moving higher but weakness shows beneath the surface

Here are three charts which illustrate well the US stock market's current condition.

The bottom chart shows the Dow industrial average for the better part of the last two years. As you know I think the Dow and the S&P have rallied just about as much as one can reasonably expect before a substantial reaction sets in. Against this background of a very overbought market I think I can make out what may well be the peak of the Dow's domed house - points 21,23, and 25 in the Lindsay schematic - which I have discussed in previous posts.

The rally from last week's low points hasn't moved the Dow or the S&P to new historical highs just yet but I think this is likely to happen within the next few days. However, as you can see in the top two charts above this post the technical condition of the market is rapidly deteriorating.

The top chart shows the 10 day moving average of the number of daily advancing issues on the New York Stock Exchange. This oscillator reached its high for the rally off of the November low points in December of 2012 and has since put in a sequence of lower tops. It is currently well below those tops despite the recent rally in the averages.

The middle chart shows the 20 day moving average of the daily number of 12 month new highs on the New York Stock Exchange. After making its top this past January this indicator has dropped steadily and is not likely to turn up substantially until the market drops 10% or more first.

These indicators illustrate the fact that the bull market advance which began from the June and November 2012 low points is living on borrowed time since fewer and fewer issues on average are participating.

While the short term trend is clearly upward but any turn downwards from current levels which shows up via a daily close below a preceding week's low print would be very bearish.

Guesstimates on April 25, 2013

June S&P E-mini Futures: Today’s range estimate is 1576-88. The market appears to have moved above its April 16 rally high at 1570.75 which now should be support. This implies that it is headed up to 1605 or so. But I still think that a drop of 10% or more is imminent.

QQQ:  Headed for 73.   

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 euro is trading above its 20 day moving average and it looks like a swing to 1.40 has begun.

Dollar-Yen: I think this bull market has much further to go. However the market is likely to stall for a few weeks beneath resistance at 100-101. Support is at 96.

June Crude:  As long as crude does not spend much time above 100 I will stick with my view that it is headed below 70.

June Gold:  The market has rallied a bit above 1440 resistance but should halt at 1465. Strength above 1465 would mean that gold is headed back to the breakout point at 1530. Downside target is still 1200-50.

May Silver: Initial downside target is 20.00 while resistance above the market is at 27.00.  

Google: The market averages are headed higher and GOOG held well above support at 747, its 2007 top during the last reaction. This is a bullish combination and makes it likely that GOOG will make it to 900 on this swing up.

Apple:  Next downside target is 350. AAPL has reached near term support at 390. Resistance above the market is at 430.

Guesstimates on April 24, 2013

June S&P E-mini Futures: Today’s range estimate is 1570-84. The market appears to have moved above its April 16 rally high at 1570.75 which now should be support. This implies that it is headed up to 1605 or so. But I still think that a drop of 10% or more is imminent.

QQQ:  Headed for 73.   

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 euro is trading above its 20 day moving average and it looks like a swing to 1.40 has begun.

Dollar-Yen: I think this bull market has much further to go. However the market is likely to stall for a few weeks beneath resistance at 100-101. Support is at 96.

June Crude:  As long as crude does not spend much time above 100 I will stick with my view that it is headed below 70.

June Gold:  The market has broken out of its long trading range to the downside. It looks like an extended bear market has begun. Initial downside target is 1200-50 while resistance above the market is at 1440.

May Silver: Initial downside target is 20.00 while resistance above the market is at 27.00.  

Google: The market averages are headed higher and GOOG held well above support at 747, its 2007 top during the last reaction. This is a bullish combination and makes it likely that GOOG will make it to 900 on this swing up.

Apple:  Next downside target is 350. AAPL has reached near term support at 390. Resistance above the market is at 430.

Guesstimates on April 23, 2013

June S&P E-mini Futures: Today’s range estimate is 1556-69. High volume selling last week makes it likely that the 1593 top ended the rally from the November 2012 low at 1340. First downside target is 1468 which is support defined by the September 2012 top.

QQQ:  Headed for 61.   

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 euro is trading above its 20 day moving average and it looks like a swing to 1.40 has begun.

Dollar-Yen: I think this bull market has much further to go. However the market is likely to stall for a few weeks beneath resistance at 100-101. Support is at 96.

June Crude:  As long as crude does not spend much time above 100 I will stick with my view that it is headed below 70.

June Gold:  The market has broken out of its long trading range to the downside. It looks like an extended bear market has begun. Initial downside target is 1200-50 while resistance above the market is at 1440.

May Silver: Initial downside target is 20.00 while resistance above the market is at 27.00.  

Google: Headed down to 675.  

Apple:  Longer term downside target is 350. AAPL has reached near term support at 390. Resistance above the market is at 430.