sold one unit at 1091.75

Long one unit at 1096.50

Guesstimates on May 28, 2010

June S&P E-mini Futures: Today's range estimate is 1093-1110. I think the low at 1036.75 ended the drop from 1216. The market has broken above the 1089 high of its recent trading range and this means that a move to 1300 is underway.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122. I think a move to 140 will begin from current levels.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

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

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400. Support stands in the 1160-70 range.

SLV - July Silver: I think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 450 level is support. A move that should take GOOG above 700 will begin soon.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 240.

A bullish picture

Here is a 30 minute bar chart showing day session e-mini trading since the April 26 top. I think this chart presents us with a bullish picture. Here's why.

Note that the low at 1037 on Tuesday occurred at the bottom of a trend channel. I might also note that 1041 was the midpoint between the 866 low in July 2009 and the 1216 top on April 26. Since that low the market has produced two consecutive higher trading areas (last two blue ovals). This broke the string low steadily lower trading areas that had developed during the drop from 1216. More significantly, the last of these trading areas (the one developing today) is entirely above the steeper declining red trend line I have drawn. This is added confirmation that the pace of the drop has changed, presumably the early warning of a new swing upward. A similar inference can be drawn from the fact that the market today has spent most of its time trading above yesterday's high.

I think the ES is in the process of breaking out above the upper boundary of the past week's trading range (dash green line). The first part of the breakout swing is likely to carry to the top of the green trend channel near 1110. A reaction down to 1090, the breakout level, would be normal then. A more significant reaction will probably develop once the ES reaches the confluence of the declining red trend line and the rising green line (green oval).

I think a very big move upward is about to start. It should carry the ES to 1300 by the end of the summer.

Green light from Jay

Here is my latest post on "The Art of Contrarian Trading".

Guesstimates on May 27, 2010

June S&P E-mini Futures: Today's range estimate is 1075-1100. I think the low at 1036.75 ended the drop from 1216. I expect to see a series of 20-30 point swings up and down within the 1060-1100 range over the next few days. Once the market stabilizes a move to 1300 will begin.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122. I think a move to 140 will begin from current levels.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

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

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400. Support stands in the 1160-70 range.

SLV - July Silver: I think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 450 level is now support. A move that should take GOOG above 700 will begin soon.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 240.

Terminal shakeout

Here is a five point box, three box reversal chart showing 24 hour e-mini trading since the April 26 top at 1216.

I think the rally from yesterday's low at 1037 is sending a very bullish message. It is the bullish half of a classic terminal shakeout. Friday and Monday the market spent most of its time trading in a 1070-1090 range (first part of blue rectangle). Then late Monday and early Tuesday the market put in an uncorrected break below that trading range and below the previous lows at 1051 and 1056 (red arrow). But then, after only a little sideways action yesterday morning, the ES took off in an uncorrected rally (green arrow) that carried all the way to the top of the previous two days' trading ranges.

This sort of action says that the market thinks prices below 1050 are too low. The implication is that a substantial rally lies ahead. A point and figure count across the base area offers a target at the old high, 1215. And I think this will be only part of a bigger rally that will carry to 1300.

Guesstimates on May 26, 2010

June S&P E-mini Futures: Today's range estimate is 1065-95. I think yesterday's low at 1036.75 ended the drop from 1216. I expect to see a series of 20-30 point swings up and down within the 106--1100 range over the next few days. Once the market stabilizes a move to 1300 will begin.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122. I think a move to 140 will begin from current levels.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

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

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400. Support stands in the 1160-70 range.

SLV - July Silver: I think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 450 level is now support. A move that should take GOOG above 700 will begin soon.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 240.

Late update

The strong afternoon rally makes it likely that the early morning low at 1036.75 ended the drop from the April 26 top of 1216.75. I expect to see a fair amount of essentially sideways action over the next few days with several 20 point swings both up and down. Once the market stabilizes a move to 1300 should get underway.

Update

Here is a five point box, three box reversal point and figure chart. It shows 24 hour e-mini trading since the April 26 top at 1216.

The initial drop from the 1174 high of May 13 carried the market down 60 points (first blue rectangle). Then we had a 35 point rally (first purple rectangle). The next low occurred this past Friday at 1051 and was followed by a 37 point rally (second purple rectangle). I am guessing that the drop from yesterday's high at 1088 will match the initial drop from 1174 (second blue rectangle). If it does the low would be about 1028 (hence the 1030 low of today's range forecast).

I still think we shall see a print pretty close to or a little below the 1030 level before the market stabilizes and begins an extended rally (green oval). At this juncture the start of this rally would be indicated by a move above yesterday's high (green dash line) which would also imply an upside penetration of the steeper descending red trend line.

Guesstimates on May 25, 2010

June S&P E-mini Futures: Today's range estimate is 1030-65. I expect a long lasting low to develop today or tomorrow. Once the low has been established I think the ES will begin a rally that will take it to 1300 and higher.

QQQ: Support stands at 42.40. A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122. I think a move to 140 will begin from current levels.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

July Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400. Support stands in the 1160-70 range.

SLV - July Silver: I think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 450 level is now support. A move that should take GOOG above 700 will begin soon.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 240.

Update

Here is a five point box, three box reversal chart showing 24 hour trading in the e-minis. I am treating the activity on May 6 that occurred below the 1100 level as a "mistake" (black dash oval). This puts the low of the first leg down from 1216 at 1091 and makes that swing 125 points in length. The second leg down started from 1174 and so far has been 123 points in length. At its 1051 low last Friday the ES also kissed the lower parallel trend line drawn from the intervening 1091 low. These two facts are preliminary evidence that a low has either already occurred or will soon develop.

Another important observation is that the sideways length of the recent trading range (lower blue line) is greater than that associated with the trading range at the 1174 top (upper blue line). Usually this means that the swing down from 1174 has ended or will soon do so.

I am going to stick with my view that the low is not yet in place and will develop in the 1030-40 range (green oval). But I will change my mind about this if I see strength above the 1100 level. Such strength would break the steeper red down trend line I have drawn and would also take the market above the high of the last reaction on the way down to the 1051 low (green dash line).

In either event I think the next significant move from current levels will be upward and will eventually take the ES to 1300.

Guesstimates on May 24, 2010

June S&P E-mini Futures: I still think that the market will drop into the 1030-40 range before turning upward. My range estimate for today is 1050-1080. Once the low has been established I think the ES will begin a rally that will take it to 1300 and higher.

QQQ: Support stands at 42.40. A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122. I think a move to 140 will begin from current levels.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

July Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400. Support stands in the 1160-70 range.

SLV - July Silver: I think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 450 level is now support. A move that should take GOOG above 700 will begin soon.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 240.

Update

Here is a thirty minute bar chart showing day session e-mini trading. I estimated a 40 point range for the day with a low at 1035. So far we have seen a 37 point range but the low was 1051. This surprised me because I thought once the market broke its 1056 low of May 6 it would drop much more than 5 points below it.

So far the rally from 1051 has been only a little bigger than the biggest rally on the way down from 1174 (blue rectangles). Unless and until the market shows strength above 1100 I am going to stick with my guess that we shall see 1035 before a sustained rally to new bull market highs starts. Note that the initial leg down from 1074 carried about 60 points. A 60 point drop from the high (thus far) of today's rally would put the ES at 1028.

Guesstimates on May 21, 2010

June S&P E-mini Futures: Yesterday's range, entirely below the 1100 level, makes me think that the market will drop into the 1030-40 range before turning upward. My range estimate for today is 1035-1075. Once the low has been established I think the ES will begin a rally that will take it to 1300 and higher.

QQQ: Support stands at 42.40. A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122. I think a move to 140 will begin from current levels.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

July Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400. Support stands in the 1160-70 range.

SLV - July Silver: I think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 450 level is now support. A move that should take GOOG above 700 will begin soon.

Apple: Should reach 350 (at least) before the bull market ends. Support is at 240.

What's next ??

Here is a five point box, one box reversal point and figure chart showing 24 hour e-mini trading.

The drop from last week's high of 1174 has been much, much bigger than I anticipated. What's next?

So far today the low end of my range estimate at 1075 has held. But the rally off of this morning's low has been feeble. That could change and strength above the 1100 level, the lower edge of the trading range outlined by the blue rectangle, would be very bullish. It would mean that the market is headed for 1200 over the next few weeks.

Should the ES drop back to 1075 before moving visibly above 1100 I think the 1056 low will be broken. The downside should be limited to the 1025-1040 area (green oval) as indicated by the two point and figure counts I have drawn on the chart. I think a drop below 1056 would turn into a terminal shakeout and be followed by big rally. Such a shakeout would also define a George Lindsay, three peaks formation with tops in October, January, and April. I'll have more to say about the implications of the three peaks if 1056 is broken.

After the smoke clears I think all the downside action since the April 26 top will eventually be seen as a normal bull market corrective phase. I think we shall see new bull market highs within a couple of months.

Guesstimates on May 20, 2010

June S&P E-mini Futures: My range estimate for today is 1075-1115. I still think that last week's low at 1056 ended the correction from 1216. Strength above 1120 would be very bullish.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122. I think a move to 140 will begin from current levels.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

July Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400. Support stands in the 1160-70 range.

SLV - July Silver: I think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 495-505 zone 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 240.

Update

Here is a 30 minute bar chart showing day session e-mini trading.

Whenever the market becomes unusually volatile and then calms down I like to mentally put my thumb over the unusual activity to see if I can make sense of the rest. In the current situation it seems clear that the Black Thursday collapse and then the big up move the following Monday identifies the activity in the black dash oval as a possible aberration, a kind of mistake made by the market.

One clue that this interpretation makes sense is that the market has otherwise traded in well defined trend channels which I have drawn on the chart. As you can see the lower boundaries of these channels today are around the 1100 level. I also think it is worth noting that at 1104 the e-minis have dropped 9.2% from the 1216 high on April 26. Recall that the June-July 2009 and the January-February 2010 reactions each amounted to 9.2%.

Given these facts I think it makes sense to think of the drop from 1216 as a normal decline which is just reaching the limits established by previous declines in the bull market. So I think the ES is establishing what Elliotteers will eventually identify as the "orthodox" low of the correction.

The market is scraping bottom and the next big move from here will be upward.

Guesstimates on May 19, 2010

June S&P E-mini Futures: Contrary to my expectation Monday's low at 1113 was broken by 8 points in Asian trading last night. My range estimate for today is 1100-25. I still think that last week's low at 1056 ended the correction from 1216. Strength above 1120 would be very bullish.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122. I think a move to 140 will begin from current levels.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

July Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400.

SLV - July Silver: I now think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 495-505 zone 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 240.

Here is a five point box, one box reversal point and figure chart showing 24 hour e-mini trading.

This morning I thought that the market would react from its open but I expected it to hold yesterday's close at 1134.75. That support level failed so I had to bag my long position. Even so this chart is the sort that portends bullish action ahead. In particular, I see a second higher low developing at the lower line of a rising trend channel. I think a low is developing because the market broke quickly from 1175, then started trading sideways at 1125. Yesterday we saw what appears to me to be a terminal shakeout (second green arrow). Then today the market took out its last reaction high on the way down to yesterday's low ( red dash line).

I expect the ES to end its drop from today's 1147.50 high near the 1120 level. The next significant swing should take the market to 1200.

sold one unit at 1131.00

Long one unit at 1138.25

Guesstimates on May 18, 2010

June S&P E-mini Futures: I think that last week's low at 1056 ended the correction from 1216. Yesterday's low ended the correction from 1174. Today's range estimate is 1135-55.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

June Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400.

SLV - July Silver: I now think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 495-505 zone 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 240.

Quick update

The market has nearly rallied all the way back to the day's high. This looks like a decisive rejection of prices below 1120 and I think it means that the low of the drop from 1174 occurred today at 1113. The ES is now headed for 1200.

Update

Here is an updated version of the 30 minute bar chart I showed you on Friday.

This morning I thought that the market would trade within Friday's range and then briefly drop below Friday's low tomorrow. Instead sellers took control right from the open and drove the ES down to the target zone centered at midpoint support near 1113 (purple dotted line). I am not really sure that the low of the drop from last week's 1174 high ended at 1113 - a further drop to the green trend line and the 1105 level later today or early tomorrow seems more likely than not.

But I do think the market is scraping bottom and that the next big move from here will take it above 1200. I also think that the 1056 low on May 6 ended the drop from 1216 and that the up swing that started then will take the ES to 1300 over the next two or three months.

Guesstimates on May 17, 2010

June S&P E-mini Futures: I think that last week's low at 1056 ended the correction from 1216. Today's range estimate is 1125-45.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

June Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400.

SLV - July Silver: I now think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 495-505 zone 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 240.

Update

Here is a 30 minute bar chart showing day session e-mini trading.

The drop from yesterday's 1174.75 high has been much bigger than I expected. I thought that 1155 was the most likely stopping point and that a 45 point drop to 1130 would be the worst we would see. But the market today has spent a fair amount of time trading below 1130. Moreover, the selling today has been relentless and on fairly high volume.

I think the market is about to retrace most, but not all, of the rally from 1102 to 1174 which resulted from the announcement of the rescue package for Greece. Midpoint support stands at 1113 (purple dotted line) and 1116 is the midpoint of the second box for this rally. I think we shall see a reaction low Monday or Tuesday. Once the drop from 1174 is over the move to 1300 should resume.

Guesstimates on May 14, 2010

June S&P E-mini Futures: I think that last week's low at 1056 ended the correction from 1216. Today's range estimate is 1139-55.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

June Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400.

SLV - July Silver: I now think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 495-505 zone 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 240.

Update

Here is a 30 minute bar chart showing day session e-mini trading. I think last week's low at 1056 ended the drop from 1216 and that the market is now on its way to 1300 or so.

At the moment the market is advancing through a stack of 40 point boxes (blue rectangles). The top of the third box is 1176, just a bit below 1177 resistance (red dash line) at the temporary low point of April 28.

The biggest correction on the way up from 1056 amounted to 45 points. A drop from 1175 ( this mornings high in Europe) of that size would take the market down to 1130, just a bit below the bottom of the current box at 1136. But I don't expect to see a reaction that big until the market moves well into its fourth box (1176-1216).

In the meantime I see support at about the midpoint of the current box which is also the midpoint of the reaction on May10 (purple dotted line). This is at the 1155 level.

Guesstimates on May 13, 2010

June S&P E-mini Futures: I think that last week's low at 1056 ended the correction from 1216. Today's range estimate is 1157-77.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

June Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400.

SLV - July Silver: I now think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 495-505 zone 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 240.

Guesstimates on May 12, 2010

June S&P E-mini Futures: I think that last week's low at 1056 ended the correction from 1216. Today's range estimate is 1150-75.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

June Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400.

SLV - July Silver: I now think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 495-505 zone 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 240.

Update

Here is a 30 minute bar chart showing day session e-mini trading. I have chopped off the bottom part of the chart so that the last two days of trading can more easily be seen.

The market has been stronger today than I initially anticipated. I was looking for a day session range of 25 points, but with a low at 1135. Instead the low was 1144 and a 25 point range from there would put the high at 1169, not far from where the market stands now.

The ES is trading in 18 point, short term boxes (blue rectangles). The high of the current box is at 1180. The April 28 low point, and the breakout point for the drop into the Black Thursday low was 1177. I think the ES will rally into the 1175-80 range and then drop to midpoint support which stands at 1153 (purple dotted line). From there the market should resume an up swing that will carry it to 1200 and above within the next couple of weeks.

I think the move up from the 1056 low will continue until the ES reaches 1300.

Buy the Euro

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Guesstimates on May 11, 2010

June S&P E-mini Futures: I think that last week's low at 1056 ended the correction from 1216. Today's range estimate is 1135-60.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

June Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: Gold has nearly reached its all time high of 1227. The odds now are that the market will continue upward to 1320. I still expect to see 875 before 1400.

SLV - July Silver: I now think silver will rally to 21.50 and then begin a move to 10.oo.

Google: The 495-505 zone 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 240.

Breakout

Here is an updated version of the point and figure chart I posted late last week.

As you can see the ES formed a higher trading range late Thursday and all day Friday (second blue oval). Then in Europe this morning the market broke above the top of this second trading range making it to 1162, the top of the trend channel I have drawn. This sequence of successively higher trading ranges is convincing evidence that the trend is upward once more and that the 1056 low will hold for many months.

The point and figure count across the second trading range projects a move to 1275, a new bull market high by a wide margin. My best guess is that before the market continues its advance it will first react to a level close to the breakout point and to the lower channel line.

More evidence ...

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Guesstimates on May 10, 2010

June S&P E-mini Futures: I think that last week's low at 1056 ended the correction from 1216. Today's range estimate is 1138-68.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

June Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: I still think the longer term trend has turned downward. I expect gold to drop to 875 over the next few months.

SLV - July Silver: I think silver has started a down move that will carry it to 10.00 over the next few months. Resistance is now 19.00.

Google: The 495-505 zone 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 240.

Update

Here is a one box reversal, five point box point and figure chart. It shows 24 hour e-mini trading going back to the low in early February at 1041.

The ES has had a 41 point range today - 1091 to 1132. I think we have seen the day's high and low. The market is moving up and down inside the 40 point box (blue rectangle) I have drawn on the chart. I expect more of this sideways action on Monday. But I think the ES will emerge from this box on the upside and begin a move which will take it to new highs for the bull market.

As I noted in a prior post the congestion area formed in April counted down to 1080, although at the time I thought there was no chance the market would drop that low! But it did that and more. The fact that the count from the top area has been fulfilled is one piece of evidence that the low is in place.

I think today's 1091 low will not be broken by much if at all. The 1091 level is the midpoint between the May 2008 high at 1442 and the November 2008 low at 739.

There are two lower midpoints which appear to be responsible for yesterday's 1056 low: the 1054 level which is the midpoint between the May 2008 high at 1442 and the March 2009 low at 666, and the 1064 level which is the midpoint between the September 2008 high at 1291 and the October 2008 low at 837.

I think support beneath the market at these three midpoints is very strong. The implication is that the next big swing will be upward.

Black Thursday - a buying opportunity

Here is my latest post on "The Art of Contrarian Trading".

Guesstimates on May 7, 2010

June S&P E-mini Futures: I estimate today's day session range will be 1108-1138. It will probably take a couple of days to restore stability, but I believe that the next big move will be upward to new bull market highs.

QQQ: A move up to 54.00 will be the next big swing.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: The market is approaching the 124-25 target zone and should soon start to stabilize.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

June Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The market moved well above 1187 resistance on yesterday's panic be I still think the longer term trend has turned downward. I expect gold to drop to 875 over the next few months.

SLV - July Silver: I think silver has started a down move that will carry it to 10.00 over the next few months. Resistance is now 19.00.

Google: The 495-505 zone 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 240.

YIKES !!!!

Here is a daily chart of the cash S&P 500 showing its 50 day moving average (blue line) and its 200 day moving average (red line).

From 2:30 pm to 2:50 pm today the ES dropped from 1131 to 1056, about 7% in twenty minutes! The range for today (thus far!) has been 112 points, about 10% from high to low. At the 1056 low a short while ago the market had dropped 13% from its 1216 high with most of that drop coming in a couple of hours this afternoon.

To put this down swing in perspective recall that the two biggest drops since the March 6, 2009 low at 666 carried the ES down 9.2% each. The first carried 90 points and the second 107 points. This latest drop has been 13.2% and has carried the market down 160 points from its 1216 top on April 26.

What now? I still think this is a bull market. Indeed, a down move like this one that develops such panic selling so soon after the top is characteristic of a bull market correction, not the kickoff of a new bear market. At today's low the cash S&P was well below its rising 50 day moving average and a little below its rising 200 day moving average. This sort of configuration is normally associated with a buying opportunity in a bull market.


As I was writing this post the ES rallied from its 1056 low back to 1131, a 75 point move again in only 20 minutes. Taking history as a guide I think the market will take a few days to stabilize, but I doubt that it will again get anywhere near the 1056 level. I would guess that the 1080-90 level will now be support.

The next big swing should be another bull market up leg. This means that it will carry to new highs above 1216 and probably into the 1250-1300 zone.

sold long unitat 1129.50

Long one unit at 1148.75

Guesstimates on May 6, 2010

June S&P E-mini Futures: I estimate today's day session range will be 1148-1168. I think a swing to 1270 will begin soon.

QQQ: A move up to 54.00 is underway.

TYX (thirty year bond yield): I think this market is headed for 5.40%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.50%.

Euro-US Dollar: Support near 131.00 has been broken. Next downside target is 124-125. Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

June Crude: I still think the next big move will take crude oil to 50.00.

GLD – June Gold: The longer term trend has turned downward. Resistance is at 1187. I expect gold to drop to 875 over the next few months.

SLV - July Silver: I think silver has started a down move that will carry it to 10.00 over the next few months. Resistance is now 19.00.

Google: The 495-505 zone 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 240.