September 23, 2006 0:30 a.m. ET (2:30 p.m. AET)
Gold weakened on the back of falling crude oil prices, but the dollar failed to strengthen -- indicating continued concerns over the state of the economy. The probability of recession in the next four quarters is still a modest 35 per cent according to the Wright model. If the dollar declines, gold is likely to strengthen.
Long Term: The Dow continues in a primary up-trend, with resistance at the all-time high of 11750 and support at 10700. A longer-term view of Twiggs Money Flow (21-day) shows the indicator whipsawing around zero, indicating continued uncertainty.
Long Term: The S&P 500 continues in a slow primary up-trend, with support at 1220.
The FTSE 100 posted a large red candle on Friday, low volume signaling an absence of buying support. Penetration of support at 5800/5820 would also break the long-term trendline, warning of a primary trend reversal.
Medium Term: Twiggs Money Flow (21-day) is trending downwards, signaling medium-term distribution.
Long Term: The primary up-trend continues, with primary support at 5500.
The Nikkei 225 closed below support at 15700 on Friday, signaling a slowing up-trend. A pull-back that respects the new resistance level would signal a test of primary support.
Medium Term: Twiggs Money Flow (21-day) continues to oscillate around the zero line, signaling uncertainty. The next target for the up-trend is the April high of 17500, but we would need an improvement in TMF for this to occur.
Long Term: The primary up-trend remains up, with support at 14200.
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The All Ordinaries intermediate down-swing encountered support at 4940 (last week's low). The tall shadow and exceptional volume on Thursday [Th] show sellers overwhelming an attempted rally, but buyers remain committed -- identified by a long tail and strong volume on Friday. Expect strong support between 4940 and 4880.
Long Term: The All Ordinaries continues in a primary up-trend with support at 4800.
My reference to 4800 as the primary support level is open to debate. We had a secondary correction from 5300 to 4800, followed by a recovery to test resistance at 5100, then narrow consolidation between 4900 and 5100 for the next 3 months. If we interpret the consolidation as a line, then 4800 is the primary support level. If not, then 4300 (or even 3900) remains as primary support for the present.
~ E James Rohn