Short-term Forecast for April 17, 2012

| April 17, 2012

Stocks Continue to Track Bearish Scenario

The S&P 500 index closed sharply higher today, reacting further off of recent short-term lows of the overbought correction from early April. As expected, market behavior has become more volatile following the breakdown of the extremely overextended rally from October 2011 and the S&P 500 will likely continue to experience violent moves higher and lower as the potential long-term top develops during the next several weeks.

With respect to cycle analysis, stocks continue to track the bearish short-term scenario that we outlined last week. A relatively weak beta phase rally with a duration of less than nine 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 continued deterioration of market internals, the bearish scenario remains more likely. The negative divergence between breadth and volume that we noted in early March has continued to intensify, with both summation indices moving sharply lower following the break below uptrend support last week.

The stock market remains in a critical window with respect to long-term direction and it will be important to monitor price 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 several sessions.

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 early April. Technical indicators are effectively neutral overall, suggesting that direction is in question.

Cycle Analysis

We are 29 trading days into the cycle following the short-term cycle low (STCL) on March 6. The magnitude of the alpha phase decline indicates that cycle translation is in question. A weak beta phase rally of less than 9 sessions in duration followed by a move below the last STCL during the beta phase decline would confirm a transition to left translation. Alternatively, an extended beta phase rally that moves above the last alpha high (AH) near 1,419 would reconfirm right translation and favor additional short-term strength. The window during which the next STCL is likely to occur is now through May 7, with our best estimate being in the April 30 to May 4 range.

  • Last STCL: March 6, 2012
  • Cycle Duration: 29 trading days
  • Cycle Translation: Right (bullish)
  • Next STCL Window: Now through May 7; best estimate in the April 30 to May 4 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 high near 1,419 would reconfirm the uptrend from October 2011 and forecast additional gains.
  • Bearish Scenario: A reversal and close below congestion support in the 1,345 area would reconfirm the overbought correction from early April 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 today, reacting off of recent short-term lows of the violent decline from March. Technical indicators are moderately bearish overall, favoring a continuation of the decline.

Cycle Analysis

We are 9 trading days into the cycle following the short-term cycle high (STCH) on April 3. The move higher today generated a cycle low signal, indicating that the alpha low (AL) likely formed yesterday. Only a quick move below the stop level at 1.97% during the next session would suggest that the decline phase of the current cycle is still in progress. A weak rebound followed by a move below the last AL would reconfirm left translation and favor additional short-term weakness. Alternatively, an extended advance that returns to the last STCH would suggest that cycle translation is in question. The window during which the next STCH is likely to occur is from April 25 to May 16, with our best estimate being in the April 30 to May 4 range.

  • Last STCH: April 3, 2012
  • Cycle Duration: 9 trading days
  • Cycle Translation: Left (bearish)
  • Next STCH Window: April 25 to May 16; 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: 1.97%

Short-term Outlook

  • Bullish Scenario: A 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 reversal and close below the recent short-term low near 1.97% would forecast a move down to congestion support in the 1.90% area.

The bearish scenario is more likely (~70% 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 slightly lower today, holding at congestion support in the 79.60 area. Technical indicators remain effectively neutral overall, suggesting that direction is in question.

Cycle Analysis

We are 10 trading days into the cycle following the short-term cycle low (STCL) on April 2. A weak beta phase rally followed by a quick return to the last STCL during the beta phase decline would suggest that cycle translation is in question. Alternatively, an extended beta phase rally that moves above the last beta high (BH) 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 April 27 to May 3 range.

  • Last STCL: April 2, 2012
  • Cycle Duration: 10 trading days
  • Cycle Translation: Right (bullish)
  • Next STCL Window: April 27 to May 11; best estimate in the April 27 to May 3 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 80 would forecast a return to the recent short-term high at 80.57.
  • Bearish Scenario: A close well below uptrend support near 79.05 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 slightly lower today, retreating further from congestion resistance in the $1,680 area near resistance at the upper boundary of the downtrend from late February. Technical indicators remain 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 April 4. An extended alpha phase decline that moves below the last STCL would reconfirm left translation and favor additional short-term weakness. Alternatively, a shallow decline followed by an extended beta phase rally that moves well above the last beta high (BH) would signal a likely transition to right translation. 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: 8 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 rebound and 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 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 bearish 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 slightly lower again today, retreating further from congestion resistance in the 41.60 area near resistance at the upper boundary of the downtrend from late February. Technical indicators remain slightly bearish overall, tentatively favoring a continuation of the decline.

Short-term Outlook

  • Bullish Scenario: A rebound and close above congestion resistance in the 41.60 area would predict a move up to congestion resistance at the 42.50 level.
  • Bearish Scenario: A 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 bearish 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 today, reacting further off of support at the lower boundary of the uptrend from October 2011. Technical indicators are neutral to slightly bearish overall, suggesting that direction is in question with a slight downward bias.

Cycle Analysis

We are 11 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: 11 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 $106.50 would predict a return to the recent high near $109.70.
  • Bearish Scenario: A 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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