Short-term Forecast for February 27, 2009

| February 27, 2009

Synopsis:
The S&P 500 index closed sharply lower today on massive volume, breaking well below support at the long-term low near 750 and reconfirming the long-term downtrend. The market crash that began last September is once again in control of price action as stocks are driven by panic selling to historically oversold levels.

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

Outlook:
A reversal and move back above 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 slightly lower today, moving down to another new low and reconfirming the downtrend from December.

Technical Analysis:
Technical indicators are moderately bearish as price action trends lower at the bottom of the Bollinger bands, MACD momentum moves below recent highs in negative territory, MACD histograms move back down into negative territory and RSI moves below recent lows in negative territory.

Outlook:
A close above downtrend resistance near 126.50 would predict a test of nearby congestion resistance in the 128 area, while a close below current levels would reconfirm the downtrend and forecast a return to congestion support in the 122.50 area. The downtrend continuation scenario is more likely (70% probable).

Currencies

Synopsis:
The US dollar index closed slightly higher today, continuing a test of resistance at the long-term high near 88.

Technical Analysis:
Technical indicators are slightly bullish as price action holds in the upper Bollinger band, MACD momentum holds near recent highs in positive territory, MACD histograms hold just above the 0 level and RSI drifts up toward recent highs 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 nearby congestion support at 86.70 would predict a test of uptrend support near 86. The uptrend continuation scenario is slightly more likely at the moment (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 near unchanged today, testing uptrend support and consolidating recent gains after the sharp rally to a new all-time high.

Technical Analysis:
Technical indicators are slightly bearish as price action holds near the middle of the Bollinger bands, MACD momentum trends lower in positive territory, MACD histograms trend down into negative territory and RSI holds near recent lows in positive territory.

Outlook:
A close above the recent all-time high at 26.70 would reconfirm the long-term uptrend and forecast additional gains, while a close below uptrend support at current levels would confirm the start of at least a short-term correction. The correction scenario is slightly more likely (60% probable).

Energy

Synopsis:
Oil closed slightly lower today, consolidating recent gains of the short-term uptrend from last week.

Technical Analysis:
Technical indicators are moderately bullish as price action holds near the top of the Bollinger bands, MACD momentum trends up to the 0 level, MACD histograms trend up to a new high in positive territory and RSI holds near recent highs in positive territory.

Outlook:
A close above current levels would reconfirm the short-term uptrend and forecast another test of resistance at the top of the trading range near $50, while a close below support at the lower boundary of the trading range near $40 would predict another test of the recent lows near $37. The uptrend continuation scenario is more likely at the moment (70% probable).

Category: Forecasts, Short-term Forecasts


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