Long-term Forecast for October 1, 2015

| October 1, 2015

S&P 500 Index Monthly Chart Analyses

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

Technical Analysis

US Stocks are in a secular bear market that began in 2000. The second cyclical uptrend began in March 2009 and the rally moved higher at an unsustainable rate after bottoming in late 2011. The sharp decline in August signaled the likely start of the next cyclical downtrend. The monthly close well below the middle of the Bollinger bands in September confirms the long-term breakdown and forecasts substantial additional losses. Technical indicators are slightly bearish overall, tentatively favoring a continuation of the decline from August.

Cycle Analysis

US stocks currently have an average long-term cycle period of about 48 months (4 years) and the following chart displays all of the long-term cycle lows (LTCLs) since the early 1980s.

We are 79 months into the cycle following the LTCL in March 2009. The window during which the next LTCL is likely to occur is from July 2016 to December 2016.

Long-term cycle tops and bottoms occur in conjunction with an annual cycle translation change. We are 12 months into the annual cycle from October 2014. A quick rebound followed by a move up to new highs would reconfirm the current bullish translation and favor additional strength in 2015. Alternatively, an extended decline phase that moves well below the last annual cycle low (ACL) at 1,820 would signal the likely transition to a bearish translation.

Long-term Outlook

  • Bullish Scenario: A rebound and monthly close above the recent long-term high at 2,109 would reconfirm the cyclical bull market from 2009 and forecast additional gains.
  • Bearish Scenario: A close well below the bottom of the Bollinger bands at 1,839 would reconfirm the downtrend from August and predict additional losses.

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

US 10-year Treasury Note Yield Monthly Chart Analyses

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

Technical Analysis

Following the long-term bottom in 2003, the 10-year note yield remained confined to a trading range until 2008 when the stock market crash propelled yields down through the lower boundary of the range near 3.50%. However, yields quickly returned to the trading range as stocks rallied sharply off of the 2009 low. After holding near the bottom of the trading range during the first quarter of 2010, yields broke below trading range support again and the long-term downtrend resumed. The violent oversold reaction from August 2012 reversed in January 2014 and yields approached previous lows of the long-term downtrend before rebounding during the first half of 2015. Technical indicators are moderately bearish overall, favoring a return to previous lows of the decline.

Cycle Analysis

We monitor cycle highs in yield as they correspond to cycle lows in price. The 10-year note yield currently has an average long-term cycle period of about 36 months (3 years) and the following chart displays all of the long-term cycle highs (LTCHs) since the early 1980s.

We are 21 months into the cycle following the LTCH in December 2013. A quick reversal followed by a move well below the long-term cycle low (LTCL) in 2012 near 1.49% would reconfirm the current bearish translation and favor additional long-term weakness. Alternatively, an extended rally phase that moves well above the last LTCH near 3.03% would signal the likely transition to a bullish translation. The window during which the next LTCH is likely to occur is from October 2016 to March 2017.

Long-term cycle tops and bottoms occur in conjunction with an annual cycle translation change. The decline during the last 3 months indicates that the latest annual cycle high (ACH) likely formed in July. We are 3 months into the annual cycle from July. An extended decline phase that moves below the last annual cycle low (ACL) at 1.65% would reconfirm the current bearish translation and favor additional weakness. Alternatively, a quick rebound followed by a move well above the last ACH at 2.47% would signal the likely transition to a bullish translation.

Long-term Outlook

  • Bullish Scenario: A rebound and close above congestion resistance in the 2.50% area would confirm a break above long-term downtrend resistance and predict a return to the previous intermediate-term high near 3.03%.
  • Bearish Scenario: A close below the recent low at 1.67% would predict a move down to previous lows of the long-term downtrend near 1.49%.

Both scenarios are equally likely.

US Dollar Index Monthly Chart Analyses

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

Technical Analysis

The US dollar index has been in a secular bear market since the peak in early 2002. After the index bottomed in 2008, a consolidation formation developed until the index closed well above the upper boundary of the formation in September 2014. The breakout confirmed the development of the latest cyclical bull market in 2011 and favored additional gains. Technical indicators are moderately bullish overall, favoring a continuation of the advance. However, the uptrend has moved higher at an unsustainable rate and the sharp decline in April may signal the start of a potentially violent overbought correction.

Cycle Analysis

The US dollar currently has an average long-term cycle period of about 48 months (4 years) and the following chart displays all of the long-term cycle lows (LTCLs) since the early 1980s.

We are 17 months into the cycle following the LTCL in May 2014. The latest long-term cycle high (LTCH) may have formed in March, although we would need to see additional weakness to confirm that development. The move well above the previous LTCH during the rally phase of the current cycle signals the likely transition to a bullish translation and favors additional long-term strength. The window during which the next LTCL is likely to occur is from March 2018 to August 2018.

Long-term cycle tops and bottoms occur in conjunction with an annual cycle translation change. We are 17 months into the annual cycle from May 2014. The magnitude and duration of the last rally phase reconfirms the current bullish translation and favors additional strength. The latest annual cycle low (ACL) is overdue and it could form at any time.

Long-term Outlook

  • Bullish Scenario: A monthly close above the recent high at 98.73 would reconfirm the uptrend from 2014 and forecast additional gains.
  • Bearish Scenario: A close well below congestion support in the 95 area would predict a return to congestion support in the 90 area.

Both scenarios are equally likely.

Gold Monthly Chart Analyses

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

Technical Analysis

Gold has been in a secular bull market since early 2001. The cyclical downtrend from 2011 has been in progress for 4 years and the monthly close well below congestion support in the 1,200 area reconfirms the decline and favors additional weakness. The character of the long-term correction from 2011 continues to favor an eventual resumption of the secular uptrend. Technical indicators are moderately bearish overall, favoring a continuation of the decline.

Cycle Analysis

Gold currently has an average long-term cycle period of about 96 months (8 years) and the following chart displays all of the long-term cycle lows (LTCLs) since the early 1980s.

We are 83 months into the cycle following the LTCL in October 2008. The window during which the next LTCL is likely to occur is from July 2016 to December 2016.

Long-term cycle tops and bottoms occur in conjunction with an annual cycle translation change. We are 10 months into the annual cycle from November 2014. An extended decline phase that moves well below the last annual cycle low (ACL) near 1,130 would reconfirm the current bearish translation and favor additional weakness. Alternatively, a quick rebound followed by an extended rally phase of more than 6 months in duration that moves well above the annual cycle high (ACH) in 2014 near 1,347 would signal the likely transition to a bullish translation. The latest ACL may have formed in August, although we would need to see additional strength in October to confirm that development.

Long-term Outlook

  • Bullish Scenario: A rebound and monthly close well above congestion resistance in the 1,200 area would predict a move up toward congestion resistance at the 1,400 level.
  • Bearish Scenario: A close below the recent long-term low at 1,095 would reconfirm the cyclical downtrend from 2011 and forecast a move down to congestion support at the 1,000 level.

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

Oil Monthly Chart Analyses

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

Technical Analysis

The secular bull market in oil that began in late 1998 experienced a violent crash in 2008 following a speculative advance to nearly 150. A sharp countertrend rally followed a rebound off of strong congestion support in the 40 area in early 2009 and the resulting cyclical uptrend moved gradually higher until closing well below uptrend support in October 2014. The breakdown was a meaningful bearish development that confirmed the start of a new cyclical downtrend. Technical indicators are bearish overall, strongly favoring a continuation of the decline.

Cycle Analysis

Oil currently has an average long-term cycle period of about 60 months (5 years) and the following chart displays all of the long-term cycle lows (LTCLs) since the early 1990s.

We are 80 months into the cycle following the LTCL in February 2009. The latest LTCL is overdue and it could form at any time.

Long-term cycle tops and bottoms occur in conjunction with an annual cycle translation change. We are 6 months into the annual cycle from April. The move well below the annual cycle low (ACL) in 2014 during the previous decline phase signals the likely transition to a bearish translation and favors additional weakness.

Long-term Outlook

  • Bullish Scenario: A rebound and monthly close well above the recent high at 60.29 would predict a move up toward congestion resistance in the 70 area.
  • Bearish Scenario: A close below current levels would reconfirm the cyclical downtrend from 2013 and forecast additional losses.

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

Category: Forecasts, Long-term Forecasts


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