S&P 500 Hits Near-Term Downside Target, Larger Up Trend at Risk

2012-04-11 04:06:00 Ilya Spivak, Head Strategist, APAC

THE TAKEAWAY: The S&P 500 met the downside target implied by a near-term Head and Shoulders topping chart formation, with sellers now aiming to force a larger reversal.

S&P 500 – Prices broke through support at 1377.10 to meet the measured target of the Head and Shoulders topping chart pattern we’ve monitored since last week (1359.30). Sizing up the overall trend from here, prices are approaching major rising trend line support set from October, a barrier reinforced by the 23.6% Fibonacci retracement at 1342.10. A break below this would mark a major bearish trend reversal. Near-term resistance is at 1373.70-1377.10 for now.

SP_500_Hits_Near-Term_Downside_Target_Larger_Up_Trend_at_Risk_body_Picture_5.png, S&P 500 Hits Near-Term Downside Target, Larger Up Trend at Risk

Daily Chart - Created Using FXCM Marketscope 2.0

SP_500_Hits_Near-Term_Downside_Target_Larger_Up_Trend_at_Risk_body_Picture_6.png, S&P 500 Hits Near-Term Downside Target, Larger Up Trend at Risk

Weekly Chart - Created Using FXCM Marketscope 2.0

CRUDE OIL – Prices took out support at 101.19, the 61.8% Fibonacci retracement level, to expose support in the 100.13-54 area marked by the bottom of a falling channel set from early March and a rising trend line established from mid-December. A break lower through here exposes downside targets at 97.89 and 95.78. The 101.19 level has been recast as near-term resistance, with a bounce back above that exposing 102.97-103.21.

SP_500_Hits_Near-Term_Downside_Target_Larger_Up_Trend_at_Risk_body_Picture_7.png, S&P 500 Hits Near-Term Downside Target, Larger Up Trend at Risk

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD – Prices breached resistance at 1644.45, with bulls now aiming to challenge 1669.15 at the intersection of the 50% Fibonacci retracement and the top of a falling channel set from March. A break above this level exposes upside targets at 1682.57 and 1699.19.

SP_500_Hits_Near-Term_Downside_Target_Larger_Up_Trend_at_Risk_body_Picture_8.png, S&P 500 Hits Near-Term Downside Target, Larger Up Trend at Risk

Daily Chart - Created Using FXCM Marketscope 2.0

US DOLLAR – Prices are testing support at 9978, the 23.6% Fibonacci expansion level, with a break below that targeting rising trend line support set from early February at 9928. Near-term resistance lines up at 10030, the 38.2% Fib. For the time being, weakness appears corrective absent a daily close below 9893-96 that would invalidate the Bullish Engulfing candle pattern set completed on March 27.