Fibozachi Forecast: Week of April 12th
Courtesy of Fibozachi
After another week closing at new highs, it remains difficult to issue long-term long positions … so we remain focused on catching short-term pops on stocks that are positioned to quickly rebound from recent sell-offs. Friday’s end-of-day buying surge into the close raises the odds that the market begins the week with strength, but the real test will come when the S&P 500 cash (INX) tests 1,200 and the DJIA (INDU) 11,000. If the S&P overcomes the round-number resistance, it will likely move up to 1,225 – 1,240 with relative ease, which was prior support back in June – July of 2006.
Many NYSE issues are slowly drifting higher, or simply sleeping sideways, without much volatility. As a result, much of our focus has shifted toward the NASDAQ Composite in an effort to highlight short-term trade setups across issues exhibiting greater beta. The indices suggested ‘more up’ last week by closing in ‘the right order of positive returns’, whereby the Russell 2K led the NASDAQ brothers, who in turn led the S&P and DJIA ~ ‘the right order’.
With an initial bailout of Greece ‘out of the way’, many market pundits will proudly proclaim the bear market slain. An initial pop Monday morning will likely stoke fears of “missing the next leg up.” With upside momentum waning alongside ever-decreasing volume tallies, negative seasonality, and a lack of significant buy signals to cite, we will continue to snipe a specific long setup here and a ride a reflex bounce there. Should the S&P 500 cash (INX) close above 1205 this week, then the next few weeks will likely bring about myriad long opportunities for those with 1-4 session time-frames.
The US Dollar (DXY) plotted a daily FNH (failed new high) this past Thursday at 81.91 before rolling over. Barring a 3-day reversal pattern back up above 81.6, Uncle Buck will likely digest his gains into mid-May after having rallied for four months straight. The most probable downside target spans an inflection point at 78.68 and 50% price retracement at 78.21.
$DXY price action and negative divergences over the past few weeks had been hinting at a correction in the near future. The week of 3/26 registered a ‘3 Outside Up’ candlestick pattern, which often begets bullish exhaustion, and the week of 4/2 registered a Bearish Harami pattern, implying that a bearish trend change was in the works. While last week’s doji wasn’t exceptionally bearish in and of itself, when combined recent price action / candlestick patterns and a very narrow 4.8% weekly real body range (open-close range as % of weekly high-low range), the US Dollar (DXY) was well positioned for a sharp downward retracement.
Gold futures have weekly resistance at 1168, with 1184 – 1190 the last barrier before new highs would be quickly attacked; gold futures recorded record highs last week in Yen and Euros. Oil futures have strong weekly resistance at 88.27, that dates all the way back to the first two weeks of November 2008. And alongside continued US Dollar weakness, EURUSD targets would be 1.384 and 1.402 with EURJPY 128.6 and 130.3.
Have fun at the casino this week !
