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US Dollar Rally Gains Momentum as S&P 500 Top Takes Shape
Written by article default Tuesday, 12 July 2011 09:50
THE TAKEAWAY – The S&P 500 is making headway toward completing a major Head and Shoulders top, laying the foundation for a structural advance in the safe-haven US Dollar.
S&P 500 – Yesterday we discussed a potential Head and Shoulders top identified on the weekly chart. Zooming in to the daily chart to evaluate the near-term picture, we note a bearish Dark Cloud Cover candlestick followed by a break through 1334.87, the 23.6% Fibonacci retracement level. Prices are now testing below the 38.2% boundary at 1320.15, with a break below that exposing 1308.24 and 1296.34. Overall, a break below 1257.30 is needed to confirm the Head and Shoulders formation, exposing a measured target at 1138.50.
CRUDE OIL – Prices put in a Bearish Engulfing candlestick pattern below resistance at the 38.2% Fibonacci retracement of the 5/2-6/27 selloff, followed by a break through 23.6% Fibonacci extension resistance at 96.38. Near-term support now stands at $94.51, with a break below that targeting $93.00.
GOLD – Prices are testing a critical barrier at $1553.42, a level that has capped the metal for the past month and now coincides with support-turned-resistance at a rising trend line established from late January. A pullback from here would open the door to the possibility of a triple top, a compelling scenario considering the level’s extremely close proximity to the midline of a long-term rising channel identified yesterday. With that in mind, confirmation of a reversal is conspicuously absent, meaning the would-be bearish setup is not actionable at present. If a reversal does materialize, sellers will meet initial support at $1515.70.
US DOLLAR – Prices show through resistance at 9691.80 – the 50% Fibonacci extension level – to challenge the 61.8% barrier at 9726.94. A break above this boundary exposes the double top in the 9742.17-9764.97 region. The 50% Fib has been recast as near-term support.
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