Intermarket Reference Levels for the Week Ahead

Mar 13, 2011: 11:54 AM CST

There’s an interesting similarity of price reference levels for the three main “Risk-On” markets – as they’re all balanced at critical support levels.

Let’s take a quick look at the reference levels to watch this week in the S&P 500, Gold, and the newly volatile Crude Oil:

First, the key level in the S&P 500:

I’ve actually been hyper-focused in this week’s postings on this critical level, but it’s really simple:

The ’round number” reference and 50d EMA – along with lower Bollinger Band – all align at 1,300.  So far, buyers closed the week above this level which is bullish, but there’s one more key reference level to watch and it’s the end-of-January swing low at 1,275.

In terms of price trend structure, a trend reversal requires a lower high (check) and lower low, which would trigger with a breakdown under 1,270 – and would likely trigger a lot of stop-losses and entries from eager bears.

Anyway – keep 1,300 as the immediate and then 1,275 as the critical reference level for the S&P 500, which translates to 12,000 and 11,800 for the Dow Jones.

Next – our good friend gold:

As I mentioned this week to members of the Weekly Intermarket Reports, I’m a little concerned with the recent price action in gold as it pushed to new highs above $1,440.

I’m watching $1,450 as a simple trigger point, but generally you expect to see an impulse or big breakthrough as a market pushes its way to new lifetime highs – and gold didn’t do that recently.

That’s a non-confirmation and something to watch closely.

On the downside, the key easy-to-remember level to watch is $1,400 which is a round-number and horizontal level – and also just under the rising 20d EMA.

A breakdown under here would be similar to the S&P 500 losing 1,300 though the real trouble comes on a break under the 50d EMA at $1,380 – which sets the downside play for $1,320 – and anything under $1,300 soon means that something went terribly wrong with the gold market… but that’s another story.

Watch $1,400 then $1,380 as your key points in the week(s) ahead for gold.

Finally, despite all the volatility in crude oil recently, it sits also on a similar confluence support zone:

As I’ve been showing in the weekly reports, we had the 50% Fibonacci Retracement at the key $92.50 level and a break above $93 set-up a target play for the 61.8% big retracement (of the whole decline) at $105.50.

Needless to say, oil met that target much quicker than expected, but that’s one of the main reasons I use IF/THEN price targeting logic.

Anyway, the current level to watch in Crude Oil is the $99 per barrel confluence of the 20d EMA and 38.2% Fibonacci Retracement as drawn, though it may be easiest just to say “$100” as the level to memorize/reference.

These are the reasons I’m such a big fan of intermarket analysis – you can cross-check one market with another and see if a similar chart structure exists – as does now – though I’m just showing the “Risk-On” markets.

While no one knows the future, one can use these reference levels as guides for both short-term (intraday for example) or intermediate term (swing and beyond) style trading/investment strategies.

For now, keep these levels in mind and play the move up off of support as the trends all resume… or alternately play potential breakdowns in support as trends send potential early reversal signals.

That’s the ultimate goal – answering the question:

“Is this recent pullback just a retracement to be bought in the context of a prevailing up-trend… or is this the start of a deeper retracement that may devlove into trend reversals?”

Objective, non-biased analysis of key inflection price points help you answer that question in real time and participate as markets move away from or down through these levels.

Corey Rosenbloom, CMT
Afraid to

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3 Responses to “Intermarket Reference Levels for the Week Ahead”

  1. Horowitzemail Says:

    As usual, an excellent review and objective article…


  2. steveo77 Says:

    Great review, a conflicted market where everything is set to take off, we just don't know what direction….

  3. Intermarket Fallout from Japan Nuclear Situation | Afraid to Blog Says:

    […] the pre-market levels in mind as they all break the major inflection points in all these markets – namely the 1,300 then 1,275 in the S&P 500, $1,400 in Gold, and $99.50 in […]