Intermediate-term Forecast for January 26, 2013

| January 26, 2013

S&P 500 Index Weekly Chart Analyses

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

Technical Analysis

The index closed moderately higher again this week, moving up to a new high for the cyclical bull market from 2009 and returning to the upper boundary of the rising wedge formation that has been developing since late 2011. A rising wedge is a technical formation that is usually followed by a sharp decline, so a confirmed break below the lower boundary of the formation would be a bearish development that would favor a return to cyclical bull market support currently near 1,258. Technical indicators remain bullish overall, strongly favoring a continuation of the advance.

Cycle Analysis

We are 10 weeks into the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending November 16. An extended rally phase that moves well above the last intermediate-term cycle high (ITCH) would reconfirm the current bullish translation and favor additional intermediate-term strength. Alternatively, a quick reversal followed by a return to the last ITCL would suggest that cycle translation is in question. The window during which the next ITCL is likely to occur is from March 8 to May 10, with our best estimate being in the April 5 to May 3 range.

  • Last ITCL: November 16, 2012
  • Cycle Duration: 10 weeks
  • Cycle Translation: Bullish
  • Next ITCL Window: March 8 to May 10; best estimate in the April 5 to May 3 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Intermediate-term Outlook

  • Bullish Scenario: A weekly close above current levels would reconfirm the cyclical bull market from 2009 and forecast additional gains.
  • Bearish Scenario: A reversal and close well below rising wedge support near 1,403 would predict a move down toward congestion support in the 1,275 area.

The bullish scenario is more likely (~70% probable).

US 10-year Treasury Note Yield Weekly Chart Analyses

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

Technical Analysis

Yields closed moderately higher this week, moving up to a new high for the uptrend from July above the congestion zone in the 1.85% area. Technical indicators are moderately bullish overall, favoring a continuation of the advance.

Cycle Analysis

We are 14 weeks into the cycle following the intermediate-term cycle high (ITCH) that occurred during the week ending October 26. The move well above the last ITCH during the rally phase of the current cycle reconfirms the current bullish translation and favors additional intermediate-term strength. The window during which the next ITCH is likely to occur is now through February 15.

  • Last ITCH: October 26, 2012
  • Cycle Duration: 14 weeks
  • Cycle Translation: Bullish
  • Next ITCH Window: Now through February 15.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Intermediate-term Outlook

  • Bullish Scenario: A weekly close above current levels would reconfirm the uptrend from July and predict a move up to congestion resistance in the 2.03% area.
  • Bearish Scenario: A reversal and close below uptrend support near 1.68% would forecast a return to the previous long-term low of the secular bear market near 1.40%.

The bullish scenario is more likely (~70% probable).

US Dollar Index Weekly Chart Analyses

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

Technical Analysis

The index closed slightly lower this week, continuing a test of congestion resistance in the 80 area above previous lows of the decline from July. Technical indicators are slightly bearish overall, tentatively favoring a return to previous lows of the decline.

Cycle Analysis

We are 19 weeks into the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending September 14. Cycle translation remains in question. A quick rebound followed by a move well above the half cycle high (HCH) in November would reconfirm the current bullish translation and favor additional intermediate-term strength. Alternatively, an extended decline that moves below the last ITCL would signal the likely transition to a bearish translation. The window during which the next ITCL is likely to occur is now through March 8, with our best estimate being in the February 8 to March 8 range.

  • Last ITCL: September 14, 2012
  • Cycle Duration: 19 weeks
  • Cycle Translation: Bullish
  • Next ITCL Window: Now through March 8; best estimate in the February 8 to March 8 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Intermediate-term Outlook

  • Bullish Scenario: A rebound and weekly close above the recent short-term high at 81.26 would predict a move up toward the previous high of the uptrend from 2011 near 83.50.
  • Bearish Scenario: A close well below congestion support in the 78.50 area would reconfirm the downtrend from July and forecast additional losses.

Both scenarios are equally likely.

Gold Weekly Chart Analyses

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

Technical Analysis

Gold closed moderately lower this week, returning to congestion support in the 1,660 area. The downtrend from September 2011 has taken the form of a bullish consolidation pattern that favors a continuation of the long-term uptrend. A rebound and weekly close well above 1,795 would strongly favor a breakout to new all-time highs. However, gold needs to hold above congestion support at the 1,660 level for the formation to retain its bullish character. A close well below the 1,660 level would cause the formation to shift to a neutral character. Technical indicators are slightly bearish overall, tentatively favoring a continuation of the decline from October.

Cycle Analysis

We are 12 weeks into the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending November 2. The decline this week indicates that the second half cycle high (HCH) may have formed during the previous week, although we would need to see additional weakness next week to confirm that development. A brief, weak rebound off of the last half cycle low (HCL) followed by a move below the HCL would confirm the recent transition to a bearish translation and favor additional intermediate-term weakness. Alternatively, an extended rebound off of the HCL that returns to the last HCH would suggest that cycle translation is in question. The window during which the next ITCL is likely to occur is from February 15 to April 12, with our best estimate being in the February 15 to March 15 range.

  • Last ITCL: November 2, 2012
  • Cycle Duration: 12 weeks
  • Cycle Translation: Bearish
  • Next ITCL Window: February 15 to April 12; best estimate in the February 15 to March 15 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Intermediate-term Outlook

  • Bullish Scenario: A rebound and weekly close well above congestion resistance in the 1,795 area would forecast a return to the previous secular bull market high near 1,886.
  • Bearish Scenario: A close well below congestion support at the 1,660 level would predict a move down toward congestion support in the 1,550 area.

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

Gold Currency Index Weekly 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 lower this week, returning to recent short-term lows of the decline from October below previous highs of the secular bull market. The long-term correction from 2011 has developed into a consolidation formation that continues to have a bullish bias. However, a subsequent weekly close well below current levels would confirm a break below the 60-week moving average and change the character of the formation from bullish to neutral. Technical indicators are slightly bearish overall, tentatively favoring a continuation of the decline from October.

Intermediate-term Outlook

  • Bullish Scenario: A rebound and weekly close well above the all-time high near 45.15 would reconfirm the secular bull market and forecast additional gains.
  • Bearish Scenario: A close well below current levels would confirm a break below the 60-week moving average and predict a move down toward congestion support in the 40 area.

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

Oil Weekly Chart Analyses

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

Technical Analysis

Oil closed slightly higher this week, moving up toward previous short-term highs near congestion resistance in the 100 area. Technical indicators remain moderately bullish overall, favoring a continuation of the rebound from November.

Cycle Analysis

We are 12 weeks into the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending November 2. The magnitude and duration of the rebound off of the last ITCL suggests that cycle translation is in question. A quick reversal followed by a move below the last ITCL would reconfirm the current bearish translation and favor additional intermediate-term weakness. Alternatively, an extended advance that moves well above the last intermediate-term cycle high (ITCH) would signal the likely transition to a bullish translation. The window during which the next ITCL is likely to occur is from February 15 to July 5, with our best estimate being in the April 12 to May 10 range.

  • Last ITCL: November 2, 2012
  • Cycle Duration: 12 weeks
  • Cycle Translation: Bearish
  • Next ITCL Window: February 15 to July 5; best estimate in the April 12 to May 10 range.
  • Setup Status: No active setups.
  • Trigger Status: No pending triggers.
  • Signal Status: No active signals.
  • Stop Level: None active.

Intermediate-term Outlook

  • Bullish Scenario: A weekly close above current levels would reconfirm the reaction from November and predict a move up to congestion resistance at the 100 level.
  • Bearish Scenario: A reversal and close below congestion support in the 90 area would forecast a return to cyclical bull market support near 81.90.

The bullish scenario is more likely (~70% probable).

Category: Forecasts, Intermediate-term Forecasts


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