S&P 500 Chart Hints at Possible Top, Offering a Lifeline to the US Dollar

2012-07-23 05:51:00 Ilya Spivak, Head Strategist, APAC

THE TAKEAWAY: S&P 500 technical positioning hints prices may be carving out a double top, hinting at the possibility of a near-term recovery in the safe-haven US Dollar.

S&P 500 – Prices completed a bearish Evening Star candlestick pattern below resistance at 1380.60, the July 5 high, and broke back below the 1392.10 level. Sellers now aim to challenge the bottom of a Rising Wedge chart formation set from early June, now at 1350.30, exposing the familiar 1334.40-41.90 area. Negative RSI divergence reinforces the case for a downside scenario.

SP_500_Chart_Hints_at_Possible_Top_Offering_a_Lifeline_to_the_US_Dollar_body_Picture_5.png, S&P 500 Chart Hints at Possible Top, Offering a Lifeline to the US Dollar

Daily Chart - Created Using FXCM Marketscope 2.0

CRUDE OIL – Prices appear to have completed a bullish Head and Shoulders (H&S) bottom chart pattern, implying a forthcoming advance to a measured target of 101.38. Prices are pulling back to retest 90.14, a familiar barrier reinforced by the H&S neckline (currently at 89.25) now recast as support. A daily close below the latter boundary invalidates bullish implications of overall positioning and initially exposes the July 3 closing high at 87.65. Near-term resistance is at 93.35.

SP_500_Chart_Hints_at_Possible_Top_Offering_a_Lifeline_to_the_US_Dollar_body_Picture_6.png, S&P 500 Chart Hints at Possible Top, Offering a Lifeline to the US Dollar

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD – Prices continue to consolidate below resistance at 1588.90. A break higher exposes falling trend line resistance now at 1607.48. Near-term support lines up at 1571.94. A breach below that initially targets 1559.55, followed by the 1522.50-32.45 area.

SP_500_Chart_Hints_at_Possible_Top_Offering_a_Lifeline_to_the_US_Dollar_body_Picture_7.png, S&P 500 Chart Hints at Possible Top, Offering a Lifeline to the US Dollar

Daily Chart - Created Using FXCM Marketscope 2.0

US DOLLAR – Prices bounced from support in the 10032-67 area to retest the underside of the previously completed bearish Flag chart formation at 10096. A daily close above this boundary neutralizes near-term downside pressure and exposes resistance levels at 10134 and 10209. Alternatively, a break below support targets a major multi-month rising trend line at 9961.