009

March S&P E-mini Futures: The market dropped to 730 on the GDP news this morning. Support today is in the 725-30 range. I think that a rally to at least the 748 level will develop during the day. I still think this market is about to begin the biggest rally seen in the last 9 months.

QQQ: The 27.30 level is support and from there I think the Q’s will start a move to 35.00.

March Bonds: The bonds have dropped into the 126-27 target zone. The next big move in this market should be upward to 135. Any significant weakness below 125 will mean that a bear market is underway.

March 10 Year Notes: The notes have yet to reach our 120 target. We think a substantial rally to 128 is imminent, but weakness below 120 would mean that a bear market is underway.

Euro-US Dollar: The euro is headed down to 122.50.

Dollar-Yen: I think a rally to 100.00 is underway.

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold is now headed for 1100. Support is at 940.

SLV - March Silver: I now think silver is headed for 1750.

Google: Resistance stands at 375. I think that its drop from 747 is over.

Out of the Box

As you can see the e-minis have broken down out of the last day's trading range (blue rectangle). Volume on the breakdown (red line) was the highest of the day, but still not very great in the context of volume during the past 10 days or so. Nonetheless, I think the market is telling us that it will move lower before it can move higher. My best guess is that the 730 level is the next stop.

In the meantime the purple dotted line at 764 is midpoint resistance. Any strength above that level on good volume would put me back on the bull side of the ledger.

Still Boxed In

Here is a 5 minute bar chart of the e-mini day sessions for the past two days. As you can see the market has stayed in the box (blue rectangle) defined by yesterday's late reaction. As it has done so volume has stayed low relative to yesterday and even lower relative to typical activity over the past 10 days. I interpret this action as a resting period prior to an attempt to break out above 780. The most bullish thing that can happen for the rest of today is .... nothing - followed by a close in the 760-65 range and then a higher open tomorrow.

Any move below the 760 level on increasing and substantial volume would tell me that the bulls are not yet strong enough to carry the market and that the e-minis will first drop below 740.

Pressure Builds

Here is a five minute bar chart of the cash S&P 500 for the past 10 days or so. The market has been trading sideways and forming what I think will prove to be a base for a substantial upmove. What interests me about this chart is the steady succession of higher lows shown by the short green lines I have drawn. This suggests that buyers have to keep raising their bids to get the stock they want. In my opinion this portends an upside breakout from this trading range.

Boxed In

Here is a five minute bar chart for the e-minis last two day sessions. At the moment the market seems trapped in a box defined by the limits of yesterday's late reaction( blue rectangle). I see today's action as only mildly bullish thus far, largely because the e-minis have held above midpoint support defined by yesterday's late reaction (dotted purple line). But volume is very low (red line). This coupled with the fact that the market is at the top of its recent trading range makes me reluctant to back up my bullish views by taking a position. I think good upside volume above 780 would resolve this uncertainty.

Guesstimates on February 26, 2009

March S&P  E-mini Futures: I again expect the market to hold support at 762 today and then head higher. I think this market is about to begin the biggest rally seen in the last 9 months.

QQQ: The Q’s will start a move to 35.00. 

March Bonds: The bonds have dropped into the 126-27 target zone. The next big move in this market should be upward to 135. Any significant weakness below 125 will mean that a bear market is underway.   

March 10 Year Notes: The notes have yet to reach our 120 target. We think a substantial rally to 128 is imminent, but weakness below 120 would mean that a bear market is underway.   

Euro-US Dollar: The euro is headed down to 122.50.

Dollar-Yen: I think a rally to 100.00 is underway. 

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold is now headed for 1100. Support is at 940.

 SLV - March Silver: I now think silver is headed for 1750.

Google: Resistance stands at 375. I think that its drop from 747 is over. 

Wave Chart at 3:30 pm

Here is the e-mini wave chart. The market held support line B on the last down wave and then put in a longer up wave. Volume showed a modest tendency to increase along the way. Support now comes up to line C which is a little below the midpoint of today's current range at 765. If this market is about to breakout to the upside I think support at line C and 765 is going to hold on any reaction.

Breakout Imminent ?

Here is a five minute bar chart of the cash S&P 500 index. You can see that the market has built a base are over the past five trading days. A move above 780 on this chart on reasonably high volume would for that reason be very bullish and this is what I expect to happen later today or tomorrow. First stop after that would be resistance at 790 and the next subsequent resistance will be found near 820.

Wave Chart at 2pm

Here is the wave chart of the e-minis. As I suspected this morning the drop after the housing number news was weak selling. Since then the market has begun to show modest bullish indications.

First of all it held initial support at the lower dotted line. Then it put in a weak up wave which showed modest signs of increasing volume and which carried above my 862 resistance point. The subsequent down wave occurred on low volume and was smaller than the down wave which preceded it. Finally the next up wave was bigger than the preceding up wave and volume also increased during that rally.

The acid test of the bullish interpretation comes on this down wave. It should make a higher low at the higher dotted line, midpoint suppport based on the last down wave.

The market is becoming balanced after a seven week drop. Increasing volume on a move above 780 would be very bullish.

Update at 11:50 am

Here is a five minute bar chart of the e-mini day sessions. The market held the lower support level that I mentioned in my last post and has moved above resistance at 762 while showing a modest volume increase. I think the rally from the day's low is bigger than we would have seen had the sellers been in control of this market. So I am guessing that any reaction from here will send the market down 8-10 points (blue rectangle) and be followed by more upside action later today.

Wave Chart at 10:30 am

Here is the e-mini wave chart at 10:30 am. I bought one unit at the first red arrow thinking that the down wave would be about as long as the previous one and thus would find support at the higher purple dotted line. My plan B was that the market would hold the midpoint of Tuesday's range and the high that preceded Tuesday's big up wave (red dashed line). In the event the market broke below that level and did so on increasing volume. I sold my position at the second red arrow.

The picture so far today is of a weak market. Volume on this morning's break was a little higher than at similar times over the past 10 days. The down wave not only was substantially longer than the preceding one but broke below yesterday's midpoint which generally is a sign of weakness also. The only positive thing I see in this chart is that the market so far has held support at the second, lower, purple dotted line which is the midpoint of yesterday's last down wave.

There is one thing that has raised my suspicions about the significance of this morning's break. It started when the existing home sales number came in below expectations. The market has been selling off on bad news very consistently lately, so much so that this "trade" seems to have attracted a big following. If this market can hold the lower of the two dotted lines I think the second half of the day will turn out to be quite bullish.

Out at 754.50

Long one unit at 764.50

Guesstimates on February 25, 2009

March S&P  E-mini Futures: I expect the market to hold support at 762 today and then head higher. I think this market is about to begin the biggest rally seen in the last 9 months.

QQQ: The Q’s will start a move to 35.00.  

March Bonds: The bonds have dropped into the 126-27 target zone. The next big move in this market should be upward to 135. Any significant weakness below 125 will mean that a bear market is underway.    

March 10 Year Notes: The notes have yet to reach our 120 target. We think a substantial rally to 128 is imminent, but weakness below 120 would mean that a bear market is underway.    

Euro-US Dollar: The euro is headed down to 122.50.

Dollar-Yen: I think a rally to 100.00 is underway.  

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold is now headed for 1100. Support is at 950.

 SLV - March Silver: I now think silver is headed for 1750.

Google: Resistance stands at 375. I think that its drop from 747 is over.

 

Late Update

Here is the updated wave chart for the e-minis. The latest upwave has broken above the 770 level but volume so far has been unimpressive (horizontal red line). At the 774 level the rally from yesterday's low equals the length of the rally from Friday's low to Monday's early morning high.

Normally the lack of volume in this situation would be a worry. On the other hand today as retraced virtually all of yesterday's one-way drop via a one-way rally. I am inclined to believe that even though the move upward has been a quiet one this is nonetheless the start of a more extended up move. If I am right about this the 762 level should be support from this point forward.

At Resistance

Here is the e-mini wave chart covering the past two day sessions. The market has rallied to midpoint resistance at 765. Volume on this rally has been unexceptional. This is an indication that the strength visible in the wave chart is not likely to continue and that the market is near the high for the day. If instead this rally continues and shows good volume on a move above 770 I shall turn short term bullish.

The Bigger Picture

Yesterday the Dow and the S&P 500 averages both closed at their lowest levels seen in the past 11 years. I thought a few charts from my public chart list at StockCharts.com would help to put this fact in a little better perspective.

The first chart shows the daily count of new 12 month lows for issues traded on the New York Stock Exchange. You can see that this number reached a high point on October 10, 2008, a lower high on November 21, 2008 and a still lower high yesterday. These three lower highs are associated with lower lows in both major averages. I think this is a sign that the bear market has reached a stage where the sellers are ceding control to the buyers, but the latter have yet to take command. In any case this is a very bullish divergence and indicates higher prices to come.

The second chart shows the 20 day moving average of the number of NYSE issues which advance in price each day. Here too we see a series of higher lows associated with successively lower lows in the averages. This is also a long term, bullish divergence.

The third chart gives some information about the very short term condition of the market. It shows the daily count of advancing issues on the NYSE. You can see that this number made a higher low yesterday as the averages made new closing lows. I think this is a clue that the short term trend is about to turn upward. If it does the other two indicators imply that the next upswing will probably be the first leg of a new bull market.

Framing the Day

Here is the e-mini wave chart showing yesterday's and today's day session activity. The market is becoming more balanced. You can see this in the development of one and possibly two successively shorter downwaves, and in the fact that the up wave which ended during the first half hour was longer than the preceding one. Today's early high was at the midpoint of yesterday's early afternoon rally abut this is only minor resistance. Any strength at this juncture would probably carry the market up to the higher of the two dotted lines. This represents resistance at the midpoint of Friday's late rally.

I still think today's range will be comparable in size to yesterday's (blue rectangle). If so the high of the day should develop in the 760-65 range and the market should also break below yesterday's low.

Guesstimates on February 24, 2009

March S&P  E-mini Futures: I think today’s low is likely to be in the 725-30 range and the high near 765. A move to 770 on good volume would be very bullish. I think this market is about to turn upward and begin the biggest rally seen in the last 9 months.

QQQ: The Q’s dropped below 28.50 support yesterday but I think they soon will start a move to 35.00. 

March Bonds: The bonds have dropped into the 126-27 target zone. The next big move in this market should be upward to 135. Any significant weakness below 125 will mean that a bear market is underway.   

March 10 Year Notes: The notes have yet to reach our 120 target. We think a substantial rally to 128 is imminent, but weakness below 120 would mean that a bear market is underway.   

Euro-US Dollar: The euro is headed down to 122.50.

Dollar-Yen: I think a rally to 100.00 is underway. 

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold is now headed for 1100.

 SLV - March Silver: I now think silver is headed for 1750.

Google: Resistance stands at 375. I think that its drop from 747 is over. 

4 pm Update

Here is my best guess about tomorrow's price action. I am expecting a low in the 725-30 range, between the two green lines. If tomorrow's range is as big as today's daytime range the high will be near the midpoint of Friday's rally (purple dotted line), around the 766 level.

Out of time and out at 744.00

Long one unit at 745.75

One Way Market

It is very unusual for the e-minis to show only a single wave during the first four hours of any trading day, but that is what we have today. This kind of action indicates weary but persistent bearish sentiment in the market. Volume isn't very high but this may change if we take out the November 21 low at 739.

I am guessing that the 739 low will hold. I estimate that today's low will be as far below Friday's low (red dashed line) as this morning's early electronic trading high at 786.50 was above Friday's high of 779.50. This would put today's low (dashed green line) at 745.50.

Sold two units at 759.50.

Am I Crazy - or What?

In my last post I said that my plan B was the hypothesis that support in the 763-65 range would hold. Then the market dropped as low as 760.50 and I ----- bought another unit!!!!! What explains such madness ?

Well, I knew that the night/day range last Friday was about 26 points. The overnight high today was 786.50 and so a similar range today would put the day low at 760. So I added another unit when I saw a potential mini volume climax on my 5 minute bar chart after the market had dropped to 861.

I am not going to tolerate much adverse price action at this juncture since it would indicate that the market is much weaker than I think it is.

Long second unit at 761.50

Plan B

Here is a five minute bar chart of the last two day sessions in the e-minis. I went long this morning at 772.00 figuring that the market would not drop below Friday's close which coincided with the midpoint of Friday's late reaction (top purple dotted line). In the even the market broke below that support level and now I have to fall back on plan B.

The low of Friday's late reaction was 763 (red line) and the 765 level is the midpoint of Friday's trading range (lower purple dotted line). I think these two levels will now be support, especially because volume is showing a tendency to contract as the market has traded sideways below Friday's high. Should high volume selling develop below this support I would conclude that Friday's low at 752.50 will be broken.

Long one unit at 772.00

Guesstimates on February 23, 2009

March S&P  E-mini Futures:  The midpoint of Fridays range is 765 and we expect that level to serve as support today. A move above 786 with good volume would be very bullish. I think this market is about to turn upward and begin the biggest rally seen in the last 9 months.

QQQ: The Q’s should hold 28.50 support and begin a rally to the 35.00 level.  

March Bonds: The bonds have dropped into the 126-27 target zone. The next big move in this market should be upward to 135. Any significant weakness below 125 will mean that a bear market is underway.    

March 10 Year Notes: The notes have yet to reach our 120 target. We think a substantial rally to 128 is imminent, but weakness below 120 would mean that a bear market is underway.    

Euro-US Dollar: The euro is headed down to 122.50.

Dollar-Yen: I think the 87.50 level will hold and that a rally to 100.00 is underway.  

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold is now headed for 1100.

 SLV - March Silver: I now think silver is headed for 1750.

Google: Resistance stands at 375. I think that its drop from 747 is over.

 

The Last Word

Here is today's e-mini action as of 3:30 pm. At the moment the afternoon rally to 778.75 does not look like a demand shock. It was concentrated into a short, 15 minute time span - a real demand shock would show much more persistent buying than that. A drop below the red line at 762 would be another reason to think we have not seen a demand shock.

On Monday I would take strength above the dotted purple line, the midpoint of today's range, as good evidence that the short term trend has turned upward.

2:30 pm Update

Here is a five minute e-mini bar chart for the past two day sessions. Earlier today I estimated that the low for the day would be near 753 (blue rectangle) and anticipating that low I put on a single unit long position at 755. I had also noted that the biggest rally on the way down from last Friday's high at 840.50 had been about 19 points (red rectangle). So when the market moved above 770 a little while ago I sold my longs a little above the top of the red rectangle.

The high volume on this rally suggests that a demand shock may be in progress, but it is too early to tell. If it really is a demand shock then I would expect the market to hold above 762 and finish the day strong. In any case a move above today's high - whatever it turns out to be - on Monday would be very bullish.

Out at 772.50

Long one unit of e-minis at 755.00

Estimating Today's Low

Here is a five minute e-mini bar chart covering yesterday's and today's day session. Today's initial rally was only a bit more than 10 points - not sufficient to break the rhythm of the decline from yesterday's high point. So at this juncture I shall operate on the hypothesis that we have seen the day's high and that today's range will match the size of yesterday's range (blue rectangles). If so we should see today's low near 753.

Some Measuring Sticks

Here is a five minute bar chart of the day session e-mini trading. The question I am considering is whether or not this market is showing enough strength to indicate that its short term trend has turned upward.

Yesterday's price action gives us three measuring sticks we can use to make a judgment about this. The last rally on the way down to this morning's low measured about 10 points, and the e-minis have already put in a 10 point rally (blue rectangles). So far there is no price indication that the trend has changed. From Wednesday's low to yesterday's early high the e-minis had rallied about 19 points. A similar rally from here (red rectangle) would put the market at 781 or so, just a tad higher than yesterday's close. Should we see such a rally I think the odds will be shifting in the bullish direction but it still would not be definitive evidence of a turn.

The final level to watch today is the midpoint of yesterday's trading range, roughly the 786 level. Any strength above there would be very bullish. Similarly, on Monday any strength above the midpoint of today's range will be a bullish indication.

Guesstimates on February 20, 2009

March S&P  E-mini Futures:  The market dropped as low as 763.25 this morning. I think 765 is support and that the next significant move from here will be upward.

QQQ: The Q’s are headed down to 28.50 or so.  

March Bonds: The bonds have dropped into the 126-27 target zone. The next big move in this market should be upward to 135. Any significant weakness below 125 will mean that a bear market is underway.    

March 10 Year Notes: The notes have yet to reach our 120 target. We think a substantial rally to 128 is imminent, but weakness below 120 would mean that a bear market is underway.    

Euro-US Dollar: The euro has broken below support at 127.50 and now is headed down to 122.50.

Dollar-Yen: I think the 87.50 level will hold and that a rally to 100.00 is underway.  

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold is now headed for 1100.

 SLV - March Silver: I now think silver is headed for 1750.

Google: Resistance stands at 375. I think that its drop from 747 is over.

 

Update at 2:30 pm

Here is a five minute bar chart of the past two e-mini day sessions. This morning I thought the market was about to break out above the 800 level so I bought my two units at the first two red arrows you see. I figured that the 786 level would hold, but it didn't so I got out on the subsequent rally at the third red arrow, near the day's midpoint (purple dotted line).

I looks like today is just a another sideways trading day, the third one this week after the big gap down early Tuesday. This is still looking like a shakeout rather than like a downside breakout. I expect to be a buyer near 765 or alternatively on strength above today's midpoint at the purple dotted line. I also think that next week will prove to be a very bullish trading week. The market has dropped relentlessly for nearly seven consecutive weeks from is early January top. It's time for a change.

Sold two units at 786.00

Plan B

Here is a 5 minute chart of the past two day sessions in the e-minis. I am still long two units because I was very confident that support at the purple dotted line would hold. In the event this support level failed and now I have to play defense. My plan B is that today's range will be as large as yesterday's (blue rectangles). If so the market is getting near today's ultimate low point. I plan to sell part or all of my position on a rally back near the purple dotted line.

Long second unit at 788.00

Out of Ammunition ??

Here is a 30 minute bar chart of the past few e-mini day sessions. I went long near the open this morning because I wanted to bet that the sellers had run out of ammunition. Note how today's open was at about the same level of the last two opens. The market dropped significantly the last two times but today it held its ground. If my guess is a correct one I think the market will hold above the purple dotted line near 786.

Long one e-mini unit at 794.00

The Tipping Point

About nine years ago Malcom Gladwell wrote a book called The Tipping Point. It's all about how little problems can grow into big disasters, much like epidemics of disease. At some point a problem which at first appears to be a manageable reaches the tipping point - a point at which the entire situation gets completely out of anyone's control and a very bad outcome is virtually assured.

I think all the rescue plans and stimulus packages governments around the globe have announced can be understood in terms of the economy's tipping point. If you study the major depressions of history you find that at some point along the economic decline people loose hope in their futures. This is always noted in the popular press of the time. Once hope is lost the depression is assured because businessmen don't want to invest or hire and consumers don't want to buy. So you want to avoid reaching this sort of economic tipping point at all costs.

The primary function of all these rescue packages is to keep our economy away from that tipping point. Yes, they will have real economic effects, although people disagree a lot about the magnitude of any economic stimulus they will generate. But the real role of these rescue plans is to prevent the economy-wide pessimism about the future. For if people fall into such a pessimistic funk it will take a long time for economic recovery to set in.

So I think all the debate about whether rescues will work or not misses a much more important question. Instead we should ask whether they give people hope that we can avert disaster and climb back upon the road of economic growth. I personally think they will.

Guesstimates on February 19, 2009

March S&P  E-mini Futures:  I think the market is about to move above the 800 level on high volume.  If this happens it will signal the start of a big move up. The worst I see on the downside from here is 765.

QQQ: The Q’s are headed down to 28.50 or so.  

March Bonds: The bonds have dropped into the 126-27 target zone. The next big move in this market should be upward to 135. Any significant weakness below 125 will mean that a bear market is underway.   

March 10 Year Notes: The notes have yet to reach our 120 target. We think a substantial rally to 128 is imminent, but weakness below 120 would mean that a bear market is underway.   

Euro-US Dollar: The euro has broken below support at 127.50 and now is headed down to 122.50.

Dollar-Yen: I think the 87.50 level will hold and that a rally to 100.00 is underway. 

April Crude: The 30-35 zone is long term support. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold has decisively breached the 935 level and this market is now headed for 1100.

 SLV - March Silver: I now think silver is headed for 1750.

Google: Resistance stands at 375. I think that its drop from 747 is over. 

Waiting

Here is the five minute bar chart of the past two e-mini day sessions. The only thing that stands out to me is the fact that after yesterday's 20 point down gap at the open the market has been relatively quiet while drifting a bit lower.

I think that any drop from current levels will stop near 765. I also think that there is a better than even chance that today's low will hold. In either event a high volume move above the green dashed line will be a very bullish indication.

Abandon All Hope, Ye Who Enter Here !

Well, the White House has released its homeowner rescue plan. The announcement has been on the schedule for a few days and details were pretty much known before hand. The interesting thing is that the market put in only a weak rally late last Thursday when the plan was leaked to the media. Since then we have seen a drop of about 60 points (7%) in the e-minis.

My sense is that people are getting tired of rescue plans. They don't expect them to work. We have entered the "no hope" zone - a psychological state in which bad news doesn't surprise or frighten people very much. I think the groundwork is in place for a very big rally which will accompany the realization that the world isn't ending and that the economy is not headed for a second Great Depression.

Shakeout Low?

Here is a 5 minute bar chart of the past two day session's e-mini trading. I am becoming more confident that this morning's low ended the shakeout and that a new up trend has started. Why?

First, the market has taken out its earlier high today and moved a tad above that resistance level. Normally, that by itself would not be very significant. But in the process the e-minis have rallied more than they have at any time during the drop from last Friday's high at 838. In particular they have rallied more than they did yesterday (blue rectangles).

The only problem I see for a bullish prognosis right now is the volume of trading - it has dropped steadily on the rally from this morning's low. This is what prevents me from becoming a short term bull right now.

Even so, I think things will start looking even more bullish by the close. In particular I think the market has a shot at establishing a high volume breakout above the key 800 level later today or tomorrow.

Wave Chart at 10:40 am

Here is the e-mini wave chart for the past two day session. The picture is still bearish because the latest down wave was bigger than the preceding one. While resistance remains at today's high near 793 I note that yesterday's rally was about 12 points (first blue rectangle). A similar rally from the current low today at 778 would carry the market to 790 (second rectangle).

At 10:05 am

Here is a 5 minute bar chart of the e-minis for yesterday's and today's day sessions. Yesterday's late break now looks like a supply shock. This gives me a somewhat lower "line in the sand" (green dashed line) to use as an indicator of an upside trend reversal.

For the rest of the day I think today's high will act as resistance (purple dotted line). My downside target remains the 760-70 range.

Guesstimates on February 18, 2009

March S&P  E-mini Futures:  I think the break below the 805 level is a shakeout preceding a strong, high volume up move. This morning’s housing starts number was worse than expected but the market didn’t even blink. If I see strength above the 805 level I shall conclude that the trend has turned upward. Meantime I’ll stick with my downside target of 760-70.

QQQ: The Q’s are headed down to 28.50 or so. 

March Bonds: The bonds have dropped into the 126-27 target zone. The next big move in this market should be upward to 135. Any significant weakness below 125 will mean that a bear market is underway.   

March 10 Year Notes: The notes have yet to reach our 120 target. We think a substantial rally to 128 is imminent, but weakness below 120 would mean that a bear market is underway.   

Euro-US Dollar: The euro has broken below support at 127.50 and now is headed down to 122.50.

Dollar-Yen: I think the 87.50 level will hold and that a rally to 100.00 is underway. 

March Crude: March crude has entered the 30-35 target zone. I think the market will start stabilizing. The next big move should be a rally to 50.

GLD – April Gold: Gold has decisively breached the 935 level and this market is now headed for 1100.

 SLV - March Silver: I now think silver is headed for 1750.

Google: Resistance stands at 375. I think that its drop from 747 is over.