Market Forecast for 05-18-12

This market report was supposed to get uploaded on Monday, but did not upload for some technical reason. Nevertheless, it is still valid and applicable today, so here it is…

DJI stock index continues lower from our last sell signal. JP Morgan's Credit Swap trading loss of $2 billion USD will likely exacerbate waning global confidence, eventually leading to another crash.

While the DOW is now touching the lower trading band and getting oversold, it has plenty of room on the down side, since I expect this down move to end between May 20th and June 15th. After this down move has run its course, we will use the wave pattern of the down move and any bounce to then determine if stocks are likely in a bear market or if they will have one more rally to new highs around the election before they begin their crash phase into 2016.

Interest rate patterns happen to suggest a June 2012 correction low, then a subsequent rally into the end of the year or early next year before a serious crash takes hold. The meltdown in Europe and the issue of new losses within JP Morgan (and potentially more to uncover) leave us in cautionary and continuous crash watch modes.

ACTION: Sell intra-day rallies as long as 60 -240 minute trends are heading lower. See weekly and daily charts with our analysis on the DOW below.

Dow Weekly Chart

dow daily chart with analysis

EURUSD continues lower from our last sell signal. Daily chart is getting oversold as the market is on its lower band. Expect a 3-5 day counter trend rally soon, one to sell into.

The weekly chart shows two target indicators showing the 1.2530-1.2500 area  as a likely target, 500 pips lower from here. Keep in mind that lately, several targets have been handily exceeded.

ACTION: Until otherwise decided, we will continue to recommend selling EURUSD on intra-day and daily rallies as long as the respective trends are heading lower. Both weekly and daily charges on EURUSD are provided below, along with a daily U.S. Dollar Index chart.

eurusd weekly chart

eurusd daily chart with analysis

us dollar index chart daily

GOLD broke out of its tightly coiled range as expected and is marching lower. Expect support in here around 1560 area, then 1535 and 1503. A break of 1503 level could lead to a flash crash. However, I think prices will hold for now.

ACTION: Continue to sell rallies until around 1503 area is reached, then expect support to develop for a tradable bounce. See the XAUUSD weekly-chart analysis below, along with an analysis on a daily Elliott Wave International chart.

gold weekly forecast

gold elliott wave daily chart

OIL continues selling off our short breakout pattern trade signal.

ACTION: Expect this sell-off to hit the 89.50 area, and potentially to the lower trend line of a possible triangle on the weekly charts.

USDJPY appears to be rebounding off the Andrews Pitchfork lower support line, and may be ready for a rally.

TRADE:  BUY 80.15 Limit, use 79.50 stop loss, move stop to breakeven at 80.50, Target 1= 81.30, Target 2= 82.30 or greater. Weekly and daily charts are provided below.

dollar-yen weekly chart

usdjpy daily chart

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