Short-term Forecast for October 5, 2011

| October 5, 2011

S&P 500 Index Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the S&P 500 index. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

The S&P 500 index closed sharply higher again today, moving back into the previous trading range between 1,120 and 1,220 and questioning the validity of the breakdown that occurred on October 3. Technical indicators are neutral to slightly bearish overall, suggesting that direction is in question with a slight downside bias.

Cycle Analysis

We are 41 trading days into the cycle following the short-term cycle low (STCL) on August 9. The strong advance today generated a cycle low signal, indicating that the latest STCL likely formed yesterday. Only a quick move below the stop level at 1,097 would invalidate the signal and suggest that the beta phase decline is still in progress. A brief alpha phase rally followed by a quick move down to new lows would reconfirm left translation and favor additional short-term weakness. Alternatively, an extended advance that approaches the last beta high (BH) would suggest that cycle translation is in question. The window during which the next STCL is likely to occur is now through October 17, with our best estimate being now through October 10.

  • Last STCL: August 9, 2011
  • Cycle Duration: 41 trading days
  • Cycle Translation: Left (bearish)
  • Next STCL Window: Now through October 17; best estimate now through October 10.
  • Setup Status: Cycle low setup occurred today.
  • Trigger Status: Cycle low trigger occurred today.
  • Signal Status: Cycle low signal was generated today.
  • Stop Level: 1,097

Short-term Outlook

  • Bullish Scenario: A close well above congestion resistance near 1,176 would predict a move up to trading range resistance at the 1,220 level.
  • Bearish Scenario: A reversal and close below the recent low near 1,097 would reconfirm the downtrend from May and forecast additional losses.

The bearish scenario is slightly more likely (~60% probable).

US 10-year Treasury Note Yield Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the US 10-year Treasury note yield. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

Yields closed sharply higher today, reacting further off of recent lows and approaching resistance at the upper boundary of the power downtrend from late July. A slight positive divergence between momentum and price behavior results in a slightly bullish condition overall, tentatively favoring a move above power downtrend resistance.

Cycle Analysis

We are 6 trading days into the cycle following the short-term cycle high (STCH) on September 28. The sharp advance today nearly generated a cycle low signal, indicating that the alpha low (AL) likely formed yesterday. A subsequent move above the last STCH during the rally phase of the current cycle would signal a transition to right translation and suggest the development of an oversold reaction. The window during which the next STCH is likely to occur is from October 20 to November 10, with our best estimate being in the October 26 to November 1 range.

  • Last STCH: September 28, 2011
  • Cycle Duration: 6 trading days
  • Cycle Translation: Left (bearish)
  • Next STCH Window: October 20 to November 10; best estimate in the October 26 to November 1 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Short-term Outlook

  • Bullish Scenario: A close well above power downtrend resistance at current levels would predict a move up to strong congestion resistance in the 2.10% area.
  • Bearish Scenario: A reversal and close below the recent low near 1.70% would reconfirm the downtrend from February and forecast additional losses.

The bullish scenario is slightly more likely (~60% probable).

US Dollar Index Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the US dollar index. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

The index closed moderately lower today, retreating from recent highs of the rally from late August. Technical indicators are moderately bullish overall, favoring a continuation of the advance.

Cycle Analysis

We are 6 trading days into the cycle following the short-term cycle low (STCL) on September 28. The decline today nearly generated a cycle high signal, indicating that the alpha high (AH) likely formed yesterday. Only a quick move above the recent high at 79.60 tomorrow would suggest that the alpha phase rally is still in progress. The window during which the next STCL is likely to occur is from October 21 to November 4, with our best estimate being in the October 26 to November 1 range.

  • Last STCL: September 28, 2011
  • Cycle Duration: 6 trading days
  • Cycle Translation: Right (bullish)
  • Next STCL Window: October 21 to November 4; best estimate in the October 26 to November 1 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Short-term Outlook

  • Bullish Scenario: A close above the recent high near 79.60 would reconfirm the uptrend from May and forecast additional gains.
  • Bearish Scenario: A close below power uptrend support near 78.70 would predict a move down to congestion support at the 77.50 level.

The bullish scenario is slightly more likely (~60% probable).

Gold Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the gold market. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

Gold closed moderately higher today, continuing a test of support at the lower boundary of the long-term uptrend. Technical indicators are moderately bearish overall, favoring a continuation of the downtrend from August. However, the lower boundary of the long-term uptrend is a strong support level and the lack of downward progress during the last 7 sessions indicates that at least a short-term bottom may be forming in this area.

Cycle Analysis

We are 5 trading days into the cycle following the short-term cycle low (STCL) on September 29. A move below the last STCL during the alpha phase decline would reconfirm left translation and favor additional short-term weakness. Alternatively, a brief decline followed by a move well above the Alpha High (AH) would favor a transition back to right translation and forecast short-term strength. The window during which the next STCL is likely to occur is from October 17 to October 27, with our best estimate being in the October 18 to October 24 range.

  • Last STCL: September 29, 2011
  • Cycle Duration: 5 trading days
  • Cycle Translation: Left (bearish)
  • Next STCL Window: October 17 to October 27; best estimate in the October 18 to October 24 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Short-term Outlook

  • Bullish Scenario: A close well above congestion resistance in the $1,660 area would predict a move up toward strong congestion resistance at the $1,750 level.
  • Bearish Scenario: A close well below long-term uptrend support near $1,605 would reconfirm the downtrend from August and forecast additional losses.

Both scenarios are equally likely.

Gold Currency Index Daily Chart Analysis

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.

Technical Analysis

The GCI closed slightly higher today, holding above recent lows of the overbought correction from early September. Technical indicators remain moderately bearish overall, favoring a continuation of the decline.

Short-term Outlook

  • Bullish Scenario: A rebound and close above congestion resistance at the 41.75 level would predict a move up toward congestion resistance near 43.50.
  • Bearish Scenario: A close below the recent short-term low near 39.60 would reconfirm the downtrend from early September and forecast additional losses.

Both scenarios are equally likely.

Oil Daily Chart Analyses

The following technical and cycle analyses provide short-term forecasts for the oil market. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.

Technical Analysis

Oil closed moderately higher again today, reacting further off of recent lows of the downtrend from May. Technical indicators are slightly bearish overall, tentatively favoring a continuation of the decline.

Cycle Analysis

We are 8 trading days into the cycle following the short-term cycle low (STCL) on September 23. A brief beta phase rally followed by a move down to new lows would reconfirm left translation and favor additional short-term weakness. Alternatively, an extended advance that returns to the alpha high (AH) would indicate that cycle translation is in question. The window during which the next STCL is likely to occur is from October 12 to October 26, with our best estimate being in the October 13 to October 19 range.

  • Last STCL: September 23, 2011
  • Cycle Duration: 8 trading days
  • Cycle Translation: Left (bearish)
  • Next STCL Window: October 12 to October 26; best estimate in the October 13 to October 19 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Short-term Outlook

  • Bullish Scenario: A rebound and close above congestion resistance in the $84 area would predict a move up to downtrend resistance near $85.50.
  • Bearish Scenario: A close below the recent low near $76.40 would reconfirm the downtrend from May and forecast additional losses.

The bearish scenario is slightly more likely (~60% probable).

Category: Forecasts, Short-term Forecasts


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