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S&P 500 Chart Setup Hints at Rebound, Pointing to US Dollar Pullback

S&P 500 Chart Setup Hints at Rebound, Pointing to US Dollar Pullback

2011-09-07 06:02:00
Ilya Spivak, Sr. Currency Strategist
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THE TAKEAWAYThe US Dollar may pullback as S&P 500 positioning hints the stock index is likely to correct higher over the near term, sapping safe-haven demand for the greenback.

S&P 500 – Prices formed a bullish Piercing Line candlestick pattern at the lower boundary of a Flag chart formation. While the Flag is indicative of bearish trend continuation, the candlestick setup hints an upswing is likely before the larger down move resumes. Initial resistance stands at 1166.31, the 23.6% Fibonacci extension level, with a break above that exposing 1190.72. Flag support lines up at 1140.52, followed by the 23.6% Fib at 1126.70.

SP_500_Chart_Setup_Hints_at_Rebound_Pointing_to_US_Dollar_Pullback_body_Picture_5.png, S&P 500 Chart Setup Hints at Rebound, Pointing to US Dollar Pullback

CRUDE OIL Prices formed a Bullish Engulfing candlestick pattern above support at $83.12, the intersection of the 23.6% Fibonacci extension level with the lower boundary of a Flag chart pattern carved out since early August. In a similar fashion to the S&P 500, the chart pattern argues for a broadly bearish bias but the candlestick setup hints an upswing may be ahead over the near term. Initial resistance lines up in the $90.37-92.00 region where the Flag top meets resistance at the upper boundary of a falling channel in place since early May.

SP_500_Chart_Setup_Hints_at_Rebound_Pointing_to_US_Dollar_Pullback_body_Picture_6.png, S&P 500 Chart Setup Hints at Rebound, Pointing to US Dollar Pullback

GOLD Prices put in a Bearish Engulfing candlestick below resistance at $1909.75, the 76.4% Fibonacci extension level, hinting a double top may be in the works. Initial support lines up at $1870.14, the 61.8% Fib. The 76.4% level remains as near-term resistance.

SP_500_Chart_Setup_Hints_at_Rebound_Pointing_to_US_Dollar_Pullback_body_Picture_7.png, S&P 500 Chart Setup Hints at Rebound, Pointing to US Dollar Pullback

US DOLLAR Prices broke above the 23.6% Fibonacci retracement at 9596 to test the key falling trend line resistance connecting major swing tops since late May (now at 9650). A break above this boundary would amount to a material bullish shift in the medium-term outlook for the greenback. The 23.6% level has been recast as near-term support.

SP_500_Chart_Setup_Hints_at_Rebound_Pointing_to_US_Dollar_Pullback_body_Picture_8.png, S&P 500 Chart Setup Hints at Rebound, Pointing to US Dollar Pullback

Created Using FXCM Marketscope 2.0

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