Friday, September 30, 2016

MTU Weekend Ed. - Monthly Outlook Update (9/30/16)

Stocks, Bonds, USD, Gold - key intermediate term scenarios to watch

SPX has been attempting to break above its overhead resistance, with price action rhyming that over the previous breakout at a larger degree (Chart S1). Support and resistance is now only about 100 index points apart (Chart S1, two red lines).

While a short term breakout projects a target 60 index points higher based on a potential bullish inverse-HS setup (Chart S2 green), it takes no small amount of effort to break the overhead resistance. Other scenarios are also at play (Chart S2 gray or the 2nd & 3rd green C, for example).

The 10Y yield index is retesting the neckline (Chart B1). If that line breaks, new lows in yields are in play for another go at the previous HS target.

The USD index remains inside a two-year consolidation range (Chart $1). While many perceive U.S. growth and rate-hike expectations, as well as challenges in Europe and Japan to be supportive of the dollar, the USD index has been making lower highs and lower lows during its consolidation so far (Chart $1).  The chart presents our bullish and bearish tracking scenarios.

The price structure in Gold over the past 3 months is similar to that in the USD index over the past 2 years (Chart G1). Likewise, the jury is still out regarding the direction of the eventual breakout. The chart presents our bullish and bearish tracking scenarios.