Short-term Forecast for January 18, 2008

| January 18, 2008

Synopsis:
The S&P 500 index closed at yet another new low today, reconfirming the current downtrend.

Technical Analysis:
The S&P 500 index closed moderately lower today, reconfirming the powerful downtrend from the end of December. Technical indicators remain strongly bearish as money flow tests recent lows in negative territory, MACD momentum trends sharply lower at new lows in negative territory, MACD histograms break to new lows in negative territory and RSI trends down into oversold territory.

Outlook:
A close below current levels would reconfirm the current downtrend and forecast additional losses, while a move above downtrend channel resistance in the 1,390 area would suggest the start of a secondary reaction. The downtrend continuation scenario remains more likely at the moment (70% probable).

Treasuries

Synopsis:
The 30-year bond closed slightly lower today, consolidating recent gains.

Technical Analysis:
The long bond closed slightly lower today, holding slightly below recent highs near the 120 level. Technical indicators are moderately bullish as MACD momentum moves sideways near recent highs in positive territory, MACD histograms hold near recent lows in positive territory and RSI moves sideways in positive territory.

Outlook:
A close well above the recent high near 120 would reconfirm the current uptrend and forecast additional gains, while a close below uptrend channel support near 119.40 would suggest a test of nearby congestion support in the 118 area. The uptrend continuation scenario is slightly more likely (60% probable).

Currencies

Synopsis:
The US dollar index closed slightly higher today as it continues to test downtrend resistance.

Technical Analysis:
The US dollar index closed slightly higher today, testing resistance at the upper boundary of the intermediate-term downtrend from the middle of December. Technical indicators are neutral as MACD momentum reacts off of recent lows in negative territory, MACD histograms move up to the 0 level and RSI tests resistance at the 50 level.

Outlook:
A close well above downtrend channel resistance near 76.40 would suggest the start of a new intermediate-term uptrend and a test of recent highs near 77.75, while a move below recent lows at 75.60 would forecast a test of the long-term low near 75. Both scenarios are equally likely at the moment.

Precious Metals

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 true, intrinsic value of gold as an international currency itself.

Synopsis:
The GCI closed slightly higher today as it continues to consolidate recent gains.

Technical Analysis:
The GCI closed slightly higher today as it continues to consolidate recent gains of the uptrend from mid December. Technical indicators are now neutral as MACD momentum backs away from recent long-term highs in positive territory, MACD histograms test support at the 0 level and RSI drifts slightly higher just below overbought territory.

Outlook:
A close above the recent high near 21.90 would reconfirm the current uptrend and forecast substantial additional gains, while a close below congestion support near 21 would suggest a test of uptrend channel support in the 20.50 area. Both scenarios are equally likely at the moment.

Synopsis:
The Gold Miners index closed moderately higher today as it consolidates recent losses.

Technical Analysis:
The Gold Miners index closed moderately higher today via a hammer candlestick session that potentially signals a reversal after the recent losses. The correction that began on January 14 has now retraced 50% of the gains of the previous uptrend from mid December. Technical indicators are neutral as MACD momentum corrects off of recent highs in positive territory, MACD histograms move down into negative territory and RSI holds support at the 50 level.

Outlook:
A close well above 1,350 would reconfirm the current uptrend from December and forecast a test of recent long-term highs near 1,475, while a close well below current levels would predict a return to congestion support in the 1,250 area. The uptrend continuation scenario is slightly more likely at the moment (60% probable).

Category: Forecasts, Short-term Forecasts


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