Sample Market Forecast from August 11, 2011

S&P 500 Index Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the S&P 500 index. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

The S&P 500 index closed sharply higher today, reacting off of recent lows of the violent decline from late July. Technical indicators are moderately bearish overall, supporting a continuation of the downtrend. However, the decline has been moving lower at an unsustainable rate and the index has become extremely oversold on a short-term basis, so the downtrend will almost certainly be followed by a violent oversold reaction. The lack of downward progress during the last 3 sessions suggests that a short-term low is forming.

Cycle Analysis

We are 3 trading days into the cycle following the short-term cycle low (STCL) on August 9. The sharp advance today caused both price oscillators to experience bullish crossovers, further supporting the current cycle count. The window during which the next STCL is likely to occur is from September 19 to October 7, with our best estimate being in the September 29 to October 5 range.

  • Last STCL: August 9, 2011
  • Cycle Duration: 3 trading days
  • Cycle Translation: Left (bearish)
  • Next STCL Window: September 19 to October 7; best estimate in the September 29 to October 5 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Short-term Outlook

  • Bullish Scenario: A close above congestion resistance at current levels would confirm the start of an oversold reaction and predict a quick move up to congestion resistance in the 1,200 area.
  • Bearish Scenario: A reversal and close well below congestion support in the 1,120 area would reconfirm the downtrend from May and forecast additional losses.

The bullish scenario is more likely (~70% probable).

10-year Treasury Note Yield Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the 10-year Treasury note yield. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

Yields closed sharply higher today, reacting off of recent lows of the downtrend from February. Technical indicators are moderately bearish overall, supporting a continuation of the decline. However, the power downtrend from late July has been moving lower at an unsustainable rate and the sharp rebound today signals the likely start of an oversold reaction.

Cycle Analysis

We are 13 trading days into the cycle following the short-term cycle high (STCH) on July 25. Both price oscillators experienced bullish crossovers and a bullish engulf pattern formed on the daily chart today, generating a cycle low signal that indicates the alpha low (AL) likely formed yesterday. Only a highly unlikely move below the stop level at 2.13% tomorrow would invalidate the signal and suggest that the low has yet to develop. The window during which the next STCH is likely to occur is from August 15 to September 6, with our best estimate being in the August 22 to August 26 range.

  • Last STCH: July 25, 2011
  • Cycle Duration: 13 trading days
  • Cycle Translation: Left (bearish)
  • Next STCH Window: August 15 to September 6; best estimate in the August 22 to August 26 range.
  • Setup Status: Cycle low setup occurred today.
  • Trigger Status: Cycle low trigger occurred today.
  • Signal Status: Cycle low signal was generated today.
  • Stop Level: 2.13%

Short-term Outlook

  • Bullish Scenario: A close above current levels would confirm the development of an oversold reaction.
  • Bearish Scenario: A quick reversal and close below the recent low near 2.13% would reconfirm the downtrend from February and forecast additional losses.

The bullish scenario is more likely (~70% probable).

US Dollar Index Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the US dollar index. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

The index closed near unchanged again today, continuing to hold near the middle of the consolidation formation that has been developing since early May. A close well outside of this trading range between 73.50 and 76.20 will predict the direction of the next meaningful move with a high degree of statistical confidence. Technical indicators are effectively neutral overall, suggesting that direction is in question.

Cycle Analysis

We are 12 trading days into the cycle following the short-term cycle low (STCL) on July 26. Cycle translation is still assumed to be bearish, but a move up toward the high of the previous cycle during the beta phase rally would indicate that translation is in question. The window during which the next STCL is likely to occur is from August 19 to September 2, with our best estimate being in the August 24 to August 30 range.

  • Last STCL: July 26, 2011
  • Cycle Duration: 12 trading days
  • Cycle Translation: Left (bearish)
  • Next STCL Window: August 19 to September 2; best estimate in the August 24 to August 30 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Short-term Outlook

  • Bullish Scenario: A close above the recent short-term high near 75.10 would predict a move up toward trading range resistance in the 76.20 area.
  • Bearish Scenario: A close below trading range support at the 73.50 level would signal a likely move down to new long-term lows and forecast additional losses.

Both scenarios are equally likely.

Gold Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the gold market. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

Gold closed sharply lower today, retreating from recent all-time highs of the secular bull market. Technical indicators are moderately bullish overall, supporting a continuation of the advance. However, the power uptrend from early July has been rising at an unsustainable rate and the sharp decline today may signal the start of an overbought correction.

Cycle Analysis

We are 5 trading days into the cycle following the short-term cycle low (STCL) on August 4. Both price oscillators experienced bearish crossovers and a bearish engulf pattern formed on the daily chart today, generating a cycle high signal that indicates the alpha high (AH) likely formed today. Only a move above the stop level at $1,800 tomorrow would invalidate the signal and suggest that the alpha phase rally is still in progress. Cycle translation remains extremely bullish and a brief alpha phase decline followed by a move above the AH would reconfirm right translation and forecast additional gains. Alternatively, a quick return to the last STCL would suggest that cycle translation is in question. The window during which the next STCL is likely to occur is from August 22 to September 1, with our best estimate being in the August 23 to August 29 range.

  • Last STCL: August 4, 2011
  • Cycle Duration: 5 trading days
  • Cycle Translation: Right (bullish)
  • Next STCL Window: August 22 to September 1; best estimate in the August 23 to August 29 range.
  • Setup Status: Cycle high setup occurred today.
  • Trigger Status: Cycle high trigger occurred today.
  • Signal Status: Cycle high signal was generated today.
  • Stop Level: $1,800

Short-term Outlook

  • Bullish Scenario: A quick rebound and close well above the recent high near $1,800 would reconfirm the long-term uptrend and forecast additional gains.
  • Bearish Scenario: A close below current levels would predict a move down toward power uptrend support at $1,680.

The bearish scenario is more likely (~70% probable).

Gold Currency Index Daily Chart Analysis

The Gold Currency Index (GCI) is a composite of gold prices in the currencies of 10 of the largest economies in the world as defined by GDP. It is therefore currency independent, reflecting the intrinsic value of gold as an international currency itself.

Technical Analysis

The GCI closed sharply lower today, retreating from recent all-time highs of the secular bull market. Technical indicators are moderately bullish overall, supporting a continuation of the advance. However, the power uptrend from early July has been rising at an unsustainable rate and the sharp decline today may signal the start of an overbought correction.

Short-term Outlook

  • Bullish Scenario: A quick rebound and close above the recent high near 43 would reconfirm the long-term uptrend and forecast additional gains.
  • Bearish Scenario: A close below current levels would predict a move down toward power uptrend support near 39.90.

The bearish scenario is more likely (~70% probable).

Oil Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the oil market. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

Oil closed sharply higher today, reacting off of recent lows of the downtrend from May. Technical indicators are moderately bearish overall, supporting a continuation of the downtrend. However, the decline from late July had been moving lower at an unsustainable rate and the strong move higher today suggests the development of at least a short-term oversold reaction.

Cycle Analysis

We are 3 trading days into the cycle following the short-term cycle low (STCL) on August 9. A brief alpha phase rally followed by a quick move below the STCL would reconfirm left translation and forecast additional losses. The window during which the next STCL is likely to occur is from August 26 to September 12, with our best estimate being in the August 31 to September 7 range.

  • Last STCL: August 9, 2011
  • Cycle Duration: 3 trading days
  • Cycle Translation: Left (bearish)
  • Next STCL Window: August 26 to September 12; best estimate in the August 31 to September 7 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Short-term Outlook

  • Bullish Scenario: A close above current levels would confirm the break above congestion resistance near $85 and predict a move up toward congestion resistance in the $92.50 area.
  • Bearish Scenario: A quick reversal and close well below $81 would reconfirm the downtrend from May and forecast additional losses.

The bullish scenario is more likely (~70% probable).