Watching S&P 1087-1084 and the euro

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On Monday, the S&P 500 fell 1.0%. Breadth was negative by a 4:1 margin and the up/down volume ratio was negative by a bit less than 6:1. Total volume increased by 15%. The daily Coppock Curve still has a bearish bias for 19 of the 24 S&P industry groups.

In yesterday’s post, we pointed out that there were signs of potential positive divergence on the hourly chart. We also repeated our recent observations on the importance the 1087-1084 support range. Despite Tuesday’s pressures the positive divergence are now more obvious and the 1087-1084 range continues hold. Those conditions will take on a more bullish flavor if both the index and momentum move back through their respective hourly downtrend lines.

With that in mind, we remain cognizant of the fact that daily and weekly momentum indicators still have a bearish bias. Moreover, the decline of recent days does have an impulsive look to it. So, it still seems likely that, even if the index begins to regain its footing, the resulting rally will short-lived (a matter of just a few days.)

As a result, there are still no meaningful changes in our support and resistance benchmarks. Since the 1087-1084 range has repelled all setbacks over the past several weeks, we will continue to give the November-December uptrend the benefit of the doubt. Meanwhile, until the 1087-1084 range is broken, the door is still open for a more serious test of the 1121-1156 range that we have highlighted as a significant resistance area. As it is, last week’s recovery high came within 0.2% of that range. Conversely, a breach of 1087-1084 would be an initial indication of potential further weakness toward the 1029-1020 area.

Euro

Also in yesterday’s post we pointed out that the dollar index has rallied through what can be considered the dominant downtrend lines from both the March high and the July reaction high. With that in mind it is worth noting that the euro – which carries almost 58% of the weighting in the index – has decisively penetrated its own dominant trend line. Indeed, we can make a case that the euro have violated its trend lines more significantly than has the index. This could be another sign that the dollar is making – or has made an important low. Nearby chart support is at 1.46, then 1.44-1.43. Trend support is at 1.41-1.40. Resistance is at 1.50-1.52.