September 19, 2006 4:30 p.m. AET
Apart from low volumes, the Dow Jones Industrial Average rally of the last two months appears sound, but its ability to break through major resistance at 11650/11750 remains questionable. Weak candles from Thursday [Th] to Monday [M] signal short-term hesitancy, but this could resolve in either direction. Intermediate support is at 11325/11300.
The FTSE 100 formed an ascending triangle below resistance at 6000. This is a bullish continuation pattern, but weak closes and increased volume over the last few days are a shorter-term bear signal that may disrupt the larger pattern. Twiggs Money Flow (21-day) has also descended below zero, signaling distribution.
The latest dip on the All Ordinaries should validate the bullish ascending triangle, but it still has to overcome short-term resistance between 5030 and 5050. An upward breakout would test intermediate resistance at 5100, while reversal below 5000 would signal weakness and a possible re-test of the lower border -- a bearish sign. Twiggs Money Flow (21-day) has held above zero for more than a month so the bigger picture shows significant accumulation and favors a breakout above 5100.
Gold formed a downward-sloping flag below $600. This is a continuation pattern and is likely to lead to a downward breakout towards primary support at $540. Failure of the flag pattern, on the other hand, would lead to a re-test of resistance at $600.