Tuesday, February 8, 2011

S&P 500 ~ Pre-Market Warm-Up 8 February 2011

The SPX hit 1323 yesterday. This rally entered its seventh month and so far there is no sign that it'll stop anytime soon.

Next targets above are the 1335ish level where wave [i] equals wave [v]. However, I do not expect the rally to end there. I think it'll hit 1350-70 before the bears get there next chance again. Important support still is at 1260-75. If we decline below that, I think, we'll revisit the 1220ish area again.

As per my observation the Dollar usually bottoms three weeks before the market tops.

There is a potential USD bottom at 77 / EUR/USD top at 1.3850. Confirmation that the bottom/top is in we get on a daily close above 78.50/below 1.35. So if we get the confirmation expect a stock market top late February.

The EUR/USD declined a bit further than I expected, we're getting the bounce towards 1.37ish now though:

As said before, the start looks promising for the bears but we learned last week that one should go short only after the downtrend is confirmed and not before. ; ) So, watch for a convincing break of 1.35ish.

The Dollar Index may be forming the right shoulder of a big inverse H&S. Watch for a breach of the neckline at 78.5.