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S&P 500 Tests Critical Support as US Dollar Accelerates Upward

By , Currency Strategist
23 February 2012 04:57 GMT

THE TAKEAWAY: The S&P 500 is inching lower to challenge the boundaries of the near-term up trend while the US Dollar has breached initial resistance and aims higher still.

S&P 500 – Prices put in a bearish Dark Cloud Cover candlestick pattern below resistance at 1376.10, the May 2011 top, hinting a move lower is ahead. Negative RSI divergence reinforces the case for a downside scenario. Initial support lines up at 1358.60 and is reinforced by a rising channel bottom now at 1354.00. A break below that exposes the 23.6% Fibonacci retracement at 1331.40.

SP_500_Tests_Critical_Support_as_US_Dollar_Accelerates_Upward_body_Picture_5.png, S&P 500 Tests Critical Support as US Dollar Accelerates Upward

Daily Chart - Created Using FXCM Marketscope 2.0

CRUDE OILA candle in Star position below resistance at 106.81, the 138.2% Fibonacci extension,gives early warning thata pullback may be ahead. Initial support lines up at 105.61, the 123.6% Fib. A break lower exposes the January 4 swing high at 103.66.

SP_500_Tests_Critical_Support_as_US_Dollar_Accelerates_Upward_body_Picture_6.png, S&P 500 Tests Critical Support as US Dollar Accelerates Upward

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD Prices continued higher after putting in a Bullish Engulfing candlestick pattern above support 1714.60, breaking resistance at 1763.00. The bulls now aim to challenge the November 8 high at 1802.80, although early signs of negative RSI divergence hint upward momentum may not prove long-lasting. The 1763.00 level has been recast as near-term support.

SP_500_Tests_Critical_Support_as_US_Dollar_Accelerates_Upward_body_Picture_7.png, S&P 500 Tests Critical Support as US Dollar Accelerates Upward

Daily Chart - Created Using FXCM Marketscope 2.0

US DOLLAR Prices took out resistance at 9856, the January 3 swing low, exposing the 38.2% Fibonacci expansion at 9918 as the next upside objective. The 9856 level has been recast as near-term support.

SP_500_Tests_Critical_Support_as_US_Dollar_Accelerates_Upward_body_Picture_8.png, S&P 500 Tests Critical Support as US Dollar Accelerates Upward

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

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23 February 2012 04:57 GMT