Short-term Forecast for April 12, 2012

| April 12, 2012

Stock Market Short-term Scenarios

The S&P 500 index closed sharply higher today, reacting further off of recent short-term lows of the decline from last week. The strong rebound indicates that the overbought correction from last week was likely the alpha phase decline of the current short-term cycle from early March. Additionally, a cycle low signal was generated today, indicating that the beta low (BL) likely formed on April 10.

The magnitude of the alpha phase decline continues to suggest that cycle translation is in question. A relatively weak beta phase rally with a duration of 5 to 8 sessions followed by an extended beta phase decline that moves below the last short-term cycle low (STCL) near 1,340 would confirm a transition to left translation and favor additional short-term weakness. Additionally, this scenario would provide the next optimal entry point for a short swing trade at the forthcoming beta high (BH).

Alternatively, an extended beta phase rally with a duration of more than 10 sessions that moves well above the alpha high (AH) would reconfirm right translation and favor additional short-term strength.

Given the rapid deterioration in market internals, the bearish scenario is more likely at the moment. The negative divergence between breadth and volume that we noted in early March has continued to intensify, with both summation indices breaking well below uptrend support this week.

Additionally, the confirmed formation of the latest intermediate-term cycle high (ITCH) at the beginning of April forecasts another two to six weeks of weakness heading into the next intermediate-term cycle low (ITCL) in late April or early May.

We have entered a critical window with respect to long-term direction and it will be important to monitor market behavior closely during the next few weeks. The first step in the development of a cyclical top would be a short-term cycle translation change from bullish to bearish, so we will be watching for the early formation of the forthcoming BH sometime during the next week.

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 index closed sharply higher today, reacting further off of recent short-term lows of the overbought correction from last week. Technical indicators are effectively neutral overall, suggesting that direction is in question.

Cycle Analysis

We are 26 trading days into the cycle following the short-term cycle low (STCL) on March 6. The strong advance today has caused a change to our preferred cycle count and it is now likely that the retracement from last week was the alpha phase decline and not the beta phase decline. A cycle low signal was generated today, indicating that the beta low (BL) likely formed on April 10. Only a quick move below the stop level at 1,358 during the next session would suggest that the previous phase is still in progress. The magnitude of the alpha phase decline indicates that cycle translation is in question. A weak beta phase rally followed by a move below the last STCL during the beta phase decline would confirm a transition to left translation. Alternatively, a move above the last alpha high (AH) during the beta phase rally would reconfirm right translation and favor additional short-term strength. The window during which the next STCL is likely to occur is from April 16 to May 7, with our best estimate being in the April 30 to May 4 range.

  • Last STCL: March 6, 2012
  • Cycle Duration: 26 trading days
  • Cycle Translation: Right (bullish)
  • Next STCL Window: April 16 to May 7; best estimate in the April 30 to May 4 range.
  • Setup Status: Cycle low setup occurred today.
  • Trigger Status: Cycle low trigger occurred today.
  • Signal Status: Cycle low signal was generated today.
  • Stop Level: 1,358

Short-term Outlook

  • Bullish Scenario: A close well above the recent high near 1,419 would reconfirm the uptrend from October and forecast additional gains.
  • Bearish Scenario: A reversal and close below congestion support in the 1,345 area would reconfirm the developing overbought correction and predict a move down to congestion support at the 1,315 level.

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 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 moderately higher again today, reacting further off of recent short-term lows of the violent decline from March. Technical indicators remain moderately bearish overall, favoring a continuation of the decline.

Cycle Analysis

We are 17 trading days into the cycle following the short-term cycle high (STCH) on March 19. The alpha low (AL) may have formed on April 10, although we would need to see a close well above current levels during the next session to confirm that development. A move above the last STCH during the rally phase of the current cycle would be required to reconfirm right translation and favor additional short-term strength. Alternatively, a weak rebound followed by a move below the developing AL would confirm a transition back to left translation. The window during which the next STCH is likely to occur is now through May 1, with our best estimate being in the April 18 to April 24 range.

  • Last STCH: March 19, 2012
  • Cycle Duration: 17 trading days
  • Cycle Translation: Right (bullish)
  • Next STCH Window: Now through May 1; best estimate in the April 18 to April 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 rebound and close above congestion resistance at the 2.10% level would predict a move up toward the recent short-term high near 2.28%.
  • Bearish Scenario: A close below the recent short-term low near 1.99% would forecast a move down toward congestion support in the 1.90% area.

The bearish 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 sharply lower today, moving down toward support at the lower boundary of the uptrend from August 2011. Technical indicators are effectively neutral overall, suggesting that direction is in question.

Cycle Analysis

We are 7 trading days into the cycle following the short-term cycle low (STCL) on April 2. A cycle high signal was generated today, confirming that the alpha high (AH) formed on April 5. A quick return to the last STCL during the alpha phase decline would suggest that cycle translation is in question. Alternatively, a shallow decline followed by a move above the last beta high (BH) during the beta phase rally would reconfirm right translation and favor additional short-term strength. The window during which the next STCL is likely to occur is from April 27 to May 11, with our best estimate being in the May 2 to May 8 range.

  • Last STCL: April 2, 2012
  • Cycle Duration: 7 trading days
  • Cycle Translation: Right (bullish)
  • Next STCL Window: April 27 to May 11; best estimate in the May 2 to May 8 range.
  • Setup Status: Cycle high setup occurred today.
  • Trigger Status: Cycle high trigger occurred today.
  • Signal Status: Cycle high signal was generated today.
  • Stop Level: None active.

Short-term Outlook

  • Bullish Scenario: A rebound and close above downtrend resistance near 80.05 would forecast a return to the recent short-term high at 80.57.
  • Bearish Scenario: A close well below uptrend support near 79 would predict a return to previous lows of the downtrend from January near 78.30.

Both scenarios are equally likely at the moment.

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 sharply higher today, moving above resistance at the upper boundary of the downtrend from late February and beginning a test of congestion resistance in the $1,680 area. Technical indicators are neutral to slightly bullish overall, suggesting that direction is in question with a slight upward bias.

Cycle Analysis

We are 5 trading days into the cycle following the short-term cycle low (STCL) on April 4. The alpha high (AH) will likely form sometime during the next 2 sessions. A weak alpha phase rally followed by an extended alpha phase decline that moves below the last STCL would reconfirm left translation and favor additional short-term weakness. Alternatively, an extended alpha phase rally that moves well above 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 from April 23 to May 3, with our best estimate being in the April 24 to April 30 range.

  • Last STCL: April 4, 2012
  • Cycle Duration: 5 trading days
  • Cycle Translation: Left (bearish)
  • Next STCL Window: April 23 to May 3; best estimate in the April 24 to April 30 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 the recent short-term high near $1,690 would confirm the start of a new short-term uptrend and predict a move up toward congestion resistance in the $1,750 area.
  • Bearish Scenario: A reversal and close below the recent short-term low near $1,622 would reconfirm the downtrend from late February and predict a move down to congestion support at the $1,600 level.

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

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 moderately higher today, moving slightly above congestion resistance in the 41.60 area and confirming the recent break above resistance at the upper boundary of the downtrend from late February. Technical indicators are neutral to slightly bullish overall, suggesting that direction is in question with a slight upward bias.

Short-term Outlook

  • Bullish Scenario: A close above current levels would confirm the break above congestion resistance in the 41.60 area and predict a move up to congestion resistance at the 42.50 level.
  • Bearish Scenario: A reversal and close below the recent short-term low near 40.50 would reconfirm the downtrend from late February and forecast a move down to congestion support in the 39.60 area.

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

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 support at the lower boundary of the uptrend from October 2011. Technical indicators are slightly bearish overall, tentatively favoring a continuation of the downtrend from late February.

Cycle Analysis

We are 8 trading days into the cycle following the short-term cycle low (STCL) on March 30. A weak beta phase rally followed by a move below the beta low (BL) would reconfirm left translation and favor additional short-term weakness. Alternatively, an extended beta phase rally that moves above the last alpha high (AH) would suggest that cycle translation is in question. The window during which the next STCL is likely to occur is from April 19 to May 3, with our best estimate being in the April 19 to April 25 range.

  • Last STCL: March 30, 2012
  • Cycle Duration: 8 trading days
  • Cycle Translation: Left (bearish)
  • Next STCL Window: April 19 to May 3; best estimate in the April 19 to April 25 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 downtrend resistance near $106.90 would predict a return to the recent high near $109.70.
  • Bearish Scenario: A reversal and close below the recent short-term low near $101 would confirm a break below uptrend support and forecast a move down toward congestion support at the $96 level.

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

Category: Forecasts, Short-term Forecasts


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