The S&P and DX 2009-12-10

BarroMetrics Views: The S&P and DX 2009-12-10

Yesterday’s price action shows we are in a possible critical juncture in the DX (US$ Index) and the S&P. Yesterday, both formed neutral days at critical levels and with patterns that raise the probability that their counter trend moves may come to an end. If so, they will have aborted much earlier than I expected.

S&P

The S&P has the clearer pattern of the two. Let’s turn to Figure 1.

It shows that yesterday. The S&P completed the 1-day swing minimum target and reached the Primary Buy Zone: 1087 to 1083.

More importantly, Figure 2 shows that in the second half of yesterday’s trading, the S&P showed preliminary signs of again bouncing off the Primary Buy Zone. This would be the 4th attempt to break down. If it fails to break through this time, Gann’s Rule of 4 suggests there is a high probability we will breach the opposing boundary.

So we face the key question tonight: will the S&P produce a bullish conviction-bar? A bullish continuation will be a signal that the US$ may resume its downtrend. In  turn this has ramification for Gold and Crude.

Figure 3 shows the key resistance levels basis March as being:

  1. 1092 to 1097
  2. 1107 to 1109

A close bullish conviction-bar close above 1097 will be a preliminary warning that the S&P is about to resume the 18-day (monthly)  uptrend. A bullish conviction-bar close above 1107 will confirm the warning.

Given the current inverse relationship between the US$ and US stocks, a move up in the S&P has ramifications for the US$.

DX

Figure 4 shows that the DX has still not accepted above the critical high at 76.50 although we saw a marginal close above 76.50 on Monday (76.65) and reaction high (76.66) yesterday. Until we accept above 76.50, there remains the possibility of a Death Zone Failure.

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FIGURE 1 S&P Daily

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FIGURE 2  S&P 81-Minute

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FIGURE 3 ES March Market Profile

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FIGURE 4 DX Daily

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