Kase Forecasts of the Week – Spot Gold and S&P 500 Index

By Dean Rogers

Spot Gold (XAU)

The long-term outlook for gold is still reasonably promising after prices rallied from a six-year low in December. However, from a technical standpoint, the decline from the 1263.48 swing high is poised to challenge support targets before the move up continues.

KaseX triggered a strong short entry signal called a pierced dart (gray down arrow and yellow triangle) on February 15. On that same day a bearish Harami line and star was completed. The subsequent pullback to 1240.02 held the 1263.48 swing high and was followed by a confirming short signal on Monday, February 22. Monday’s decline also completed another bearish Harami line and star. These factors call for the decline to continue for the near-term.

Gold Daily Candlestick ChartGold Chart

The primary wave that the move down formed, 1263.48 – 1191.02 – 1240.02, projects to 1194.5 as the 0.618 target. Most waves that meet the 0.618 projection extend to at least the 1.00 projection, which in this case is near the 1163.6 confluence point. 1163.6 is the decision point for a larger correction to 1126.2 and possibly lower. A close below 1163.6 would significantly dampen the likelihood of a continued rise, and a close below 1126.2 would shift the long-term outlook to negative.

Gold Table

First resistance is 1232.3. This is currently the 0.618 projection of the small wave up from 1191.02. A close over this would call for 1251.1, the 1.00 projection. As it stands, odds are 25 percent for a close over 1251.1 before at least 1194.5 is met. A close over 1251.1 would indicate that the move up should extend to at least 1277.1 and possibly 1331.0 and higher.

S&P 500 Index (SPX)

The S&P 500’s rally from a double bottom at 1810.1 has been relatively strong and is challenging the completion point of the formation at 1947.2. This is significant because a close over 1947.2 would complete the double bottom and open the way for a potential rally to the formation’s 2084.0 target.

S&P 500 Index Daily ChartSPX Chart

A similar double bottom had formed in late 2015 and was completed when the index closed over 2020.86. The ensuing move fell short of this double bottom’s 2177.0 target, but was still substantial. We could see a similar type of rally upon a close over 1947.2 that falls short of the 2084 target, but challenges key resistance before the decline continues.

Other technical factors, such as wave projections and retracements, call for at least 1971.6. This then connects to 2019.7, 2057.7, and finally 2084.

SPX Table

The move down stalled just below a key support level at 1849. This was the 1.00 projection of the wave 2134.72 – 1867.01 – 211.48. The index only closed for one day below this level, so this is still crucial support.

A normal correction of the move up should hold 1894.0 and must hold 1862. These are the 38 and 62 percent retracements from 1810.1 to 1946.7. Key support is 1848, and a close below this would shift the outlook back to negative and call for 1810 and lower again.

These are brief technical analyses with a 10-day outlook based upon Kase’s technical forecasting models and trading indicators KaseX and Kase StatWare. If you are interested in taking a trial of KaseX or Kase StatWare please contact sales@kaseco.com. We would love to get your thoughts about the forecasted targets and probabilities. Leave a comment or send them along with your request for a trial to sales@kaseco.com.

By Dean Rogers

March WTI pulled back from its $31.53 swing high made in early trading Tuesday after several nations, including Saudi Arabia and Russia, agreed to freeze production at current levels.

While this might be a step in the direction of a long-term recovery, halting output at current levels would do little for a market that is already oversupplied.

In addition, and most importantly, the deal is strapped with a major caveat: Iraq, Iran, and other large producers would also have to halt production increases. Reports indicate that Iran has balked at the idea of halting production levels as they aim to return their output to presanctions levels.

Regardless of the reasons for the move up, from a technical standpoint, the outlook for oil remains weak. WTI was due for a correction when the 1.382 projection of the wave $34.82 – 29.4 – 33.6 was met at $26.05. There were also plenty of positive technical factors leading into the correction. However, the move up stalled at $31.53 when several intraday momentum indicators, including KaseX, triggered overbought signals. In addition, $31.53 was near the 62 percent retracement of the decline from $34.82 to $26.05.

CLH6 20160216

Prompt month March futures have already retraced 50 percent of the move from $26.05 to $31.53. March is now poised to test support at $28.3. This is Friday’s midpoint and near the 62 percent retracement. A close below $28.3 would call for $27.3, Friday’s open, and then $26.7, the last target protecting the $26.05 low.

There is an outside chance that the move up could continue, and corrections of such a swift decline are bound to take place. Prices must overcome at least $30.5 to show the upward correction will possibly extend to $32.1 and higher.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

Forecasts for freezing temperatures this weekend in the eastern U.S. have had a minimal impact on natural gas prices this week. Many traders are looking ahead to above normal temperatures in coming weeks. In addition, many speculate that Thursday’s EIA Natural Gas Storage Report will reflect the smallest withdrawal from storage for this time of year since 2012.

The negative sentiment is being reflected on the charts too. March natural gas is continuing to grind its way lower to targets below $2.00. Monday’s gap from $2.076 stalled at $2.172 and was quickly filled on Tuesday. Subsequently prices have fallen to $2.017 so far.

The move down will likely continue to be a grind. March has struggled to close below the psychologically important $2.00 level in recent weeks. That said, prices should fulfill targets below $2.00 as the waves down from $2.493 and $2.315 project to $1.95 and $1.90. We expect that these projections will be met before another significant correction takes place.

NGH6 20160210

Look for resistance at $2.10 and $2.18. The latter is key because it is the 62 percent retracement from $2.315 to $1.954 and is in line with the $2.172 swing high.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

Many have already thrown in the towel on the prospects of a continued winter rally for natural gas. The negative sentiment was reflected on the charts earlier this week when prices plummeted from $2.315 after breaking higher out of the recent trading range between $2.08 and approximately $2.20. Trading will likely remain volatile, and yes, we should see a few more tests of resistance (as soon as tomorrow) as shifting weather reports predict potential cold spells in coming weeks. However, for now, and for the foreseeable future, this is still a bear market.

The majority of technical factors are negative and March natural gas finally closed below $2.08 support on Tuesday. Ultimately, the decline is poised to continue to at least $1.91. This is near the 1.00 projection of the wave $2.493 – 2.08 – 2.315, and is in line with the $1.91 contract low. First support is $1.99, and a close below this would indicate today’s small upward correction is over.

NGH6 20160203

That said, there are a few factors that indicate today’s correction could extend before prices fall to $1.90. The psychologically important $2.00 level has held on a closing basis, and today’s price action formed a bullish Harami line and star setup on the daily chart. Resistance at $2.10, and maybe $2.18 could be tested first, though we expect the latter to hold.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

WTI’s rally from $27.56 late last week was sparked by a few positive technical factors such as a daily bullish engulfing line and momentum divergence. These are factors that would normally accompany a major turn. The move up was a bit over exuberant though, and has stalled at $32.74. Major support at $29.6 is already being tested, and it looks like the rally might be short lived.

Technicals will generally lead the way when a turn is taking place. However, markets, especially the energy markets, have a propensity to overcorrect after being so deeply oversold. To sustain the move higher a shift in the underlying fundamentals must take place. Given today’s pullback, it looks like the market is doubtful that will be the case. The move up is not doomed (yet), but major support is being already being challenged.

The rise from $27.56 unfolded as five-waves that stalled at $32.74, the trend terminus (Y^3/X^2) of Wave I. The decline from $32.47 might be a three-wave correction. However, prices are testing major support at $29.6. A close below $29.6 would call for $28.6 and then a retest of the $27.56 low.

CLH6 20160125

Give the confluence of support at $29.6 a test of resistance could take place early tomorrow. First resistance is $31.1. However, WTI will need to close over $31.8 to have a shot at moving higher again later this week.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

S&P 500 Index (SPX)

It has been a rough start for investors and the stock market so far this year. Falling oil prices and a weak economic outlook for China have soured the outlook for global markets and have indices across the world testing major support.

The technical outlook for the S&P 500 Index is negative. The index fell below its late August 2015 1867.01 swing low and has challenged major support at 1842 for the past few days. A few weeks ago we call for the S&P to test 1842 because of its confluence as a projection for major waves down from 2134.72 and 2116.48. This extremely important 1842 target was taken out by the 1812.29 swing low, but the index has not settled below 1842 yet.

Daily S&P 500 Index with KaseXSPX 20160121

The 1842 target has been adjusted to 1845 based upon the new wave formations and retracements. A sustained close below 1845 could open the way for the decline to continue to at least 1771 and ultimately 1688 as indicated in the table below.

SPX-Table

 

The confluence of 1842 makes it a potential stalling point, and at minimum, a correction will likely take place before the move down continues. Resistance at 1910 should hold, but the key level for the near-term is 1938. A close over 1938 would not mean that the move down is over, but would rather call for an extended upward correction to 1986 and possibly 2056. A close over the latter would be bullish for the long-term outlook.

10-Year T-Note Futures (TY)

As stock prices have fallen some monetary funds have been shifting into fixed income. As a result, 10-Year T-Note futures have risen substantially in recent weeks. The move up is poised to continue, but several negative technical factors indicate a correction should take place first.

An important resistance level at 128’19 was overcome earlier this week. This was the 0.618 projection for the wave 124’19 – 130’00.5 – 124’14. Kase’s wave analysis studies show that once the 0.618 projection is met most waves will extend to at least the 1.00 projection, in this case 130’17. This is near our model’s confluence point of 130’0 and the most recent major swing high. A sustained close over 130’0 would call for 131’20 and very likely 132’16.

TY-Table

 

The retracements of the move up from 125’14 to 129’08 define crucial support levels in coming weeks. As stated, a correction is expected, and a normal correction should hold 127’25.5. A close below this would call for an extended correction to key support at 126’25.5. If the move up is going to have any chance at continuing in coming weeks 126’25.5 must hold.

Daily Continuation 10-Year T-Note Futures with KaseXTY1 20160121

These are brief technical analyses based upon Kase’s technical forecasting models and trading indicators KaseX and Kase StatWare. If you are interested in taking a trial of KaseX or Kase StatWare please contact sales@kaseco.com. We would love to get your thoughts about the forecasted targets and probabilities. Leave a comment or send them along with your request for a trial to sales@kaseco.com.

By Dean Rogers

Natural gas fell back into the trading range between $2.23 and $2.39 where it spent the first week of the new year. This comes after the failure to extend to the 0.618 projection of the wave $1.802 – 2.386 – 2.188. There is still an outside chance the move up will extend to $2.56 while $2.188 holds, but overall, the charts do not look good and odds favor a decline to test major support.

The move down from $2.495 broke down into five waves that terminated near $2.241. Today’s small move up to $2.323 was the type of three-wave correction that would be expected after a five-wave pattern. This keeps short-term odds in favor of the decline below key support at $2.23. Upon a close below $2.23 look for $2.17, the 0.618 projection of the wave $2.495 – 2.241 – 2.323. This then connects to $2.07 as the 1.00 projection. These are also the 50 and 62 percent retracements of the move up from $1.802 to $2.495, respectively.

NGG6 20160113

Today’s Harami line and star setup is positive, but the star’s blow-off high dampens the likelihood of a turn higher tomorrow. A surprise bullish withdrawal reported by the EIA tomorrow morning could push prices higher, but based upon the price action for the past few days it looks as though most market participants expect the decline to continue.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

China’s stock market plunge wreaked havoc on stock and commodity prices around the world last week. Fears of a further slowing economy in the world’s largest energy consumer along with weak manufacturing demand and the deepening global supply glut have recast a negative outlook on oil prices. The negative sentiment has been reflected in the technicals too as prices continue to fall.

February WTI fell to $30.88 on Monday and came close to meeting a crucial confluence point at $30.6. This is near the 0.618 projection of the wave $38.39 – 32.1 – 34.34, and is the last support protecting against a decline into the $20s. A close below $30.6 would call for at least $29.0 and likely $28.1. The latter is the 1.00 projection for the wave down from $38.39.

CLG6 20160111

The KasePO PeakOut (green P) indicates Monday’s $32.2 midpoint might be tested early Tuesday, but we expect this level to hold. Other than the intraday PeakOut there is little to no technical evidence that the decline is going to stall. Therefore, without some type of unexpected shift in the underlying fundamentals and/or technicals we expect to see prices fall into the $20s soon.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

There is little doubt that the lack of demand for natural gas as a heating fuel this winter is taking its toll on prices. The market still looks and feels desperate to push higher, but fundamental and technical factors are working against this scenario. There is an outside chance prices could rally by another 10 to 15 cents on a close over $2.39, but we do not expect the move up to last much longer without a significant boost from external factors. In other words, it is going to have to get really cold, really soon, in key areas of the U.S., and last for several consecutive weeks for the move up to continue to any significant degree.

The move up from fresh 16 year lows stalled at $2.39 on December 29 and has subsequently oscillated in a narrowing range. A coil, or possibly an ascending triangle, has formed, and prices briefly broke lower out of the formation before Wednesday’s settlement. The formation indicates a breakout should take place very soon as the pattern nears its apex. The key levels to watch are $2.26 and $2.39.

NGG6 20160106

Odds favor a break lower due to KaseX’s bearish turn signal (purple arrow) on the 3.5-cent Kase Bar chart. A close below $2.26 would call for $2.17 and $2.09.

As stated, there is a modest chance that prices could rally 10-15 cents on a close over $2.39. However, even if this is the case, we do not expect prices to overcome $2.55 given current circumstances.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

Evolving weather models that had previously predicted a cold spell in the Northeast U.S. and in the Great Lakes region are reportedly now forecasting above normal temperatures in early January. This could dampen the likelihood of a further price rally for natural gas in coming weeks, and the charts tend to agree.

Today’s decline was quite negative for the near-term outlook, and $2.16 is an important target that should be tested in coming days. This is near the 0.618 projection of the wave down from $2.386 and the 38 percent retracement of the move up from $1.80. A close below $2.16 would call for $2.09 and $2.03.

NG G6 - eSignal

That said, this is a tough call right now because the market still seems desperate to rally after recently falling to 16 year lows. Wednesday’s decline could be a correction of the move up as prices attempt to extend toward a highly confluent $2.51 level. The late rally in trading after hours on Wednesday indicates $2.31 and even $2.37 might be tested in early trading ahead of Thursday’s EIA Natural Gas Storage report. We expect $2.37 will hold.

It is a bit early to call for a trading range, but we get the sense that is the most likely scenario for natural gas in coming weeks. The boundaries of the range could be quite wide, between approximately $2.03 and $2.37. Trading over the next few days should give us a better sense of what is in store for natural gas prices in early 2016.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.