THE TAKEAWAY: S&P 500 chart setup hints a top is in the works below the May 2011 high. Yesterday’s bullish US Dollar breakout appears to have been a head-fake.
S&P 500 – Prices completed 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. A break below that exposes the 23.6% Fibonacci retracement at 1331.40.
Daily Chart - Created Using FXCM Marketscope 2.0
CRUDE OIL – Prices cleared 50% Fibonacci extension resistance at 106.70, with the bulls now aiming to challenge the 61.8% barrier at 110.04. The 106.70 level has been recast as near-term support. Notably, RSI studies are at their most overbought since April (the last time Iran-linked jitters inflated crude prices). That was followed by a sharp decline in May, so the threat of a reversal may be rising.
Daily Chart - Created Using FXCM Marketscope 2.0
GOLD – The break above the December 2 high at 1763.00 exposes the 1800.00 figure as the next important barrier. Early signs of negative RSI divergence warn of lackluster bullish momentum however, warning a pullback may be ahead. The 1763.00 level has been recast as near-term support.
Daily Chart - Created Using FXCM Marketscope 2.0
US DOLLAR – Prices reversed sharply lower, sliding back below 9856 and taking out minor rising channel support set from the February 8 low to form a Bearish Engulfing candlestick pattern. The bears now stand to challenge the 9786 level, with a break below that exposing 9679. Near-term channel resistance stands at 9835.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
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