Short-term Forecast for September 3, 2010

| September 3, 2010

Stock Daily Chart Analyses

The following daily chart analyses provide short-term forecasts for the stock markets that we monitor. For intermediate-term outlooks see the latest weekly review, and for long-term outlooks see the big picture update.

The S&P 500 Index

The index closed sharply higher today, reconfirming the short-term reaction from earlier this week and beginning a test of congestion resistance in the 1,108 area. Technical indicators have strengthened further and are now moderately bullish overall, supporting a continuation of the advance.

We are 3 trading days into the cycle following the short-term cycle low (STCL) on August 31. The window during which the next STCL is likely to occur is from October 12 to November 1, with our best estimate being somewhere in the October 22 to October 28 range.

A close above congestion resistance in the 1,108 area would reconfirm the short-term reaction and predict a move up to the previous high near 1,128. A quick reversal and close below new congestion support at the 1,080 level would predict a move back down to the recent low at 1,047. The uptrend continuation scenario is slightly more likely (~60% probable).

The European Top 100 Index

The index closed moderately higher today, breaking above congestion resistance in the 222.50 area returning to recent highs of the uptrend from late May. Technical indicators have strengthened further and are now moderately bullish overall, supporting a continuation of the advance.

A close above the recent high near 225 would predict a test of congestion resistance at the 227.50 level. A close below new congestion support in the 218 area would forecast a move down to uptrend support near 214.50. The uptrend continuation scenario is slightly more likely (~60% probable).

The Shanghai Composite Index

The index closed near unchanged today, holding below recent highs of the uptrend from early July. Price action has been confined to a narrow trading range between 2,600 and 2,700 for the past 6 weeks and a close outside of this area will likely signal the direction of the next meaningful move. Technical indicators remain neutral to slightly bullish overall, indicating that near-term direction is in question with a slight upside bias.

A close above congestion resistance near 2,700 would reconfirm the uptrend from early July and forecast additional gains. A close below the recent low near 2,570 would confirm the start of a new short-term downtrend and predict a move down to the bottom of the trading range at the 2,500 level. The uptrend continuation scenario is slightly more likely (~60% probable).

Treasury Daily Chart Analyses

The following daily chart analyses provide short-term forecasts for the US treasury markets that we monitor. For intermediate-term outlooks see the latest weekly review, and for long-term outlooks see the big picture update.

The US 10-year Treasury Note Yield

Yields closed sharply higher today, reconfirming the short-term uptrend from late August and beginning a test of gap resistance in the 2.69% area. Technical indicators have strengthened further and are now moderately bullish overall, supporting a continuation of the advance.

We monitor cycle highs in yield as they correspond to cycle lows in price. We are 28 trading days into the cycle following the short-term cycle high (STCH) on July 27. The next STCH is imminent and will likely occur by September 9.

A close well above gap resistance at current levels would reconfirm the short-term uptrend from late August and predict additional gains. A close below the recent low at 2.46% would reconfirm the downtrend from April and forecast additional losses. The uptrend continuation scenario is slightly more likely (~60% probable).

The US 30-year Treasury Bond Yield

Yields closed moderately higher today, reconfirming the short-term uptrend from late August and beginning a test of congestion resistance in the 3.79% area. Technical indicators have strengthened further and are now moderately bullish overall, supporting a continuation of the advance.

A close above congestion resistance at current levels would reconfirm the short-term uptrend from late August and predict a move up to strong congestion resistance in the 3.90% area. A close below the recent low at 3.51% would reconfirm the downtrend from April and forecast additional losses. The uptrend continuation scenario is slightly more likely (~60% probable).

Currency Daily Chart Analyses

The following daily chart analyses provide short-term forecasts for the currency markets that we monitor. For intermediate-term outlooks see the latest weekly review, and for long-term outlooks see the big picture update.

The US Dollar Index

The index closed moderately lower today, beginning a test of congestion support in the 82 area. Technical indicators have weakened slightly and are now neutral to slightly bearish overall, indicating that near-term direction is in question with a slight downside bias.

We are 20 trading days into the cycle following the short-term cycle low (STCL) on August 6. The window during which the next STCL is likely to occur is now through September 16, with our best estimate being somewhere in the September 7 to September 13 range.

A close above congestion resistance near 83.50 would reconfirm the short-term uptrend from early August and forecast additional gains. A close well below congestion support at current levels would predict a move down to congestion support in the 81 area. A move below congestion support at 82 is slightly more likely (~60% probable).

The European Euro Index

The index closed moderately higher today, moving up to nearby congestion resistance in the 129 area. Technical indicators are now slightly bullish, supporting a continuation of the reaction.

A close above congestion resistance at current levels would reconfirm the short-term reaction from late August and predict additional gains. A close below the recent low at 126.20 would reconfirm the downtrend from early August and forecast additional losses. The uptrend continuation scenario is slightly more likely (~60% probable).

The Japanese Yen Index

The index closed near unchanged today, holding below recent highs of the uptrend from early May. Technical indicators are now neutral to slightly bullish overall, indicating that near-term direction is in question with a slight upside bias. The failure to move up to new highs following the breakout early last week is a sign of fatigue, so the development of a correction has become more likely.

A close well above the recent high at 119.15 would reconfirm the uptrend from May and forecast additional gains. A close below congestion support near 117 would predict a move down to congestion support in the 115 area. Both possibilities are equally likely at the moment.

Precious Metal Daily Chart Analyses

The following daily chart analyses provide short-term forecasts for the precious metal markets that we monitor. For intermediate-term outlooks see the latest weekly review, and for long-term outlooks see the big picture update.

Gold

Gold closed slightly lower today, retreating from recent highs of the uptrend from late July. A bullish consolidation formation from early May is in progress, increasing the likelihood of another long-term breakout by the end of September. Technical indicators have been gradually weakening over the past two weeks but remain slightly bullish overall, supporting a continuation of the advance.

We are 9 trading days into the cycle following the short-term cycle low (STCL) on August 23. The window during which the next STCL is likely to occur is from September 9 to September 21, with our best estimate being somewhere in the September 10 to September 16 range.

A close well above the all-time high at $1,256 would reconfirm the long-term uptrend and forecast additional gains. A close below new congestion support near $1,230 would forecast a move down to congestion support in the $1,210 area. Both possibilities are equally likely at the moment.

The Gold Currency Index

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.

The GCI closed slightly lower today, retreating from recent highs of the short-term uptrend from late July. A bullish consolidation formation from early May is now in progress, increasing the likelihood of another long-term breakout by the end of September. Technical indicators have been gradually weakening over the past two weeks and are now neutral to slightly bullish, indicating that near-term direction is in question with a slight upside bias.

A close above congestion resistance in the 32 area would reconfirm the uptrend from late July and predict a move up to the all-time high near 32.75. A close below congestion support in the 31 area would predict a move down to long-term uptrend support near 30.10. Both possibilities are equally likely at the moment.

The Gold Miners Index

The index closed near unchanged today, holding at recent highs of the short-term uptrend from late July. Price action has been confined to a trading range between 1,300 and 1,500 since May and a close outside of this range will likely signal the direction of the next meaningful move. Technical indicators remain slightly bullish overall, supporting a continuation of the advance.

A close well above the top of the trading range at 1,500 would reconfirm the uptrend from July and forecast additional gains. A close below new congestion support near 1,440 would predict a move down to congestion support in the 1,400 area. Both possibilities are equally likely at the moment.

Commodity Daily Chart Analyses

The following daily chart analyses provide short-term forecasts for the commodity markets that we monitor. For intermediate-term outlooks see the latest weekly review, and for long-term outlooks see the big picture update.

The CRB Index

The index closed moderately higher today, reconfirming the short-term reaction from last week and moving into the middle of the trading range between 267 and 280. Technical indicators remain slightly bullish overall, supporting a continuation of the advance.

A close above congestion resistance in the 273 area would reconfirm the short-term uptrend from last week and predict additional gains. A close below uptrend support near 264 would reconfirm the downtrend from early August and forecast additional losses. The uptrend continuation scenario is slightly more likely (~60% probable).

Oil

Oil closed moderately lower today, holding above recent lows of the short-term downtrend from early August. Technical indicators are now effectively neutral overall, indicating that near-term direction is in question.

A close above congestion resistance in the $76 area would predict a move up to congestion resistance near $78. A close below the recent low near $71.50 would reconfirm the downtrend from early August and forecast a test of congestion support at the $70 level. Both possibilities are equally likely at the moment.

Category: Forecasts, Short-term Forecasts


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