S&P 500- Coiling Pattern
Coiling patterns are tricky. This particular pattern initally produces a false breakout that quickly reverses in the opposite direction. In this case, a final short squeeze rally could allow such a senario to play out. Also, this pattern seems more fitting when considering the elliot wave count.
S&P Elliot Wave Count
Although it is still possible we have not quite completed the corrective pattern of wave 4, the final wave 5 is imminent and should push stocks into the 1328-1334 target area. Tomorrow, if Bernanke dissapoints investors with no QE3, which he will, a sell-off into the close may produce the long awaited reversal in stocks. This scenario is based on the expectation that we surge tomorrow morning, but give back all the gains after the announcement.
The U.S. Dollar Index- 4 hour chart
The final rally in stocks could allow for the dollar to head lower and fill its gap.
The U.S. Dollar Index- Daily Chart
Confluence of support lies at the declining trendline and gap support.