Intermediate-term Forecast for September 4, 2010

| September 4, 2010

Stock Weekly Chart Analyses

The following weekly chart analyses provide intermediate-term forecasts for the stock markets that we monitor. For short-term outlooks see the latest short-term forecast and for long-term outlooks see the latest long-term forecast.

The S&P 500 Index

The index closed sharply higher this week, reacting off of critical congestion support of the cyclical uptrend from early 2009 in the 1,060 area. The topping formation that has been developing since late 2009 is at an important juncture and the next few weeks should provide a great deal of clarity with respect to long-term direction. A second weekly close well below congestion support near 1,060 would be a major bearish signal, and a close below the June low at 1,022 would reconfirm the new cyclical downtrend from late April and forecast substantial losses, beginning with a quick move down to the 950 level. The only development that would reinforce the bullish scenario and call into question the validity of the topping formation would be a move above the January high of 1,150, but that remains a low probability scenario at the moment. Technical indicators are now effectively neutral overall, indicating that near-term direction is in question.

We are 9 weeks into the cycle that followed the intermediate-term cycle low (ITCL) on July 2. The window during which the next ITCL is likely to occur is from October 15 to December 17, with our best estimate being somewhere in the November 5 to November 24 range.

A weekly close above the previous short-term high near 1,123 would reconfirm the rally from early July and predict a move up to the January high at 1,150. A close below congestion support in the 1,060 area would forecast a move down to the recent low near 1,022. A move below congestion support at 1,060 is slightly more likely (~60% probable).

The European Top 100 Index

The index closed sharply higher this week, moving up to recent highs of the short-term uptrend from early July. The topping formation that has been developing since late 2009 continues to favor an eventual breakdown, and a move well above the April high would be required to restrengthen the cyclical uptrend from early 2009. A weekly close below the 205 support level would be a major bearish signal that would confirm the start of a new cyclical downtrend. Technical indicators are neutral to slightly bullish overall, indicating that near-term direction is in question with a slight upside bias.

A weekly close above current levels would forecast a move up to congestion resistance in the 230 area. A close below the recent low at 215 would predict a move down to long-term congestion support near 205. Both possibilities are equally likely at the moment.

The Shanghai Composite Index

The index closed slightly higher this week, holding near recent highs of the short-term uptrend from the beginning of July. The short-term reaction from early July has moved up to the middle of the Bollinger bands and the failure to break above this downtrend resistance level would signal a likely return to recent lows. Technical indicators are effectively neutral overall, indicating that near-term direction is in question.

A weekly close well above current levels would reconfirm the short-term uptrend from early July and predict a move up to congestion resistance at the 2,800 level. A close below congestion support near 2,500 would forecast a return to recent lows in the 2,350 area. Both possibilities are equally likely at the moment.

Treasury Weekly Chart Analyses

The following weekly chart analyses provide intermediate-term forecasts for the US treasury markets that we monitor. For short-term outlooks see the latest short-term forecast and for long-term outlooks see the latest long-term forecast.

The US 10-year Treasury Note Yield

Yields closed moderately higher this week, reacting further off of recent lows of the downtrend from April and confirming the likely start of a short-term uptrend or period of consolidation. Technical indicators are neutral to slightly bearish overall, indicating that near-term direction is in question with a slight downside bias.

We monitor cycle highs in yield as they correspond to cycle lows in price. We are 21 weeks into the cycle that followed the intermediate-term cycle high (ITCH) on April 5. The window during which the next ITCH is likely to occur is now through October 15, with our best estimate being somewhere in the September 3 to September 24 range.

A close above downtrend resistance at current levels would reconfirm the oversold reaction from late August and predict a move up to congestion resistance in the 3.00% area. A close below the recent low at 2.61% would reconfirm the downtrend from April and forecast additional losses. The reaction confirmation scenario is slightly more likely (~60% probable).

The US 30-year Treasury Bond Yield

Yields closed moderately higher this week, reacting further off of recent lows of the downtrend from April and confirming the likely start of a short-term uptrend or period of consolidation. Technical indicators are now slightly bearish overall, supporting a continuation of the decline.

A weekly close above congestion resistance in the 3.80% area would reconfirm the oversold reaction from late August and predict a move up to congestion resistance near 4.00%. A close below the recent low at 3.66% would reconfirm the downtrend from April and predict additional losses. The reaction confirmation scenario is slightly more likely (~60% probable).

Currency Weekly Chart Analyses

The following weekly chart analyses provide intermediate-term forecasts for the currency markets that we monitor. For short-term outlooks see the latest short-term forecast and for long-term outlooks see the latest long-term forecast.

The US Dollar Index

The index closed moderately lower this week, retreating from recent highs of the short-term uptrend from the beginning of August. Technical indicators are now effectively neutral overall, indicating that near-term direction is in question.

We are 4 weeks into the cycle that followed the intermediate-term cycle low (ITCL) on August 6. The window during which the next ITCL is likely to occur is from November 19 to January 14, with our best estimate being somewhere in the November 24 to December 23 range.

A weekly close above the recent high near 83 would reconfirm the short-term uptrend from the beginning of August and predict a move up to congestion resistance near 84. A close below congestion support in the 80.50 area would reconfirm the downtrend from early June and forecast additional losses. The uptrend continuation scenario is slightly more likely (~60% probable).

The European Euro Index

The index closed moderately higher this week, reacting off of recent lows of the short-term downtrend from the beginning of August. Technical indicators are now effectively neutral overall, indicating the near-term direction is in question.

A weekly close above the recent high near 133 would reconfirm the uptrend from June and predict a move up to strong congestion resistance at the 135 level. A close below the recent low at 127 would reconfirm the short-term downtrend from early August and forecast a move down to congestion support in the 126 area. The downtrend continuation scenario is slightly more likely (~60% probable).

The Japanese Yen Index

The index closed moderately higher this week, moving up to a new high for the long-term uptrend. The rally from early May remains relatively healthy and moderately bullish indicators support a continuation of the advance.

A weekly close above current levels would reconfirm the long-term uptrend and forecast additional gains. A close below nearby congestion support in the 115 area would predict a move down to congestion support at 112.50. The uptrend continuation scenario is more likely (~70% probable).

Precious Metal Weekly Chart Analyses

The following weekly chart analyses provide intermediate-term forecasts for the precious metal indices that we monitor. For short-term outlooks see the latest short-term forecast and for long-term outlooks see the latest long-term forecast.

Gold

Gold closed moderately higher again this week, moving up to recent all-time highs of the long-term uptrend. A bullish consolidation formation is now developing from May, suggesting that another long-term breakout has become more likely during the next 2 to 4 weeks. Technical indicators remain slightly bullish overall, supporting a continuation of the advance.

We are 5 weeks into the cycle that followed the intermediate-term cycle low (ITCL) on July 30. The window during which the next ITCL is likely to occur is from November 24 to January 7, with our best estimate being somewhere in the December 3 to December 23 range.

A weekly close well above the recent all-time high at $1,255 would reconfirm the long-term uptrend and forecast additional gains. A close below uptrend support at $1,200 would predict a move down to congestion support near $1,180. The long-term breakout scenario is slightly more likely (~60% probable).

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 near unchanged this week, holding above support at the lower boundary of the long-term uptrend. A bullish consolidation formation is now developing from May, suggesting that another long-term breakout has become more likely during the next 2 to 4 weeks. Technical indicators remain slightly bullish overall, supporting a continuation of the advance.

A weekly close above current levels would predict a move up to the recent all-time high in the 32.60 area. A close well below uptrend support near 31.30 would forecast a move down to the recent short-term low at 29.70. A move up to recent all-time highs is slightly more likely (~60% probable).

The Gold Miners Index

The index closed near unchanged this week, holding near recent highs of the long-term uptrend. Technical indicators are moderately bullish overall, supporting a continuation of the advance.

A weekly close well above congestion resistance in the 1,500 area would reconfirm the long-term uptrend and forecast additional gains. A close below congestion support near 1,300 would confirm the start of a new short-term downtrend and predict additional losses. A breakout to new long-term highs is slightly more likely (~60% probable).

Commodity Weekly Chart Analyses

The following weekly chart analyses provide intermediate-term forecasts for the commodity indices that we monitor. For short-term outlooks see the latest short-term forecast and for long-term outlooks see the latest long-term forecast.

The CRB Index

The index closed moderately higher this week, moving up to the middle of the trading range between 260 and 280. Price action has been confined to this trading range for the better part of 11 months, and a close well outside of this area will likely signal the direction of the next meaningful move. Technical indicators remain effectively neutral overall, indicating that near-term direction is in question.

A close well above the top of the trading range in the 280 area would reconfirm the uptrend from early June and predict a move up to the previous long-term high near 293. A close below the bottom of the trading range at the 260 level would reconfirm the downtrend from the beginning of the year and forecast a move down to recent lows near 248. Both possibilities are equally likely at the moment.

Oil

Oil closed slightly lower this week, holding near the middle of the trading range between $70 and $80. Price action has been confined to this trading range for the better part of 11 months, and a close well outside of this area will likely signal the direction of the next meaningful move. Technical indicators remain effectively neutral overall, indicating that near-term direction is in question.

A weekly close well above the top of the trading range in the $80 area would predict a move up to congestion resistance near $85. A close below trading range support at the $70 level would reconfirm the downtrend from May and forecast substantial losses. A break below trading range support is slightly more likely (~60% probable).

Category: Forecasts, Intermediate-term Forecasts


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