r=resistance, s=support
VL=Very Likely,VU=Very Unlikely

DOW r 11820 VL Before Fed meeting
SPX r 1342 VL Before Fed meeting
GOLD s 572 hit already, if not held expect 550
$US r 94.70 VU and far, but foolingeverybody
OIL s 60.50 VL very soon.
TNOTE s 4.02 VU and far.

Markets are challenging the highs. Should we celebrate?

If you look at things in $Dollars everything looks good.

Home prices are rising, at least until recently, stock prices are rising salariesare rising, inflation is hoped/hyped by FED to fall - There is first time foranything.

But as a theoretical physicist I have learned to find the constants.

Remember Speed of Light C (supposed to be constant, until proven otherwise), or Plank Constant H (governs the size of quantum uncertainty). Well if you do... then we can enjoy what follows.

S&P in US Dollars has corrected about 78% of March 2000 high to March 2003 decline.

But only 40% in USDI (US Dollar Index). We call the USDI adjusted S&P - Deflated S&P.

IT IS THE DOLLAR STUPID!

So, it is the $Dollar that is going down, not markets going up. It is the $Dollargoing down not home prices going up.

Now that we mastered this simple concept, let us see how does this "Grand Bull Market" or "Suckers Bear Rally" (depending on your measures), compares to Nikkey 1989 decline.

Nikkey has also corrected about 38% of the initial 1992 lows into 1996 high.

I do not believe in exact analogies, but if history rhymes, at least, then we project top around 3/2007 in US markets that will last for another 6-7 years.

If Deflated S&P tops at 40% retracement then $Dollar based S&P will move just about the way the Dollar moves until then.

If we assume that Deflated S&P tops at 50% retracement then $Dollar wouldhave to move down and/or S&P has to move up.

Therein lies the clue to the markets.

Let us watch the $Dollar and have the calculator ready.

We provide unorthodox research. We do not tell the stories, just the supportresistance levels scientifically projected and rigorously traded.

For an example see our call on XOI top, just a day before it actually happened.When most believed $100 Crude was inevitable our system showed a formidable resistancewall. Couple days ago we suggested to take the profits on that short XOI/Crudecall.

To read about these and other research we provide go to borisc.blogspot.com.