Short-term Forecast for February 17, 2009

| February 17, 2009

Synopsis:
The S&P 500 index closed sharply lower today, breaking well below the lower boundary of the pennant formation that has been developing since November and virtually guaranteeing a test of the long-term low near 750.

Technical Analysis:
Technical indicators are moderately bearish as price action trends below the bottom of the Bollinger bands, money flow trends sharply lower in positive territory, MACD momentum turns lower just above recent lows in negative territory, MACD histograms move below the 0 level and RSI trends lower in negative territory.

Outlook:
A move back above new congestion resistance in the 825 area would predict a test of recent highs near 870, while a close below current levels would reconfirm the downtrend and forecast a test of the long-term low near 750. The downtrend continuation scenario is highly likely (80% probable).

Treasuries

Synopsis:
The 30-year bond closed sharply higher today, breaking above resistance at the upper boundary of the downtrend from December.

Technical Analysis:
Technical indicators are slightly bullish as price action moves up into the upper Bollinger band, MACD momentum moves higher in negative territory, MACD histograms move up into positive territory and RSI moves up to the 50 level.

Outlook:
A close above current levels would confirm the break above resistance at the upper boundary of the intermediate-term downtrend and forecast a test of resistance at 132.50, while a close below recent lows at 125 would reconfirm the downtrend and forecast a return to congestion support in the 122.50 area. The uptrend continuation scenario is slightly more likely at the moment (60% probable).

Currencies

Synopsis:
The US dollar index closed sharply higher today, beginning a test of the long-term highs near 88.

Technical Analysis:
Technical indicators are moderately bullish as price action moves well above the Bollinger bands, MACD momentum moves up to recent highs in positive territory, MACD histograms move higher just above the 0 level and RSI trends up toward the overbought level.

Outlook:
A close well above the long-term high near 88 would reconfirm the long-term uptrend and forecast additional gains, while a close below new congestion support near 86.25 would predict a return to support near 84.50. The uptrend continuation scenario is slightly more likely (60% probable).

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 moderately higher today, closing at another all-time high and reconfirming the long-term uptrend.

Technical Analysis:
Technical indicators are strongly bullish as price action trends above the Bollinger bands, MACD momentum trends up to a new high in positive territory, MACD histograms trend higher in positive territory and RSI trends up to the overbought level.

Outlook:
A close above current levels would reconfirm the long-term uptrend and forecast additional gains, while a close below new support at the 24 level would suggest a test of uptrend support near 22.30. The uptrend continuation scenario is highly likely (80% probable).

Energy

Synopsis:
Oil closed sharply lower today, moving back below congestion support at the $40 level and reconfirming the long-term downtrend.

Technical Analysis:
Technical indicators are moderately bearish as price action moves down to the bottom of the Bollinger bands, MACD momentum holds at recent highs just below the 0 level, MACD histograms move back down toward the 0 level and RSI moves lower in negative territory.

Outlook:
A close well above resistance at the upper boundary of the downtrend from January near $44 would confirm the start of a new uptrend and forecast another test of resistance at the top of the trading range near $50, while a close well below current levels would confirm the breakdown from the trading range and predict a retest of the long-term low at $35. The breakdown scenario is now more likely (70% probable).

Category: Forecasts, Short-term Forecasts


Comments are closed.