Monday, March 21, 2011

Lower Weekly Reference Levels for Gold, SP500, and Oil

How far will the current pullback in the “Risk-On” markets last? Has the pullback already ended and are we going to start marching on to new recovery highs?

Let’s take a look at the current weekly chart picture in the S&P 500, Gold, and Oil to see weekly lower support reference levels should these retracements be deeper than what we saw last week.

First, the S&P 500:

The purpose of this post is just to give a quick take on lower reference levels should they come into play. If this pullback is all we get, then they simply won’t be tested.

This post answers the question:

“Should the risk markets pull-back lower, where might they find potential support?”

That being said, there are three main weekly levels to watch in the S&P 500:

The 1,267 level is the 20w EMA which is just under the key 1,270 pivot. So far, this level has held in what may be the end of the retracement… but if not, we’ll look to:

The 1,228 Level which is the famous 61.8% large-scale Fibonacci level that also happens to be swing highs from April 2010 (pre-crash) and November 2010.

Finally, the 1,200 level is both a simple “Round Number” and the 50w EMA.

We start talking ‘reversal’ instead of ‘retracement’ under 1,180.

Now, let’s apply that logic to Gold:

Gold may be a little easier to reference, in terms of simple support.

First, there’s the ‘obvious’ $1,400 level we’re all watching, and under that it’s the 20 week EMA at $1,370. So far, these support zones have held gold in this week’s pullback.

If under the $1,370 level, we’d be looking for the $1,320 prior low if not a full test of $1,300.

However, discussing these lower levels is only appropriate if we soon fall back under $1,400. If not, the uptrend continues.

Finally, let’s end with a quick take on the newly volatile Crude Oil market:

As I mentioned before and to weekly members, we looked to play an “IF/THEN” breakout above $92.50 to the $105.50 level which were simple plays between the 50% Fibonacci ($92.50) and 61.8% level ($105.50) from the entire bear market.

That “IF/THEN” payed off and occurred much quicker than anticipated.

So now, we use the $105.50 level as a key reference, and under that it’s simply $100 as an “all eyes are watching” level.

A break under $100 allows for a retest of the $92.50 key pivot, and under there – namely under $90 – allows for a move down to the $85 level.

Once again, as long as oil stays above $100, lower targets do not come into play – they only do so if we breakdown through one level and monitor price as it moves to the next.

These are probably over simplistic levels, but it does benefit investors and traders to know key reference levels and what to expect from one to the next.

Keep these in mind if we do start to trade lower in these markets, but be ready to turn just as quickly to upside projections and new recovery highs if the retracement this week is all we get.

Corey Rosenbloom, CMT

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