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Thursday, 14 May 2015

Resistible Force Meets Movable Object + USD Update

There's not a great deal to add on SPX today. Bulls failed to recover over the daily middle band yesterday but did establish a three touch rising support trendline from the 2067 low. This is a springboard to attempt the marginal new high that I'm looking for here in the next trading days and the big gap up is a promising start to that. On a break below that rising support trendline the chances are that both the short term and 2015 high would already have been made. SPX 5min chart:
I was expecting this decline on USD from the March high to reverse back up from rising megaphone support in the 95 area, but instead USD broke rising megaphone support. What now then? Well there is a strong case for further downside here and in my view there a three higher probability paths that USD may take from here. These are as follows:

First option - USD has broken down from a double top targeting major support at the 61.8% fib retrace area at 88.70. USD may continue straight there. Most likely see a resumption of greater uptrend there.

Second option - USD bounces here at 38.2% fib retracement support and does a 38.2% fib retrace of the decline so far into the 96-7 area. The double top then plays out into the 88.70 area target. This is the most bearish option as it sets up a possible H&S at the 38.6% fib neckline that would then target a 77.2% target well below 88.70 area support. This would increase the chances that the 100.71 high was a major top, and that the megaphone will therefore retrace all the way back into the low 80s.

Third option - The double top fails here at the 38.2% fib and the uptrend resumes into at least the major double bottom target in the 105 area.

I'm watching what happens at this support level with very great interest. USD daily chart:
SPX has been kicking round in this area for subjectively forever. Neither side seems to have much conviction and it's been hard to get anything going for long. I'm hoping that bulls have the juice left to get SPX into a new all time high. After that they can and will most likely fail into the summer retracement, which may well last the rest of the year. The last print of 2014 was 2058.90, and my historical stats are not expecting to close significantly over that at best, with a very possible close 5% to 10% below.

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