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S&P 500 Rebounds as Expected But Overall Bias Remains Bearish

S&P 500 Rebounds as Expected But Overall Bias Remains Bearish

2011-09-08 04:59:00
Ilya Spivak, Sr. Currency Strategist
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THE TAKEAWAYThe S&P 500 benchmark stock index rebounded as expected but the overall bias remains bearish, pointing to further gains in the safe-haven US Dollar.

S&P 500 – As we suggested yesterday, prices advanced after forming a bullish Piercing Line candlestick pattern at the lower boundary of a Flag chart formation. Near-term resistance now stands in the 1227.40-1257.30 region. Initial support lines up at 1190.72, the 14.6% Fibonacci extension level. Broadly speaking, the Flag setup favors bearish continuation over the medium term, with only a daily close above 1257.30 neutralizing the downside bias.

SP_500_Rebounds_as_Expected_But_Overall_Bias_Remains_Bearish_body_Picture_5.png, S&P 500 Rebounds as Expected But Overall Bias Remains Bearish

CRUDE OIL Mirroring our expectation for the S&P 500, we suggested crude oil prices would advance having produced 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. The upswing materialized and prices are now testing the Flag’s upper boundary ($90.51), a barrier reinforced by the top of a falling channel established from May (now at $91.50). Only a break above the latter threshold would negative the broadly bearish implications of positioning. Otherwise, a return to downward momentum is favored, with initial support still at $83.12.

SP_500_Rebounds_as_Expected_But_Overall_Bias_Remains_Bearish_body_Picture_6.png, S&P 500 Rebounds as Expected But Overall Bias Remains Bearish

GOLD A Bearish Engulfing candlestick pattern identified yesterday marked the beginning of a pullback from resistance at $1909.75, the 76.4% Fibonacci extension level. Prices are now challenging the 38.2% Fib at $1806.10, with further selling exposing the 23.6% level at $1766.49. Initial resistance stands at $1838.12, the 50% extension.

SP_500_Rebounds_as_Expected_But_Overall_Bias_Remains_Bearish_body_Picture_7.png, S&P 500 Rebounds as Expected But Overall Bias Remains Bearish

US DOLLAR Prices recoiled from resistance at a falling trend line connecting major swing tops since late May, finding support at the 38.2% Fibonacci retracement level (9544). A rebound now underway is seeing initial resistance at 9596, the 23.6% level, with a breakout clearing the way for another test of the trend line (now at 9650). Alternatively, renewed selling targets the 50% Fib at 9502.

SP_500_Rebounds_as_Expected_But_Overall_Bias_Remains_Bearish_body_Picture_8.png, S&P 500 Rebounds as Expected But Overall Bias Remains Bearish

Created Using FXCM Marketscope 2.0

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