Short-term Forecast for September 7, 2010

| September 7, 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 moderately lower today, retreating from recent highs of the short-term reaction from last week. Volume remains light and a failure to break above congestion resistance in the 1,110 area would result in the development of a symmetrical triangle formation. The symmetrical triangle is a consolidation pattern that usually results in the continuation of the previous trend, which in this case would be the downtrend from late April. A breakout well above the early August high near 1,128 on heavy volume would be required to restrengthen the rally from early July, but that scenario remains unlikely at the moment. Technical indicators are now slightly bullish overall, supporting a continuation of the advance.

We are 4 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 1,110 area would reconfirm the short-term reaction and predict a move up to the previous high near 1,128. A close below new congestion support at the 1,080 level would predict a move back down to congestion support in the 1,050 area. Both possibilities are equally likely at the moment.

The European Top 100 Index

The index closed near unchanged today, holding above congestion resistance in the 222.50 area at recent highs of the uptrend from late May. Technical indicators remain 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 at 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 have strengthened and are now slightly bullish overall, supporting a continuation of the advance.

A close above congestion resistance at current levels would reconfirm the uptrend from early July and forecast additional gains. A close below uptrend support at 2,655 would predict a move down to the recent low near 2,570. 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 lower today, retreating from gap resistance in the 2.69% area. A failure to move up to a new short-term high above 2.71% would signal the development of a consolidation formation that favors another long-term breakdown, so yield behavior should be monitored closely over the next several sessions. Technical indicators have weakened and are now effectively neutral overall, indicating that near-term direction is in question.

We monitor cycle highs in yield as they correspond to cycle lows in price. We are 29 trading days into the cycle following the short-term cycle high (STCH) on July 27. The next STCH is imminent and may have occurred on Friday, although we would need to see additional weakness over the next several sessions in order to confirm that development.

A close above the recent short-term high near 2.71% 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. Both possibilities are equally likely at the moment.

The US 30-year Treasury Bond Yield

Yields closed sharply lower today, retreating from recent highs of the short-term uptrend from late August. A return to recent lows would signal the development of a consolidation formation that favors another long-term breakdown, so yield behavior should be monitored closely over the next several sessions. Technical indicators have weakened and are now effectively neutral overall, indicating that near-term direction is in question.

A close above congestion resistance near 3.79% 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. Both possibilities are equally likely at the moment.

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 sharply higher today, reacting off of congestion support in the 82 area and moving up toward recent highs of the short-term uptrend from early August. Technical indicators are now effectively neutral overall, indicating that near-term direction is in question.

We are 21 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. Today’s strong move higher suggests that the low likely occurred on Friday, although we would need to see additional strength over the next several sessions in order to confirm that development.

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

The European Euro Index

The index closed sharply lower today, moving back down to support at the lower boundary of the uptrend from early June. Technical indicators are now slightly bearish, supporting a break below uptrend support.

A close above congestion resistance near 129 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 downtrend continuation scenario is slightly more likely (~60% probable).

The Japanese Yen Index

The index closed moderately higher today, moving up to a marginal new high for the uptrend from early May. Technical indicators are now slightly bullish overall, supporting a continuation of the advance. However, the continued hesitation over the past two weeks is a sign of fatigue, so the development of a correction has become more likely.

A close above current levels would reconfirm the uptrend from May and forecast additional gains. A close below uptrend support near 118.80 would predict a move down to congestion support in the 117 area. The uptrend continuation scenario is slightly more likely (~60% probable).

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 moderately higher today, moving up to all-time highs of the long-term uptrend. 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 are slightly bullish overall, supporting a continuation of the advance.

We are 10 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 13 to September 17 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. 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 moderately higher today, moving up to a new high for the short-term uptrend from late July and beginning a test of strong congestion resistance in the 32 area. 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 are slightly bullish overall, supporting a continuation of the advance.

A close above congestion resistance at current levels 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 30.15. The uptrend continuation scenario is slightly more likely (~60% probable).

The Gold Miners Index

The index closed moderately higher today, moving up to a new high for the short-term uptrend from late July and continuing a test of strong congestion resistance in the 1,500 area. 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. The uptrend continuation scenario is slightly more likely (~60% probable).

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 Continuous Commodity Index

The index closed slightly higher today, moving up to a new high for the uptrend from early June above strong congestion resistance in the 505 area. Technical indicators are moderately bullish overall, supporting a continuation of the advance.

A close above current levels would reconfirm the uptrend from early June and forecast additional gains. A close below uptrend support near 493 would suggestion the start of a correction and predict a move down to congestion support in the 482 area. The uptrend continuation scenario is slightly more likely (~60% probable).

Oil

Oil closed moderately lower today, moving down toward recent lows of the short-term downtrend from early August. Technical indicators are neutral to slightly bearish overall, indicating that near-term direction is in question with a slight downside bias.

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


Comments are closed.