Today, we looked at the short-term price action of U.S. indices nearing wedge breaks. Crude oil at risk of dropping below prior highs, if it does more weakness to follow. Gold and silver remain in range-trading mode.
- S&P 500, Dow, Nasdaq 100 wedges near breaking points
- Crude oil on the verge of dropping below twin peaks
- Gold/silver range-trading mentality remains
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S&P 500, Dow, Nasdaq 100 wedges near breaking points
The Dow is currently trading at the top of a large descending wedge pattern, which if it is to remain ‘clean’ needs to turn down very, very soon (like today/tomorrow soon). Even if it were to break the top-side trend-line of the pattern a series of lower-highs and a flat bottom could remain in place, but the pattern won’t be as clear. In any event, for the broader topping formation to trigger the double-bottom in the mid-23300s along with the 200-day MA needs to break.
Dow Daily Chart (Descending wedge still intact)
All the U.S. indices are currently putting in ascending wedges (best seen on the hourly time-frame), which should break this week. A downside break would keep the aforementioned Dow structure in place. The S&P 500 and Nasdaq 100 have the cleanest ascending wedges when looking at the hourly.
The wedges look corrective in nature after the March decline, but could break to the top-side too, which is why we need to wait for them to trigger. An upside breakout would be at greater risk of failing, but we’ll run with what the market presents, and should it fail we’ll reverse course. In the S&P 500 a downside breakout would likely have the 200-day MA and Feb ’16 trend-line quickly back in focus.
S&P 500 Daily Chart
S&P 500 Hourly Chart (Wedge)
Turning to the Nasdaq 100 daily, a breakdown could cement a right shoulder of a head-and-shoulders top. Even if the 100 were to rally further from here, though, the H&S topping scenario will still be on the table.
Nasdaq 100 Daily Chart (Possible H&S)
Nasdaq 100 Hourly Chart (Ascending wedge)
For the intermediate-term fundamental/technical outlook, check out the Q2 Forecast for Global Equity Indices
Crude oil on the verge of dropping below twin peaks
After last week’s breakout above the January and March peaks, crude oil is on the verge of failing back below. It’s currently sitting at support, but a close down into the 65s is seen as opening up a path for a larger pullback.
For now, it will be viewed as only a pullback given the broader bullish trend with the Feb trend-line as a possible target on a deep retracement. Large swings with limited progress has been oil’s path the past few months, so that would be in line with how its been ‘behaving’ even if it is to continue to new heights.
US Oil Daily Chart (watch for break below peaks)
For the intermediate-term fundamental/technical outlook, check out the Q2 Forecast for Crude Oil
Gold/silver range-trading mentality remains
Gold and silver remain contained by resistance, and generally warrant a range-traders mentality. The approach is still to look to the perimeter of the range for fades until one side or the other gives way. Silver is stuck below a thicket of resistance below 16.90 and is viewed as the better candidate for shorts of the two major precious metals.
Gold Daily Chart
Silver Daily Chart (thicket of resistance)
For the intermediate-term fundamental/technical outlook, check out the Q2 Forecast for Gold
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---Written by Paul Robinson, Market Analyst
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