Market Forecast for 07-25-12

US Market: The S&P500 sold off to a slightly new low as forecasted and has likely bottomed on Wave 1 down. We should now expect a 2-5 day rally. IF the SP500 breaks the July 24th low of 1321.13, then that will likely confirm a crash acceleration lower (more likely, but not set in stone yet). However, if the market bounces to above 1370, then that means the bearish wave count is wrong and we will see a final terminal rally into October or November (less likely thus far).

ACTION: Trade intra-day charts primarily on the long side for 2-5 days or until the 1348 level is reached, where the Andrews/Shiff Median Line is; then expect a potential sell-off that MAY take out the 1321 low. If that happens, you would want to watch your retirement accounts carefully and consider moving to cash (not necessarily USD). Again, the market needs to stay below 1370 to remain bearish; above that, it's bullish until near the elections. The next week or so is crucial. Be careful and pay attention (see daily and 4-hour charts with forecast below)…

us market sp500 daily chart

sp500 4-hour chart with analysis

EURUSD: The Euro appears to have competed a wave 5 and (5) of larger degree Wave ((3)). Therefore, if I am correct, then the USD should sell off for a while and the EURO MAY have a fairly good corrective rally for several weeks or longer.

ACTION: Buy the EUR/USD with a stop below the two day low, of 1.2036. Expect a rally to Andrews Median Line @ 1.2190 or to the upper Andrews Resistance Line @ 1.2339 before a sizable pullback is likely (see daily and 240-minute Euro charts below).

daily euro chart

euro 240-minute chart

XAUUSD: Gold has coiled long enough and has broken out to the upside of the daily wedge pattern. It would have to clear the 1615.0 price area before it breaks above the weekly wedge pattern boundary. If that happens, it would then likely portend one more leg up to new highs. However, should the 3-day low @1561.0 be broken on the downside, then we will see 1522 or lower before any major recovery. Either way, gold has an 8-year cycle peak to peak. It was supposed to top in 2012 (and again in 2020), but it is possible that it topped a bit early in late 2011. If it breaks the weekly resistance level on the upside, then this will be the year of the top or by FEB-March 2013. If it breaks below 1546.50, it means the 8-year high is in and we would likely see a 1-3 year correction.

ACTION: For now, get long on intra-day pullbacks until 1607 is reached; then we will see if it breaches 1615.0 for a major up move (see gold daily chart below).

gold xauusd daily

CADJPY: The currency pair sold off as expected and has reach its 2nd target area. I now expect a 1-3 day rally before it could resume any downside to the potential lower targets. If gold and oil runs to the upside, they will likely benefit Canada to some extent. We will keep a close eye on Gold, Oil and this pair. Gold and oil may "decouple" over the next week or two. If gold go up (possible) but oil fails (likely), then that says a lot about the economy (negative) and the increasing fear of problems rolling into the USA.

canadian dollar vs japanese yen chart daily

ACTION: If short, move stop to breakeven at 77.57 area. Expect a corrective rally to 77.16 to 77.46 for another short opportunity on the daily and 240-minute charts. Breaking today's low of 76.32 means that we will likely see Target-3 of 75.62 and perhaps a terminal move to at or below 74.27 to complete this down wave.

Crude Oil: Expect a corrective rally over the next 2-5 days to 89.50 to 91.70-80 area on oil; then another potential sell off, as shown on the chart (see below).

crude oil 240-min chart

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