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Saturday, May 14, 2011

Weekend wrap.

The week turned out to be a round trip, capped by the weak finish. Gold printed a weekly doji candle and oil gained a tiny bit despite some rise in the dollar. The chart for the SPX is as interesting as they get, with several technical patterns in play.
There is an inverted H&S consolidation with a breakout and now the neckline being retested- a bullish pattern. There is also a support from the blue trendline. On the other hand there appears to be a deja vu of the pattern seen in February/March as encircled, suggesting that quite a bit of selling may still be in cards short term, with support around 1295. In support of this resolution is the non-impulsive pattern of the wave from March lows, and best fitting count  would be an ABC correction as marked. Back to the positives again: the uncertainty should be resolved rather quickly when the index breaks either blue or the red trendline. Anyway, SPX did not arrive yet to its top for this bull and more rally will eventually follow.
Russell 2000 is hanging on the support and could drop easily by 50 points if that's the direction of the move. If that happens we may be seeing actual top in making for this index. Just to be clear, bounces and retest would happen but just to complete the distribution process.
 US dollar had another decent week, pushing into resistance zone but target of around 62 still stands, and commodities should start picking up soon.
Oil held 95 and may have completed its correction, with the caveat that a final drop to the 200 DMA, currently around 90 may be a risk.
Silver printed weekly long-legged indecision doji candle and is simply writing its own story, that will be a legend for future generations. Near term a transition into a trading range as noted in the last weekly update is likely, with the caveat that early drop next week may push it down to lower level supports around 27 and 24.
In summary, after the indecision last week we may get some direction next week and that should be apparent early on. R2K is at risk for having topped out but I do not believe that top for the SPX yet arrived and commodities and gold should start rallying soon.

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