THE TAKEAWAY ? A corrective rebound in the S&P 500 has been mirrored by a pullback in the US Dollar that promises to yield an attractive opportunity to buy the safe-haven currency.
S&P 500 ?The longer-term formation of a Head and Shoulders top we initially noticed four weeks ago and have been monitoring sinceappears on the verge of completion after prices broke below the June low at 1257.90. However, as we suggested yesterday, a corrective pullback has been mounted from the March 17 low (1246.00). Initial resistance lines up at 1263.59, the 23.6% Fibonacci retracement level, with a break above that exposing the 38.2% level at 1281.74.
CRUDE OIL ? Prices continue to test the lower boundary of a long-term rising channel that has guided the rally since March 2009, with a break lower on a weekly basis amounting to a structural trend reversal. Near term, piercing through Fibonacci support at $92.64 has exposed $90.77. Trend-based extension studies imply the measured target for the downswing from the July 26 high is at $87.75.
GOLD ? As we pointed out yesterday, prices are testing the upper boundary of a rising channel that has guided the rally higher since mid-May 2010. Sizing up near-term positioning, RSI studies are deep into overbought territory while a Doji candlestick below resistance at $1664.57, the 176.4% Fibonacci extension level, points to indecision and hints a pullback is ahead. Initial support lines up at 1647.74, the 161.8% Fib. Alternatively, a push through resistance exposes the 200% level at $1691.76.
US DOLLAR ? Prices pulled back from support-turned-resistance at the underside of a falling channel set from mid-June as expected as the S&P 500 began to recover out of oversold territory. More of the same may be ahead but only a daily close beneath the May 2 lowat 9336 would swing momentum back in favor of the bears. With that said, we will refrain from adding to existing long US Dollar exposure until the current down move exhausts itself.
Created Using FXCM Marketscope 2.0
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