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It has been a year since gold began its downward biased consolidation out of the acute phase of the Euro meltdown and resulting hysteria. In that time, the deflation case was released from the jail that had been a heightened public fear of inflation (the pinnacle of which was in spring of 2011, a time when bond king Bill Gross was very famously short long-term US Treasury bonds).
I mentioned yesterday that ES and SPX were looking short term toppy and that's even more the case today. On ES we have a possible rising wedge forming as I mentioned yesterday, and within that rising wedge ES has broken short term (weak) rising support and now formed a possible double-top. On a break below 1390 the pattern target is in the 1378 area, but I'd really be looking for a move to rising wedge support in the 1370 area.
The decision at the ECB meeting yesterday was a strong indication that the fighting talk from Draghi, Merkel and others last week was just wind, and that there will most likely be no big push from the ECB to start printing money on a large scale, because the Germans won't accept it.
There was a substantial decline on the news which pushed SPX slightly below the 1360 area support zone with the daily middle bollinger band and the 100 DMA, and recovery over 1360 by the close. If we see more downside then main support is in the 1335 area, but as I said on Monday, the 1360 area is the first obvious support area and it may hold:
SPX closed down yesterday for the third day this week and we have a series of short term lower highs and lows, so as long as that lasts we are in a short term downtrend. On the SPX daily chart first decent support is still in the 1360 area at the middle bollinger band and 100 DMA, and secondary and main support is still in the 1335 SPX area if that breaks:
Just for a change of pace I'll mainly be using futures charts today. Not much to add to yesterday's charts on SPX with a doji at the upper bollinger band on the daily chart, and the rising wedge I showed on the 15min chart has now broken the support trendline as expected.
Rising support has also broken on the ES 60min chart on strongly negative 60min RSI divergence. If you look at the last couple of months on the chart you can see that these divergences have been a very good signal of a coming reversal:
