January 28, 2006
The close below support at 1270 on the S&P 500 triggered strong buying, evidenced by narrow ranges and substantial volume. The index is headed for a test of short-term resistance at 1295, the recent high.
The 10-Year treasury yield is preparing for another test of resistance at 4.60%. While a breakout would result in short-term pain, it would strengthen the weak yield differential (10-year T-notes minus 13-week T-bills), a long-term positive for the economy. Otherwise, the Fed may be forced to slow short-term interest rate hikes in order to shore up the flat yield curve -- while hoping that inflation does not take root.
New York: Spot gold continues to consolidate above support at $540, closing at $558.50 on Friday. The narrow consolidation, during a primary up-trend, is likely to resolve in a continuation of the trend.
The Big Picture: Gold is in a primary up-trend with a target of $580: 540 + (540 - 500). Increased demand signals weakness for the US dollar.
After a false break below support the FTSE 100 resumed a strong up-trend. Twiggs Money Flow (21-day) formed a low above the zero line at [a], signaling accumulation.
The Big Picture: The primary trend is up, with a target close to 6000: 5500 + (5500 - 5140) = 5860.
The Nikkei 225 respected support at 15200, followed by a rally to test resistance at 16400. A new high, confirmed by a retracement or consolidation that holds above 16400, would signal that the strong primary up-trend will continue. Twiggs Money Flow (21-day) formed a low above the zero line at [a] -- a possible start of further accumulation.
The Big Picture: The Nikkei is in a strong primary up-trend. The retracement to 15200 may provide a base for further gains. The target for a breakout would be 17500: 16400 + (16400 - 15300).
The All Ordinaries confirmed the strength of the up-trend with a strong blue candle on Friday, following a breakout above resistance at 4820. Earlier in the week the index tested support at 4730, with a long tail signaling buying strength. This was followed by increased volume at  as buyers encountered selling at the resistance level; the strong close again signaling buyers' commitment.
The Big Picture: The index is in a strong primary up-trend with a target close to 5000: 4620 + (4620 - 4300) = 4940.
Wisdom consists in not exceeding that limit.
~ Elbert Hubbard