Intermediate-term Forecast for September 18, 2010

| September 18, 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 slightly higher again this week, moving up to previous highs of the short-term uptrend from July. The topping formation that has been developing since late 2009 remains 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. A close well above congestion resistance in the 1,150 area would signal that a long-term breakdown is no longer likely during the next two months. Technical indicators remain effectively neutral overall, indicating that near-term direction is in question.

We are 11 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 current levels 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. Both possibilities are equally likely at the moment.

The European Top 100 Index

The index closed slightly lower this week, retreating from 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 congestion resistance in the 230 area would reconfirm the uptrend from July and forecast a move up to the previous long-term high near 234. 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 moderately lower this week, retreating from recent highs of the short-term uptrend from the beginning of July. The short-term reaction from early July has been unable to move up to a meaningful new high for 7 weeks, indicating that a return to recent long-term lows has become more likely. Technical indicators are now slightly bearish overall, supporting a return to recent lows of the long-term downtrend.

A weekly close well above the recent high near 2,670 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 slightly lower this week, retreating from recent highs of the short-term uptrend from late August. Technical indicators are now 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 23 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. The high may have occurred last week, but we would need to see additional weakness over the next few weeks to confirm that development.

A close above the recent high near 2.83% 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. Both possibilities are equally likely at the moment.

The US 30-year Treasury Bond Yield

Yields closed slightly higher this week, reconfirming the short-term oversold reaction from late August and moving slightly above resistance at the upper boundary of the downtrend from April. Technical indicators remain effectively neutral overall, indicating that near-term direction is in question.

A weekly close above current levels 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. Both possibilities are equally likely at the moment

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 sharply lower this week, moving down toward previous lows of the downtrend from June. Technical indicators have weakened and are now slightly bearish overall, supporting a return to recent long-term lows.

We are 6 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. The sharp decline this week suggests that the high of this cycle may have occurred in August, and a subsequent breakdown to new lows would confirm that development.

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. Both possibilities are equally likely at the moment.

The European Euro Index

The index closed sharply higher this week, moving up toward recent highs of the uptrend from June. 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 congestion support near 126 would reconfirm the short-term downtrend from early August and forecast additional losses. Both possibilities are equally likely at the moment.

The Japanese Yen Index

The index closed sharply lower this week, retreating from recent highs and moving down to support at the lower boundary of the long-term uptrend. Technical indicators have weakened slightly and are now effectively neutral overall, indicating that near-term direction is in question.

A weekly close above the recent high near 119.50 would reconfirm the long-term uptrend and forecast additional gains. A close below congestion support in the 115 area would predict a move down to congestion support at 112.50. Both possibilities are equally likely at the moment.

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 this week, breaking out to a new all-time high and reconfirming the long-term uptrend. In general, long-term breakouts such as this one are confirmed by a subsequent close 2.5% above the previous high, so a weekly close above $1,288 would be a major bullish signal. Technical indicators remain slightly bullish overall, supporting a continuation of the advance.

We are 7 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 above $1,288 would reconfirm the long-term breakout and forecast additional gains. A close below uptrend support at $1,210 would predict a move down to congestion support near $1,180. The breakout confirmation 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 this week, moving up toward recent all-time highs of the long-term uptrend. A bullish consolidation formation has been developing since 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 below uptrend support at 31.80 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 moderately higher this week, moving up to previous highs of the long-term uptrend at the top of the current trading range. Price action has been confined to a relatively narrow trading range between 1,300 and 1,500 for the past 5 months, and a close well outside of this area should signal the direction of the next meaningful move. Technical indicators remain slightly bullish overall, supporting a continuation of the advance.

A weekly close well above congestion resistance at current levels would constitute a long-term breakout and forecast additional gains. A close below 1,400 would predict a move down to congestion support near 1,300. The long-term breakout scenario 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 Continuous Commodity Index

The index closed sharply higher this week, moving up to a new high for the long-term uptrend from late 2008. Technical indicators remain moderately bullish overall, supporting a continuation of the advance.

A close above current levels would reconfirm the long-term uptrend and forecast additional gains. A close below new congestion support near 500 would predict a move down to congestion support in the 480 area. The uptrend continuation scenario is highly likely (>80% probable).

Oil

Oil closed moderately lower this week, remaining 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. Both possibilities are equally likely at the moment.

Category: Forecasts, Intermediate-term Forecasts


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