Equities, Commodities Pushing Higher
12/13/2005
The cash S&P 500 (SPX) exhibits a near term sideways pattern superimposed on the October-December upleg. Perhaps the sideways pattern is a pre-FOMC preparation? Who knows? We will have to wait-out Tuesday's FOMC meeting and policy statement, and the volatility that usually follows, prior to a resolution to the extreme near-term pattern and the resumption of the larger, likely incomplete three-month upleg.
Looking at the daily chart, we see that both Friday's and Monday's sessions appear to form a sideways type of pattern off of last Thursday's pullback lows at 1250.91. A hurdle of 1263 is needed to trigger the upside acceleration, while a break below 1255 should trigger a retest of important support at 1251-1250.
Right now, my work favors an upside resolution to the pattern. However, in that tomorrow is Fed Day, which usually involves some knee-jerk action in both directions, we will have to see whether the bulls or the would-be bears have the upper hand after the FOMC issues its next policy statement.
Meanwhile, after plunging to test key support at $59/bb. Friday, oil prices have avoided a nasty breakdown, and instead have rocketed towards an upside breakout resistance level.
In the topsy turvy world of crude oil trading, after a nasty downside reversal Friday, which pressed prices right into critical near-term support at $59 (for the third test of $59 in three sessions), prices reversed to the upside today and now are pushing up against last week's recovery rally peak at $61.50. If $61.50 is hurdled and sustained, we should expect additional strength into my next optimal target zone of $62.60-$63.
Finally, looking at gold, the very big picture view of monthly gold prices shows that the price structure has blasted above $500 and above the 1983 high at $509.25 - on the way to my next optimal target zone of $550.
In the event that spot gold prices thrust above, sustain and close above $551/553, we will have to start looking at $600-$620 as the next likely target window.
At this juncture, only a sudden downside reversal that breaks and sustains below $519.50 will trigger our initial signal that the current upleg has peak and is starting a corrective rest process.
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