Guesstimates on March 19, 2012

June S&P E-mini Futures: Today's day session range estimate is 1388-1398. The rally from the March 6 low is getting close to resistance in the 1405-1415 range. The advancing issues oscillators are showing some important divergences so a drop of at least 70 points is likely to begin within the next couple of weeks.

QQQ: Next upside target is 66.25 has been reached. Support is now at 63.50 and the next upside target is 69.00.

TNX (ten year note yield): The 10 year yield has broken out to the upside from a narrow, multi-month trading range and has taken a peek above its declining 200 day moving average. I think this is a genuine breakout. It is telling us that the US economic growth is about to accelerate and this is a very bullish longer term development for the stock market. The 10 year yield has started a move to 3.00%.

Euro-US Dollar: I think the trend of the euro is now downward. Over the next few months I expect to see the market drop below 1.2600. Right now support is at 129.50.

Dollar-Yen: I think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

May Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold broke support at 1680 and will now probably drop to 1585. A move to 2100 is underway.

SLV - May Silver: I think silver is headed for 50.00. The 31.50 level is now support.

Google: Google is now headed for its 2007 top near 750.

Apple: Resistance is at 605 and support at 575. The market's upside run last week was extreme and I think AAPL will now trade sideways for a while.

Guesstimates on March 16, 2012

June S&P E-mini Futures: Today's day session range estimate is 1394-1404. The rally from the March 6 low should continue to 1415.

QQQ: Next upside target is 66.25 has been reached. Support is now at 63.50 and the next upside target is 69.00.

TNX (ten year note yield): The 10 year yield has broken out to the upside from a narrow, multi-month trading range and has taken a peek above its declining 200 day moving average. I think this is a genuine breakout. If so it is telling us that the US economic growth is about to accelerate and this is a very bullish longer term development for the stock market. The 10 year yield has started a move to 3.00%.

Euro-US Dollar: I think the trend of the euro is now downward. Over the next few months I expect to see the market drop below 1.2600. Right now support is at 129.50.

Dollar-Yen: I think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

May Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold broke support at 1680 and will now probably drop to 1585. A move to 2100 is underway.

SLV - May Silver: I think silver is headed for 50.00. The 31.50 level is now support.

Google: Google is now headed for its 2007 top near 750.

Apple: Resistance is at 605 and support at 575. The market's upside run during the past three days has been extreme and I think AAPL will now trade sideways for a while.

Guesstimates on March 15, 2012

June S&P E-mini Futures: Today's day session range estimate is 1384-1397. The rally from the March 6 low should continue to 1415 with normal interruptions along the way.

QQQ: Next upside target is 66.25 has been reached. Support is now at 63.50 and the next upside target is 69.00.

TNX (ten year note yield): Yesterday the 10 year yield broke out to the upside from a narrow, multi-month trading range and has taken a peek above its declining 200 day moving average. I think this is a genuine breakout. If so it is telling us that the US economy is about to experience higher growth rates than currently expected. The 10 year yield has started a move to 3.00%.

Euro-US Dollar: I think the trend of the euro is now downward. Over the next few months I expect to see the market drop below 1.2600. Right now support is at 129.50.

Dollar-Yen: I think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

May Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold broke support at 1680 and will now probably drop to 1585. A move to 2100 is underway.

SLV - May Silver: I think silver is headed for 50.00. The 31.50 level is now support.

Google: Google is now headed for its 2007 top near 750.

Apple: Overnight AAPL has traded as high as 599, just shy of the 605 resistance level. The market's upside run during the past three days has been extreme and I think AAPL will now trade sideways for a while. Support is now at 575.

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breakout

Here is a weekly bar chart of the cash S&P 500. Over the past few days this average has moved above its 2011 high and joined the Dow and the Nasdaq at new highs for the move up from the 2009 low point.

I think this is a genuine breakout which is likely to be followed by a move in the S&P back to its 2007 high points.Here are my reasons for optimism.

First, I see no divergences among the stocks and sectors which have been leading the averages upward from their October 2011 low points. In particular, banks and home builders are showing persistent strength as is the tech sector led by Apple (AAPL), this bull market's leading stock. Until such divergences begin to appear this advance will remain on solid ground.

Second, the British, French, and German stock markets are all strong and making new highs for the move up from their September 2011 low points. They have not yet moved above their 2011 highs. But weakness in the euro currency against the dollar shows that the European central bank is providing plenty of liquidity. As long as the euro continues its drop against the dollar (I think it is headed below 1.2600) the north European bull market should continue. This in turn means that an EU banking crisis is no longer a danger, a possibility that weighed heavily on stock markets world wide last year.

Third, the Japanese central bank has committed itself to a positive inflation target and is doing its best to devalue the yen against the dollar. I think they will be successful and expect the see the dollar/yen at or above 90.00 in the coming months. This provision of yen liquidity will have positive economic repercussions for the world economy.

Finally, the Fed appears to be committed to keeping the Federal funds rate low for the next couple of years. I think this is an admission of failure and a manifestation of its unwillingness to aggressively encourage higher nominal GDP growth in the US. However, if the Fed is serious about maintaining this target higher-than-expected growth in the US economy will have the effect of producing "back door" quantitative easing. This will occur because the Fed's announced target rate will be too low relative to the higher levels of US growth I see coming and consequently the Fed will have to provide more and more liquidity to keep the funds rate where it is now.

Looking at the chart above you can see two sets of rectangles. The pair of blue rectangles shows that the S&P would rally to 1440 if the move up from the October 2011 low matches the size of the July 2010 to May 2011 rally. If the move up from the October 2011 low matches the size of the March 2009 to April 201 rally (red rectangles) it will end with the S&P a little above 1600. The 1600 target is a bit above the 2007 top at 1576 and stands at the upper green trend line I have drawn. The green oval delineates my current target for this bull market.

Guesstimates on March 14, 2012

June S&P E-mini Futures: Today's day session range estimate is 1382-1396. The rally from the March 6 low should continue to 1415 with normal interruptions along the way.

QQQ: Next upside target is 66.25 has been reached. Support is now at 63.50 and the next upside target is 69.00.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: I think the trend of the euro is now downward. Over the next few months I expect to see the market drop below 1.2600. Right now support is at 129.50.

Dollar-Yen: I think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

May Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold broke support at 1680 and will now probably drop to 1585. A move to 2100 is underway.

SLV - May Silver: I think silver is headed for 50.00. The 31.50 level is now support.

Google: Google is now headed for its 2007 top near 750.

Apple: Overnight AAPL reached resistance at 575. I expect a stall here and probably a drop to 545. After that the next upside target will be 605.

Guesstimates on March 13, 2012

June S&P E-mini Futures: Today's day session range estimate is 1368-1378. The rally from the March 6 low should continue to 1415 with normal interruptions along the way.

QQQ: Next upside target is 66.25. .

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The euro has bounced twice off of 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: I think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

April Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold should find support near 1680. A move to 2100 is underway.

SLV - May Silver: I think silver is headed for 50.00. The 32.50 level is support.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL is headed for its next upside target at 575. Support is at 520.

Guesstimates on March 12, 2012

June S&P E-mini Futures: Today's day session range estimate in the June contract is 1361-1371. The price action of the last three days now looks to me like the kick off phase of a bigger rally which should take the ES to 1415 or so.

QQQ: Next upside target is 66.25. .

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The euro has bounced twice off of 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: I have changed my view on the yen. It has started to accept prices above the 81.00 level. I now think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

April Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold should find support near 1680. A move to 2100 is underway.

SLV - May Silver: I think silver is headed for 50.00. The 32.50 level is support.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL is trading between 545 resistance and 518 support. Next upside target is 575.

Guesstimates on March 9, 2012

June S&P E-mini Futures: Today's day session range estimate in the June contract is 1360-1371. The rally from the November 25 low matched the size of the October 2011 rally and also carried the market to its May 2011 top. A drop of 50-70 points has probably started. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 61.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The euro has bounced twice off of 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: I have changed my view on the yen. It has started to accept prices above the 81.00 level. I now think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

April Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold should find support near 1680. A move to 2100 is underway.

SLV - May Silver: I think silver is headed for 50.00. The 32.50 level is support.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL is trading between 545 resistance and 518 support. Next upside target is 575.

Guesstimates on March 8, 2012

March S&P E-mini Futures: Today's day session range estimate is 1357-1367. The rally from the November 25 low matched the size of the October 2011 rally and also carried the market to its May 2011 top. A drop of 50-70 points has probably started. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 61.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The euro has bounced twice off of 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: I am switching my views on the yen. It has started to accept prices above the 81.00 level. I now think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

April Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold should find support near 1680. A move to 2100 is underway.

SLV - May Silver: I think silver is headed for 50.00. The 32.50 level is support.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL is trading between 545 resistance and 518 support. Next upside target is 575.

Guesstimates on March 7, 2012

March S&P E-mini Futures: Today's day session range estimate is 1340-1352. The rally from the November 25 low matched the size of the October 2011 rally and also carried the market to its May 2011 top. A drop of 50-70 points has probably started. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 61.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The euro has bounced twice off of 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: I am switching my views on the yen. It has started to accept prices above the 81.00 level. I now think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

April Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold should find support near 1680. A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00. The 32.50 level is support.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL has bounced off 545 resistance. Support is at 518. Next upside target is 575.

to 1310 then up

Here is a daily bar chart of the March 2012 ES going back to the October 4, 2011 low.

As I have explained in previous posts there is strong resistance near 1375 for two reasons. First, the 2011 high on May 2 of that year was 1373.50 (red dash line). Second, a rally from the November 25, 2011 low which matched the size of the October 2011 rally would have ended at 1366 (large blue dash rectangles).

Today's price action looks like a downside breakout from a small trading range which had formed during the past two weeks. I think it means that the ES is headed for the dash green trendline. A more precise estimate of the upcoming break is the size of the drop in early December which was about 71 points. That gives a downside target of 1306 (small blue dash rectangles).

I think this is only a normal correction in an ongoing bull market. There is still the possibility that the ES is forming the top of a domed house (see this post) but if so it still should rally above its recent 1377 top before the top is complete. A more bullish prospect is that there is no ongoing 3 peaks and a domed house formation and that instead the market is headed for its 2007 top at 1587.

Guesstimates on March 6, 2012

March S&P E-mini Futures: Today's day session range estimate is 1350-1362. The rally from the November 25 low has matched the size of the October 2011 rally and has also carried the market to its May 2011 top. So I think it is likely that the market's advance will pause near this resistance. A drop of 50-70 points is likely. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 59.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The euro has bounced twice off of 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: I am switching my views on the yen. It has started to accept prices above the 81.00 level. I now think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

April Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold should find support near 1680. A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00. The 32.50 level is support.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL has bounced off 545 resistance. Support is at 518. Next upside target is 575.

Guesstimates on March 5, 2012

March S&P E-mini Futures: Today's day session range estimate is 1363-1375. The rally from the November 25 low has now matched the size of the October 2011 rally and has also carried the market to its May 2011 top. So I think it is likely that the market's advance will pause near this resistance. A drop of 50-70 points is likely. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 59.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The euro has bounced twice off of 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: I am switching my views on the yen. It has started to accept prices above the 81.00 level. I now think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

April Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold should find support near 1680. A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL has reached 545 resistance. I think it will stall here temporarily. Support is at 518. Next upside target is 575.

Guesstimates on March 2, 2012

March S&P E-mini Futures: Today's day session range estimate is 1368-1377. The rally from the November 25 low has now matched the size of the October 2011 rally and has also carried the market to its May 2011 top. So I think it is likely that the market's advance will pause near this resistance. A drop of 50-70 points is likely. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 59.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The euro has bounced twice off of 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: I am switching my views on the yen. It has started to accept prices above the 81.00 level. I now think the market is headed for 85.00 and eventually will move to 90.00. This is a good sign for worldwide equity markets because it means that the Japanese central bank is trying to raise the growth rate of Japanese nominal national income and will probably succeed.

March Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold should find support near 1680 after yesterday's $90 break. A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL reached 545 resistance yesterday. I think it will stall here temporarily. Support is at 518.

Guesstimates on March 1

March S&P E-mini Futures: Today's day session range estimate is 1358-1370. The rally from the November 25 low has carried the market up to its May 2011 top. The rally from the November 25 low has now matched the size of the October 2011 rally. So I think it is likely that the market's advance will pause near this resistance. A drop of 50-70 points is likely. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 59.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: On Friday the euro traded as high as 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: The yen has been trading a little above resistance at 80.00. If the market starts spending time above 81.00 I will conclude that it is headed for 90.00. Until then I am sticking with my 70.00 target.

March Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: Gold should find support near 1680 after yesterday's $90 break. A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL reached 545 resistance yesterday. I think it will stall here temporarily. Support is at 518.

will the ECB take away the punch bowl?

Today marked the second phase of the European Central Bank's cheap finance program designed to support the EU commercial banking system. The program is an open ended offer by the ECB of cheap, three year financing against bad collateral. According to reports EU commercial banks borrowed even more than expected today, probably because they are worried that the ECB will soon take away this punch bowl.

The effects of this program can easily be seen in the bottom two charts. The lower chart is a daily bar chart of the German stock stock market index, the DAX, while the middle chart is a daily chart of the S&P 500. The ECB announced its two phase financing program in early December of 2011. The initial market response was negative because it was feared that the program would not do enough to stave off a European banking crisis. But when the first round of financing was completed on December 20 the markets saw the effects of the program on the European bond markets - yields came down substantially on paper issued by governments with financial problems. The DAX and the S&P 500 then embarked on rally which has continued to this day.

But will the ECB take away the punch bowl? My guess is that they won't, especially if the stock markets start dropping from current levels. You can see on the charts what happened to the S&P and the DAX when the Fed ended its two quantitative easing programs. The first ended in April of 2010 and the second a year later. Both times the US and European stock markets dropped. My guess is that something similar will happen now but I don't think the drop will be nearly as bad as the ones in 2010 and 2011. Moreover, when the ECB and the Fed see what is happening I think both will step in with new financing programs which will ultimately boost the markets above today's highs.

The top chart is a chart of the euro priced in dollars. The most bullish thing that can happen to the euro from the perspective of US and European stock markets is a resumption of its drop to 1.200 and below. Such action would be a reflection of the ECB's willingness to do whatever is necessary to stave off a renewed financial crisis in Europe. Based on their behavior over the past three months I think they are willing to do this.

But first I think the markets will have to throw a scare into the Fed and the ECB. If so I expect the euro will rally some distance from current levels before resuming a longer term decline. I also think that the DAX and the S&P 500 are likely to break, perhaps back to their 200 day moving averages (red lines on the charts) before ultimately moving much higher.

Guesstimates on February 29, 2012

March S&P E-mini Futures: Today's day session range estimate is 1369-1381. The rally from the November 25 low has carried the market up to and a little above 1370 which has made that rally as big as the October 2011 rally. The May 2011 top was at 1373. So I think it is likely that the market's advance will pause near these resistance levels. A drop of 50-70 points is likely. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 59.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: On Friday the euro traded as high as 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: The yen has been trading a little above resistance at 80.00. If the market starts spending time above 81.00 I will conclude that it is headed for 90.00. Until then I am sticking with my 70.00 target.

March Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL rallied to new bull market highs yesterday. Resistance above the market now is at 545.

Guesstimates on February 28, 2012

March S&P E-mini Futures: Today's day session range estimate is 1353-1368. The rally from the November 25 low has carried the market up to and a little above 1370 which has made that rally as big as the October 2011 rally. The May 2011 top was at 1373. So I think it is likely that the market's advance will pause near these resistance levels. A drop of 50-70 points is likely. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 59.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: On Friday the euro traded as high as 1.3485, just shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: The yen has been trading a little above resistance at 80.00. If the market starts spending time above 81.00 I will conclude that it is headed for 90.00. Until then I am sticking with my 70.00 target.

March Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00.

Google: Google is now headed for its 2007 top near 750.

Apple: AAPL rallied to new bull market highs yesterday. Resistance above the market now is at 545.

Guesstimates on February 27, 2012

March S&P E-mini Futures: Today's day session range estimate is 1350-1360. A rally from the November 25 low at 1147.50 which matches the size of the October rally would bring the ES to 1370. The May 2011 top was at 1373. After that top is exceeded a drop of 50-70 points again becomes likely. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 59.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: On Friday the euro traded as high as 1.3485, jut shy of my 1.3540 target. My best guess is that the rally from 1.2623 is nearly over.

Dollar-Yen: The yen has been trading a little above resistance at 80.00. If the market starts spending time above 81.00 I will conclude that it is headed for 90.00. Until then I am sticking with my 70.00 target.

March Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00.

Google: Google is now headed for its 2007 top near 750.

Apple: A drop to 475 or so is likely. After that AAPL should head for the next resistance at 545.

Guesstimates on February 24, 2012

March S&P E-mini Futures: Today's day session range estimate is 1360-1373. A rally from the November 25 low at 1147.50 which matches the size of the October rally would bring the ES to 1370. The May 2011 top was at 1373. After that top is exceeded a drop of 50-70 points again becomes likely. But even so I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 59.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The rally from 1.2623 should continue to 1.3540 before the market turns down once more. Meantime support is at 1.2940.

Dollar-Yen: The market is headed down to 70.00. Resistance above the market is at 80.00.

March Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00.

Google: Google is now headed for its 2007 top near 750.

Apple: A drop to 475 or so is likely. After that AAPL should head for the next resistance at 545.

Guesstimates on February 23, 2012

March S&P E-mini Futures: Today's day session range estimate is 1352-1361. A rally from the November 25 low at 1147.50 which matches the size of the October rally would bring the ES to 1370. The May 2011 top was at 1373. I expect the market to move well above the1400 level over the next few months.

QQQ: Resistance stands in the 63-65 zone and a break to 59.50 will probably be the next development.

TNX (ten year note yield): The 10 year yield has started a move to 2.50%.

Euro-US Dollar: The rally from 1.2623 should continue to 1.3540 before the market turns down once more. Meantime support is at 1.2940.

Dollar-Yen: The market is headed down to 70.00. Resistance above the market is at 80.00.

March Crude: An extended upswing is underway. It will probably take crude to 114 or so.

GLD – April Gold: A move to 2100 is underway.

SLV - March Silver: I think silver is headed for 50.00.

Google: Google is now headed for its 2007 top near 750.

Apple: A drop to 475 or so is likely. After that AAPL should head for the next resistance at 545.

central banks, money, and the global economy

Here are two weekly forex bar charts. The top chart shows the price of the euro in US dollars, while the bottom chart shows the price of the US dollar in yen.

The past four years have seen three distinct episodes of world wide fears of possible bank panics in the US and in Europe in 2008, 2010 and 2011. In each case there were fundamental economic problems that lay underneath the banking problems - in 2008 bad real estate loans and associated derivative products and in 2010 and 2011 uncompetitive economies in Greece, Portugal, Spain, Italy, Ireland, .....

Monetary policy cannot solve economic problems, but it can buy time to solve such problems by allaying fears of a banking panic and bank collapses. During the past three years the Fed, the European Central Bank, the Bank of England, and the Bank of Japan have all attempted to provide markets with necessary liquidity through programs of quantitative easing.

This quantitative easing was necessary because economic uncertainties and risks had increased the demand for short term, safe and liquid assets. Absent central bank action this increased demand for liquidity would have led to the collapse in the value of longer term assets (loans and bonds) held by commercial banks. Indeed such a collapse occurred during the second half of 2008 before central banks even realized there was a problem. A collapse in asset prices is always associated with economic weakness and this makes it harder for governments to do something about underlying economic problems.

Quantitative easing by a country's central bank generally leads to a depreciation in that country's currency. Indeed, this is the single most important indication that the central bank's action has been effective.

You can see in the charts above that the Fed (and the Bank of England) took the lead in implementing quantitative easing programs. The first effort by the Fed lasted about a year from March 2009 to April 2010. The second phase started in October 2010 and ended in May 2011. Both phases were associated with significant depreciating of the US dollar against the euro and against the yen (green arrows on both charts).

Next up was the Bank of Japan which sold yen against foreign currencies to stop yen appreciation which is an effective tightening of monetary policy unless counteracted. On four separate occasions, starting in March 2011 around the time of the big earthquake in Japan, the Bank of Japan intervened dramatically in the currency markets (four purple arrows on upper chart).

Late last year the European Central Bank began a program of buying sovereign bonds from commercial banks. This program is scheduled to end on February 28 and has had a modest effect on the euro (blue arrow).

I personally think the central banks have not provided nearly enough liquidity to the markets but at least their hearts are in the right place as these charts show. They have warded off the imminent threat of a banking panic which would have done terrible economic damage above and beyond the damage we have already seen. Looking forward I think their efforts will be reflected in higher stock prices in the US, in Europe, and in Asia over at least the next year or so.