Equity markets are edging upwards on low volumes, indicating a lack of enthusiasm from buyers, and the Dow Transport Index signals declining general economic activity.

The negative yield differential is likely to cause problems in the months ahead, but falling long-term yields may revive the housing market.

Crude oil fell through support at $71/$72, starting a primary down-trend. If this continues, expect gold to weaken.

The Nasdaq 100 completed a flag on Monday, with a target of the 1630 resistance level. Volume is rising but narrow ranges between open and close indicate that buyers are encountering opposition. Twiggs Money Flow (21-day), however, suggests accumulation as closes are near the daily highs.

The Dow Jones Transportation Average and lead indicators, Fedex and UPS, are all in primary down-trends -- signaling that the economy is slowing.

The Dow Industrial Average respected support at 11300 and appears headed for a test of the all-time high at 11650. Continued low volumes place a question-mark over the index's ability to break through this major resistance level.

Medium Term: Twiggs Money Flow (21-day) is rising, signaling accumulation.

Long Term: The Dow continues in a primary up-trend, with support at 10700.

The S&P 500 completed a short retracement and appears headed for a test of the May high at 1325. Again, low volumes signal trend weakness.

Medium Term: Twiggs Money Flow (21-day) is rising, signaling accumulation.

Long Term: The S&P 500 is in a slow primary up-trend, with primary support at 1220. The index is oscillating in a channel around the linear regression line, with stubborn resistance at earlier highs and initial support levels often penetrated. The pattern appears set to continue.

Treasury yields

The yield on 10-year Treasury notes is falling steeply as inflation expectations are lowered. 

Medium Term: Core consumer prices rose a low 0.1% in July, according to the Department of Commerce, confirming the Fed's view that the economy is slowing. However, the overall price index rose 0.3%, reflecting higher energy costs and the continuing threat of a resurgence in core inflation.

Long Term: The yield differential (10-year T-notes minus 13-week T-bills) is in negative territory, increasing the risk of a down-turn.

Probability of recession in the next four quarters increased to 32 per cent, according to the Wright Model (developed by Fed economist Jonathan H Wright). A spike that reaches 50% would warn of a stronger down-turn than the "soft-landing" most investors hope for.

Gold

Spot gold continues to test support at $600. Falling crude oil prices should weaken gold and strengthen the dollar.

Medium Term: A reader correctly pointed out that the breakout from the recent large symmetrical triangle was close to the apex. The strongest signals are taken from breakouts two-thirds to three-quarters along the length of the triangle, though any breakout before the apex is still a valid signal. Penetration of support at $600 would be a strong bear signal. The target for the triangle breakout is $450: (630 - (730 - 550)), well below primary support at $540/$550.

Long Term: The primary trend remains up, but surrounded by uncertainty.

Crude Oil

Light Crude gapped below support to commence a primary down-trend, Friday's open-close reversal day giving early warning. Another pull-back may test the new resistance level; if it respects resistance at $71/$72 that will confirm the down-trend.

Currencies

The Euro is trending upwards, headed for another test of resistance at 1.30 dollars. The recent pattern does not qualify as an ascending triangle because the lower border has not been respected by two clear down-swings. However an upward breakout above 1.30 would signal a test of the all-time high at 1.35/1.36 (and a bullish sign for gold).

On the other side of the world, the dollar is strengthening against the yen: testing the upper border of a long-term descending triangle. An upward breakout would be a positive sign, but the overall pattern is bearish.

United Kingdom

The FTSE 100 tested the upper border of the symmetrical triangle on Wednesday [W], but failed to breakout. Triangles are normally continuation patterns when found in an up-trend, the signal weakening as we approach the apex of the triangle. Watch for a breakout above 5950 or below 5850.

Medium Term: The intermediate trend is upwards. If Twiggs Money Flow (21-day) respects zero, that would be a bullish sign.

Long Term: The primary up-trend continues.

Japan

The Nikkei 225 pull-back respected the new support level at 15700, confirming the up-trend.

Medium Term: The index is in an intermediate up-trend and likely to test resistance at 17500. Twiggs Money Flow (21-day) is rising slowly, however, indicating continued uncertainty. 

Long Term: The primary up-trend is up.

ASX Australia

The All Ordinaries is headed for a test of resistance at 5100 after Thursday's strong blue candle and big volume. Friday's short red candle and lower volume reveals some hesitancy, but should not change the direction of the trend.

Medium Term: The latest retracement [F] will give a strong indication as to future direction. A short duration (two/three days) would be a strong bull signal, while a longer retracement that ends below 5000 would be bearish. 

I hesitate to call the pattern of the last 3 months an ascending triangle because the rectangle from [A] to [B] is not a regular down-swing. What is clear, however, is that 5100 is shaping up as a key resistance level and a breakout above this would be a bull signal. Twiggs Money Flow (21-day) is rising, signaling accumulation.

Long Term: The All Ordinaries is in a primary up-trend with support at 4800.