Another day with no significant reversal on equities, and though upside progress in the last two weeks has been very limited on SPX, it is still crawling up the strong resistance trendline I have on the SPX 60min chart. SPX is now trading under the support trendline from the Dec 19th low and is showing increasing negative divergence on the daily RSI, but is showing little sign of actually retracing. In the event that SPX should hit my resistance trendline again, I see that in the 1372/3 area today, so we may see a test of the 2011 high shortly:
That wasn't a chart target and regional instability is obviously one factor behind that prediction. The other is the fast changing basis of crude oil demand, with rapidly increasing demand from the world excluding the US, Europe and Japan, only partly masked by gently falling demand there. Oil demand is growing fast and supply is relatively inelastic, so there is a growing imbalance there that can only be curbed either (temporarily) by economic weakness in emerging markets, or by price rising enough to choke off rising demand and increase supply. Throw in instability in oil producing regions and a possible confrontation with Iran, and you have a potentially very explosive mixture. We'll see.
Here's a great chart from Chart of the Day showing the demand levels from the old world and the new since 1987 and you'll see what I mean. You can see the original article here or by clicking on the chart below. I highly recommend their free emails every day with thought-provoking charts covering many areas:
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