Weekly Outlook: 2014, May 11 - 18

S&P 500 forecast for the week of May 12, 2014, Technical Analysis

The S&P 500 as you can see initially fell during the week, and then bounced off of the 1860 level. That being the case, it appears that the market has formed a hammer for the week, but now it is obvious more than ever that the 1900 level needs to be overcome in order to start going long on a longer-term basis. We believe that will ultimately happen, so therefore on a move above that level we would not hesitate to get involved. Pullbacks all the way to the 1820 level should be supportive as well, as we see plenty of support between here and there.

FTSE forecast for the week of May 12, 2014, Technical Analysis

FTSE as you can see initially fell during the week, but did bounce enough in order to form a hammer. The hammer is at the top of the current consolidation area, so we feel that a move above the 6850 level of course is a sign that we will go higher. In fact, we think that the market could go much higher, probably heading to 7000 in the short term. Nonetheless, even if we fall from here, there should be plenty of support all the way down to the 6500 level, making this a “buy only” market.

Dow Jones 30 forecast for the week of May 12, 2014, Technical Analysis

The Dow Jones 30 as you can see initially fell during the week, but found the 16,400 level to be supportive enough to turn things back around. Ultimately, the market ended up closing with a slightly positive candle, and with that the week ended up running a hammer that is pressing up against the 16,600 resistance level. With that in mind, we are buyers on a break above the highs from the week as it should signal a breakout to the upside in a continuation of the longer-term uptrend.

US Dollar Index forecast for the week of May 12, 2014, Technical Analysis

The US Dollar Index fell during the bulk of the week, but found enough support down at 79 to turn things back around and form a massive hammer. Because of this, we believe that a break above the 80 handle is in fact a longer-term buy signal, as this area has been so reliable over the longer term. On the other hand, if we broke down below the bottom of the hammer from the past week, that would be a very bearish sign. That of course would have this market really kind of coming undone, probably heading to the 75 level.

On the upside, we could hit the 81.25 level without too many issues. Above there, we could head to 82, 83, and then possibly as high as the 85 level. It really comes down to what the Federal Reserve is going to do, and we have recently heard that they are going to back off of quantitative easing, which of course has been bringing down the value of the Dollar.

Keep an eye on the Federal Reserve and its statements, but the latest one was a little bit of a mixed bag in the sense that we did hear that they are pulling back quantitative easing little bit, but at the same time suggests that perhaps there are some cracks in the economy yet again. Before going forward, we also have to pay attention to other currencies such as the Euro, which of course has been under significant pressure due to the fact that the European Central Bank is likely to do something in June if the market does in correct the pricing of that particular currency against the US dollar. Remember, the Euro is worth 40% of this contract, said that by itself almost ensures that we will probably go higher at this point. On top of that, the Yen is probably going to be on the back foot soon as well, as the Bank of Japan is likely to continue to jawbone that particular currency down. Between the two currencies, that is enough to move this market.

Silver forecast for the week of May 12, 2014, Technical Analysis

The silver markets fell during the bulk of the week, but still remain within the support area that we have been testing for some time. If we can break above the $20 level, we feel that this market should continue to go higher, probably aiming for the $22 handle. On the other hand, if we close on a daily candle below the $19 level, we feel that this market could start to come undone at that point and probably aim to reach the $15 level as that’s the next massive support area.

Gold forecast for the week of May 12, 2014, Technical Analysis

Gold markets initially tried to rally during the week, but found far too much in the way of resistance above the $1300 level to continue that move. That being the case, we ended up falling enough to form a shooting star but there are two hammers just before this candle as well, leading us to believe that we are probably getting ready to grind sideways. With that being the case, we think that ultimately this market will probably go higher, and a break of the top of the shooting star from this past week would be a buying opportunity. We suspect that the “floor” in this market is at the $1200 level.

USD/JPY forecast for the week of May 12, 2014, Technical Analysis

The USD/JPY pair fell during the bulk of the week, but as you can see the trend line has held up as support. Because of this, we feel that this market continues to go higher, but recognize that it would be difficult to get to the 103 level initially. However, if we break above the 103 level, we are buyers as well, as it would send this market looking for the 105 level which is our longer-term target. As far selling is concerned, if we get below the 101 level, we feel that the 100 level will be targeted first, and then ultimately the 97 level.

USD/CAD forecast for the week of May 12, 2014, Technical Analysis

The USD/CAD pair fell during most of the week, but as you can see bounced enough to form a hammer overall. The 1.09 level was a level that needed to hold by the end of the week, and that’s essentially where we have closed. Because of this, it still very likely that we will bounce, and a move above the 1.10 level has the market looking for the 1.1250 handle over the course of the next several weeks. On the other hand, there is the possibility that we break down, but the downside seems to be somewhat limited in our opinion.

NZD/USD forecast for the week of May 12, 2014, Technical Analysis

The NZD/USD pair tried to rally over the course of the week, but as you can see struggle that the 88 level. The market fell back down and formed a shooting star, which of course is very bearish. Nonetheless, it appears that we are still within consolidation, and we feel that the “floor” in this market is at the 0.85 handle, so thereby making this a market that’s probably not can it be able to be traded from a longer-term perspective quite yet. However, we would be buyers near 0.85 off of the daily chart and supportive action.

GBP/USD forecast for the week of May 12, 2014, Technical Analysis

The GBP/USD pair initially tried to rally during the week, but as you can see the 1.70 level of course did offer the resistance and we anticipated seen. With that, it appears that the market found a lot of sellers in that general vicinity, turning the market completely around and forming a massive shooting star by the end of the week. The target has been hit with that we have been talking about for some time, so quite frankly we are flat of this market at the moment. However, we still believe that the buyers will take control the market again. However, it might take a minute.

The shooting star doesn’t have us selling, rather it has us looking for some type of buying opportunity lower as we pull back from lofty levels. That being the case, the reality is that the buyers will be very interested in going long as lower levels.

The 1.65 level is massively supportive obviously, and therefore any move down to that level would be very interesting for us as it would provide a longer-term buying opportunity. However, the 1.67 level could also be an area where we find buyers. On the other hand, if we break the top of the shooting star, that’s a very bullish move, and we would be very bullish of the British pound at that point time as it should send the market to the 1.75 handle first, and probably much higher than that.

We also see a taut of support just below the 1.65 handle, so we think that is essentially the “floor” in this marketplace. If we managed to break down below the 1.64 handle, at that point time we could very easily see this market turned around and perhaps have a trend change again. That is without a doubt the least likely scenario, but it is a possibility that we have to keep in mind. Ultimately though, we do have a longer-term target 1.75, and possibly 1.80 by the end of the year given the right conditions.