Market Forecast for 12-20-12

TIP: The first or second pullback after a trend has turned up (or first or second retracement after a trend has turned down) are often the safest signals to trade.

S&P500: The stock index sold off from our last sell signal, reversed to long with a slight loss, tagged our resistance target and went slightly above it, then reversed to short Wednesday with a small winner in an against-the-trend trade that we normally do not take. However, due  to the prevailing circumstances, we suggest taking them because the potential is just to good, given the small stops we use or the quick reverse signals we often get.

ACTION 1: consider shorting on intra-day retracements, IF Monday's low of 1423.13 is broken on the downside.

ACTION 2: consider going long again on intra-day pullbacks, IF Tuesday's high of  1445.63 is exceeded on the upside. See the daily chart below.

sp500 daily chart 12-20-12

DJ: The DOW JONES stock index chart we posted last week still appears to hold true regarding a trend-line break to the down side, then a rally to kiss the trend-line goodbye. This is especially true after we see THREE rallies to a high (three upper tapes of the upper resistance trend-line, which we now have). Thus far, the US market now looks to be one of the weakest equity markets of those that have had recent rallies. See Dow weekly chart below with analysis.

dow weekly chart 12-20-12

EURJPY: Euro-Yen is currently at 111.067 and on a monthly resistance of a centered moving average line, still has room to hit 115.67 in the weeks ahead. However, it looks like a pullback is now in order. A retracement to 110.00, 109.55 or 108.95 seems likely.

ACTION 1: Look for consolidations to breakout from on daily charts, or buy deeper pullbacks on daily and 240 minute charts as long as the 60 and/or 240 minute trends are up. The 60 minute trend is now down, so when it turns up again (or the 240 turns down, then up again) while the daily trend is still up, may provide a nice reentry.

ACTION 2: Short-term traders may have some room for quick short trades over the next 3-7 days, especially after a bounce into the London session. See Euro-Yen monthly graph below.

eurjpy monthly chart 12-20-12

EURUSD: The Euro is currently at 1.3223 and still has the monthly trends pointing down. The market reached monthly resistance today of the purple mid band line. However, after a likely pullback or at least a consolidation, assuming the daily trends stay up, the monthly target is 1.4280, the weeks or months ahead.

The Euro also just hit a SCHIFF Median Line (in dark blue on the daily chart). A retracement to 1.3110 is possible. Breaking above Wednesday's high of 1.3227 would likely mean that we are in a 3rd Wave extension and an acceleration up.

ACTION: Look for consolidations to breakout from on daily charts, or buy deeper pullbacks to 1.3135-1.3110 area, as long as the 60 and/or 240 minute have turned up. See monthly and daily charts below for the Euro.

eurusd monthly chart 12-20-12

euro daily chart for december 20, 2012

Crude Oil and Heating Oil held support and broke out to the upside. Crude oil still appears to be in a giant triangle or wedge pattern. Until it breaks the upper or lower boundaries, we cannot make a long-term forecast. However, expect the upper boundaries to now come into play as potential upper targets. See crude oil monthly, weekly and daily charts, as well as a heating oil daily graph below for likely price path, targets and resistance areas.

crude oil monthly 12-19-12

crude oil weekly chart 12-19-12

crude oil daily chart 12-19-12

heating oil chart for 12-19-12

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