S&P 500 Breaks Lower as US Dollar Overturns Bearish Chart Setup

Ilya Spivak
October 10, 2012

THE TAKEAWAY: The S&P 500 has taken out initial support, boosting the case for an emerging double top, while the US Dollar has nullified a bearish chart setup.

S&P 500 – Prices followed the formation of a bearish Evening Star candlestick pattern with a break below rising trend line support set from late July, reinforcing the case for a double top at 1466.10. Sellers now aim to challenge support at 1422.40, a barrier reinforced by the bottom of a rising channel set from early June (1419.00). A break below that exposes the 1400 figure. Trend line resistance is now at 1454.80.

SP_500_Breaks_Lower_as_US_Dollar_Overturns_Bearish_Chart_Setup_body_Picture_5.png, S&P 500 Breaks Lower as US Dollar Overturns Bearish Chart Setup
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SP_500_Breaks_Lower_as_US_Dollar_Overturns_Bearish_Chart_Setup_body_Picture_5.png, S&P 500 Breaks Lower as US Dollar Overturns Bearish Chart Setup

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CRUDE OIL Prices are testing minor falling trend line resistance at 92.80 that has capped gains over recent weeks. A break higher targets the 94.00 figure, followed by the underside of a rising channel set from early July (now at 97.49). Near-term support is at 87.70, the 38.2%Fibonacci expansion, with a push below that targeting the 50% level at 83.76.

SP_500_Breaks_Lower_as_US_Dollar_Overturns_Bearish_Chart_Setup_body_crude.png, S&P 500 Breaks Lower as US Dollar Overturns Bearish Chart Setup
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SP_500_Breaks_Lower_as_US_Dollar_Overturns_Bearish_Chart_Setup_body_crude.png, S&P 500 Breaks Lower as US Dollar Overturns Bearish Chart Setup

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GOLD Prices continue to push lower after completing a bearish Dark Cloud Cover candlestick pattern below resistance in the 1790.55-1802.80 area, a setup reinforced by negative RSI divergence. Sellers have now cleared the bottom of a Rising Wedge chart pattern, exposing the 23.6% Fibonacci retracement at 1747.20 as the next downside objective. The Wedge bottom, now at 1772.09, has been recast as near-term resistance. A push back above that threatens 1790.55-1802.80 anew.

SP_500_Breaks_Lower_as_US_Dollar_Overturns_Bearish_Chart_Setup_body_Picture_7.png, S&P 500 Breaks Lower as US Dollar Overturns Bearish Chart Setup
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SP_500_Breaks_Lower_as_US_Dollar_Overturns_Bearish_Chart_Setup_body_Picture_7.png, S&P 500 Breaks Lower as US Dollar Overturns Bearish Chart Setup

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video.

US DOLLAR Prices invalidated a Bearish Engulfing candlestick pattern and are now probing through resistance in the 9928-38 area to the top of a falling channel established from the June 1 swing high (9950). A break above this boundary initially targets the 23.6% Fibonacci expansion at 9976. Rising trend line support is now at 9818.

SP_500_Breaks_Lower_as_US_Dollar_Overturns_Bearish_Chart_Setup_body_Picture_8.png, S&P 500 Breaks Lower as US Dollar Overturns Bearish Chart Setup
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SP_500_Breaks_Lower_as_US_Dollar_Overturns_Bearish_Chart_Setup_body_Picture_8.png, S&P 500 Breaks Lower as US Dollar Overturns Bearish Chart Setup

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

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