STOCK INDICES SPI Bearish unless above 4831.

Last week the SPI made a third attempt at the 4800 level, rejecting it in spectacular style. Moreover, on Wednesday an intraday break of the two prior highs was made at 4831 but the closing level was well below previous resistance at 4779. This of itself is a bearish signal because a spike top was formed, but occurring on a third rejection of the highs has established a potential triple top. Another factor has added a cold shower to the SPI chart: the lows on Thursday (4735) went below the lows of Tuesday at 4737. The smaller double top pattern will not be confirmed unless the SPI closes below the intervening low of the previous high is on January 7 at 4654 (whish is also next support). A triple top pattern – a far more ominous bearish signal – would be confirmed if the SPI closes below the low of November 23 at 4550. That constitutes support as does the low of December 2 at 4634.

Cat Davey

A recovery this week is likely to fund resistance at Friday’s highs of 4777 followed by the sticking point of 4800 and then the spike top high of 4831. A close above the latter level would change the outlook to bullish.

RES: 4777 4800 4831
SUP: 4654 4634 4550

S&P 500
Bearish unless above 1296.

The S&P formed a bearish engulfing pattern last week. More downside action this week will confirm a reversal in trend but so far, apart from technical indicators reflecting an overbought situation, there has been limited capitulation. A rebound on Friday would have to close above the recent high of 1296 to banish the bearish outlook. First support is at Thursday’s lows of 1267 followed by the well-tested lows of January 3 at 1255 then the Fibonacci 38% retracement of all the gains since November (1165 – 1296) at 1246.

A rebound this week is likely to find resistance at the highs of last week of 1296 followed by the psychological level of 1300 then 1315.

RES: 1296 1300 1315
SUP: 1267 1255 1246

COMMODITIES

Gold spot
Bearish unless above 1393.

The most striking element of the chart for gold is the fact there has been no sizeable corrections since October 2008. Drawing an uptrendline under that action means the trend won’t be broken until gold breaks US$1290. But in the meantime the chart has confirmed a head and shoulders pattern that started to form in October. The timing means it is significant even if the vertical distance of the pattern (and potential downside magnitude) is only about $90 and close to recent lows.

Gold closed below the key level of 1352 last week and proceeded to make a low of 1337 on Friday. Next support is the Fibonacci 38% retracement of the gains since late July at 1326 (which coincides with the head and shoulders target). The 50% mark is at 1294 (close to the long-term uptrendline) followed by the last significant highs, made on June 21 at 1265.

A reversal this week could take gold as highs as Thursday’s high of 1350 followed by the high of Wednesday at 1379 then high of January 13 at 1393.

RES: 1350 1379 1393
SUP: 1326 1294 1265

Crude Oil
Bearish below 88.45; bullish above 93.47.

Crude is on the verge of confirming a double top pattern that dates back to an initial high of US$93.43 from January 3. The confirmation would take place if crude closes below the January 7 lows of 88.45. Next support would be at the October highs of 86.75 followed by the November lows of 81.41.

A close above 93.47 this would be a bullish signal and give next resistance at 97.89 followed by the triple-digit psychological resistance of 100.

RES: 93.47 97.89 100.00
SUP: 88.45 86.75 81.41