S&P500 Daily chart 7:10AM EDT 7/12/2012

Previous: S&P 500 Breaks Key Support; 1303 is Next (7/12)

S&P 500 futures started to anchor into a declining channel since the 1375.06 high on July 5th. It broke below June’s rising trendline on July 12th, but has pulled back since. As we get ready for the 7/13 US session, the pullback is testing the short-term declining channel resistance.

What the market does this Friday will be key. If it respects the channel and continues lower, we have more reason to believe that the breakout is valid, and that risk-bears are in control for next wee, with the next support pivot at 1303, before exposing the 1262 June low.

Otherwise, a break above the channel, and a break above the 1340-1341 area should invalidate the breakout, and reflect a market that continues to hold risk-on dynamic, bringing July’s high at 1375.06 back in sight.

Remember risk-on gives USD and JPY strength, and pressures commodity currencies as well as the EUR and GBP. Risk-off has the opposite effects.

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist of FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.