Short-term Forecast for October 7, 2010

| October 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 slightly lower today, holding at recent highs of the uptrend from early July following the breakout above congestion resistance in the 1,150 area. A subsequent close well above current levels during the next few sessions would confirm the breakout and forecast a move up toward the April high. However, continued hesitation would call the breakout into question and a return to recent lows in the 1,140 area would suggest the development of a correction. Technical indicators remain slightly bullish overall, supporting a continuation of the advance.

We are 26 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 18 to October 24 range.

A close well above current levels would confirm the breakout above congestion resistance in the 1,150 area and forecast additional gains. A reversal and close below new congestion support in the 1,120 to 1,130 range would confirm the start of at least a short-term correction and predict a move down to congestion support at the 1,100 level. The uptrend continuation scenario is slightly more likely (~60% probable).

The European Top 100 Index

The index closed near unchanged today, holding above support at the lower boundary of the uptrend from late May. Technical indicators are effectively neutral overall, indicating that near-term direction is in question.

A close above congestion resistance in the 225 area would predict a return to the recent high near 229.50. A close below uptrend support at 220 would reconfirm the downtrend from the middle of September and forecast additional losses. Both possibilities are equally likely at the moment.

The Shanghai Composite Index

The Chinese stock market was closed today. Price action has been confined to a narrow trading range between 2,600 and 2,700 for the past 10 weeks and a close outside of this area will likely signal the direction of the next meaningful move. Technical indicators are now effectively neutral overall, indicating that near-term direction is in question.

A close above congestion resistance in the 2,700 area would reconfirm the uptrend from early July and forecast additional gains. A close below congestion support near 2,600 would signal the start of a new short-term downtrend and predict a move down to the 2,500 level. Both possibilities are equally likely at the moment.

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 near unchanged today, holding at recent long-term lows of the downtrend from April. Technical indicators remain moderately bearish overall, supporting a continuation of the decline.

We monitor cycle highs in yield as they correspond to cycle lows in price. We are 19 trading days into the cycle following the short-term cycle high (STCH) on September 10. The window during which the next STCH is likely to occur is now through October 22, with our best estimate being somewhere in the October 14 to October 20 range.

A close well above new congestion resistance in the 2.48% area would predict a move up to downtrend resistance at 2.69%. A close below current levels would reconfirm the downtrend from April and forecast additional losses. The downtrend continuation scenario is slightly more likely (~60% probable).

The US 30-year Treasury Bond Yield

Yields closed moderately higher today, moving back up to the middle of the recent trading range. Technical indicators are slightly bearish overall, supporting a return to previous long-term lows near 3.52%.

A close well above long-term downtrend resistance near 3.88% would reconfirm the short-term uptrend from late August and predict a move up to congestion resistance in the 4.10% area. A close below 3.64% would forecast a return to recent long-term lows in the 3.52% area. A return to previous lows 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 reversed large early session losses to close near unchanged today, holding at recent lows of the downtrend from early June. The downtrend is currently overextended and today’s reversal may signal the start of at least a short-term oversold reaction. Technical indicators remain moderately bearish overall, supporting a continuation of the decline.

We are 23 trading days into the cycle following the short-term cycle low (STCL) on September 6. The window during which the next STCL is likely to occur is now through October 14. The low may have occurred yesterday, although we would need to see additional strength during the next several sessions to confirm that development.

A close well above power downtrend resistance at 77.90 would suggest the start of at least a short-term oversold reaction and predict a move up to congestion resistance in the 80 area. A close well below current levels would reconfirm the downtrend from June and forecast additional losses. Both possibilities are equally likely at the moment.

The European Euro Index

The index closed slightly lower today, retreating from recent highs of the uptrend from early June. Technical indicators are slightly bullish overall, supporting a continuation of the advance. However, the rally from early September is overextended and rising at an unsustainable rate, suggesting that a relatively violent correction will occur after it ends.

A close above the recent high near 140 would reconfirm the uptrend from June and forecast additional gains. A close well below power uptrend support at current levels would predict a relatively quick move down to congestion support in the 135 area. Both possibilities are equally likely at the moment.

The Japanese Yen Index

The index closed sharply higher today, moving up to a new high and reconfirming the long-term uptrend. Technical indicators are now 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 120 would forecast a move down to uptrend support at 118.50. The uptrend continuation scenario is highly likely (>80% 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 reversed large early gains to close moderately lower today, retreating from recent all-time highs of the long-term uptrend. The rally is currently overextended and today’s reversal may signal the start of at least a short-term overbought correction. Technical indicators are now slightly bullish overall, supporting a continuation of the advance.

We are 18 trading days into the cycle following the short-term cycle low (STCL) on September 13. The high of the current cycle may have occurred yesterday, although there is a good chance the duration of any subsequent correction will be relatively short like those of the previous two pauses in August and September. The window during which the next STCL is likely to occur is now through October 13.

A close well above the recent all-time high near $1,350 would reconfirm the long-term uptrend and forecast additional gains. A close below nearby congestion support in the $1,320 area would predict a move down to power uptrend support at $1,295. 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 moderately lower today, retreating from recent highs of the long-term uptrend and moving below congestion resistance in the 32.70 area. Technical indicators are now neutral to slightly bullish overall, indicating that near-term direction is in question with a slight upside bias.

A close well above the recent high at 32.89 would reconfirm the long-term uptrend and forecast additional gains. A close below congestion support in the 32 area would predict a move down to congestion support near 31.50. Both possibilities are equally likely at the moment.

The Gold Miners Index

The index closed sharply lower today, retreating from recent highs of the long-term uptrend and beginning another test of power uptrend support. Technical indicators are now neutral to slightly bullish overall, indicating that near-term direction is in question with a slight upside bias.

A close above the recent high near 1,605 would reconfirm the long-term uptrend and forecast additional gains. A close below power uptrend support at 1,550 would predict a move down to congestion support in the 1,500 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 Continuous Commodity Index

The index closed slightly lower today, holding below recent highs of the uptrend from early June. Technical indicators are now neutral to slightly bearish overall, indicating that near-term direction is in question with a slight downside bias.

A close above the recent high near 538 would reconfirm the uptrend from early June and forecast additional gains. A close well below congestion support near 525 would confirm the developing correction from late September and predict a move down toward strong congestion support in the 505 area. Both possibilities are equally likely at the moment.

Oil

Oil closed sharply lower today, retreating from recent highs of the short-term rally from late August. Technical indicators are now neutral to slightly bullish overall, indicating that near-term direction is in question with a slight upside bias.

A close well above the recent high near $83.40 would reconfirm the uptrend from late May and forecast a move up to the April highs in the $88 area. A close below congestion support at the $80 level would predict a move down to uptrend support at $76.90. Both possibilities are equally likely at the moment.

Category: Forecasts, Short-term Forecasts


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