Short-term Forecast for February 23, 2009

| February 23, 2009

Synopsis:
The S&P 500 index closed sharply lower today, breaking below support at the long-term low near 750 and reconfirming the long-term downtrend. The market crash that began last June is in the process of reasserting itself, and it has become very likely that the index is about to move down to new lows.

Technical Analysis:
Technical indicators are strongly bearish as price action trends down below the bottom of the Bollinger bands, money flow trends sharply lower in negative territory, MACD momentum trends down to a new low in negative territory, MACD histograms trend lower in negative territory and RSI trends down into oversold territory.

Outlook:
A successful hold of the 750 level would predict at least a short-term reaction up to new congestion resistance near 825, while a close well below current levels would reconfirm the long-term downtrend and forecast additional losses. The downtrend continuation scenario remains highly likely (80% probable).

Treasuries

Synopsis:
The 30-year bond closed near unchanged today, holding near resistance at the upper boundary of the downtrend from December.

Technical Analysis:
Technical indicators are effectively neutral as price action holds near the middle of the Bollinger bands, MACD momentum holds near recent highs in negative territory, MACD histograms hold near recent highs just above the 0 level and RSI drifts up toward the 50 level.

Outlook:
A close above recent short-term highs near 130.50 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. Both scenarios are equally likely at the moment.

Currencies

Synopsis:
The US dollar index closed moderately higher today, holding just below resistance at the long-term high near 88.

Technical Analysis:
Technical indicators are moderately bullish as price action holds in the upper Bollinger band, MACD momentum holds near recent highs in positive territory, MACD histograms drift back down toward the 0 level and RSI reacts off of recent lows in positive territory.

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 uptrend support at 85.60 would suggest the start of at least a short-term correction. The uptrend continuation scenario is more likely at the moment (70% 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 slightly lower today, consolidating recent gains after the sharp rally to a new all-time high.

Technical Analysis:
Technical indicators remain bullish as price action holds near the top of rising Bollinger bands, MACD momentum trends up to a new high in positive territory, MACD histograms hold near recent highs in positive territory and RSI retreats from recent highs in overbought territory.

Outlook:
A close well above current levels would reconfirm the long-term uptrend and forecast additional gains, while a close below short-term uptrend support near 24.90 would suggest the start of at least a short-term correction. The uptrend continuation scenario remains more highly at the moment (70% probable).

Energy

Synopsis:
Oil closed moderately lower today, backing away from new congestion resistance in the $40 area.

Technical Analysis:
Technical indicators are neutral to slightly bearish as price action moves down toward the bottom of the Bollinger bands, MACD momentum holds at recent highs just below the 0 level, MACD histograms hold at the 0 level and RSI drifts lower just below the 50 level.

Outlook:
A close well above resistance at the upper boundary of the downtrend from January near $43 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 confirmation scenario is now only slightly more likely (60% probable).

Category: Forecasts, Short-term Forecasts


Comments are closed.