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Have you heard of "3 peaks and Domed house" which is NOT my favorite formation?

It seems like every trader is talking about it and driving markets higher to target SPX 1300 and DOW 13000.

I have forecasted the higher target when I noted 4-8 cycle to you as well, but the price hype to DOW 13000 is too fast and quick.

Market is at another major juncture, i.e. NASDAQ/QQQQ double top formation. SPX/DOW closed at upper Channel resistance TL.

However, all market forecasters are getting Higher and Higher.

All bears are Domed if the Fed decides to bubble up the markets as quickly as SPX 1300 without any meaning retracement.

Have a nice weekend




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http://www.trend-signals.com/index.htm


With the tamed CPI number, market traded to upper resistances during premarket, QQQQ 44.85 and NASDAQ 2470 (previous Nov highs), SPX 1430 and DOW 12486 (upper Price Channel TL resistance). As noted earlier, market traded down after the open, finishing the day in positive territory.
OIL closed at 63.43 +0.92, USD 83.75 +0.40, 10y T 45.97 +0.02, GOLD 618.80 -12.10.

We have strong bullish sentiment, negative divergences on breadth charts, and overbought markets; hence, it is wise to be cautious since market could become irrational, i.e. Irrational Rally. It would be disastrous to see Irrational Rally, but we need to be aware of the possibility and be cautious.

If market is rational, we would see a healthy retracement from the recent Jun-Jul rally. When market becomes irrational, it will continue to trade to make new highs into normal favored trading months into Spring without any meaningful retracement.



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DOW 13000: During Jun-Jul 2006 bottoming process, I commented on "70yr" LT price channel support. Now we have surpassed my conservative target of DOW 12000 and trading near at DOW 12500 at which it is the half of 1000 point break out. As commented during that time when I called the mid year bottom, I noted that much cash was sitting on the side line. I also noted when market rallies, shorts will be squeezed; hence, I warned to shorts to cover shorts. As shorts were squeezed, market rallied as we have seen markets were trending higher without any meaningful retracement. Now, we are in the process of sideline cash coming into markets as we have seen in Cash flow Index on SPX.

I am not in favor of "Three Peaks and Domed House" formation which many speculators are commenting on. The formation is similar as the 8yr global cycle formation that I commented on a few month ago. The rally that we have seen since Jun-Jul bottom is too fast which is increasingly becoming dangerous market. The hyped up market speculators will also be quick to crash bubbled up markets; hence, extreme caution is necessary.