Gold, Oil, Currencies & Interest Rates
By Colin Twiggs
June 19, 2007 4:00 a.m. EST (6:00 p.m. AEST)
Spot gold rallied over the last few days, but remains in a
secondary correction. Expect a test of primary support at $630.
Strong crude prices normally support demand for gold, but this
is being offset by a strong dollar.
In the longer term, the primary trend remains up and a rise above $695 would signal continuation of the up-trend, while a fall below $630 would signal that the primary trend has reversed.
December Light Crude broke out above the right-angled descending broadening formation after a failed down-swing (partial decline). The target is $76 (71+[71-66]).
The euro retraced to test the long-term trendline on the weekly chart as expectations rise of further rate hikes by the Federal Reserve. Breakout below the trendline would signal trend weakness, while a fall below $1.29 would reverse the primary trend. Respect of the long-term trendline, on the other hand, would signal another test of resistance at $1.37.
The dollar broke through resistance at 122 against the yen, signaling continuation of the primary advance. Retracement to test the new support level is likely in the short/medium-term, but the long-term target is 135.
The Australian dollar continues its strong up-trend, after the break above 0.8400. The long-term target is 0.9200 from the large triangle on the weekly chart (0.80+[0.80-0.68]).
The ten-year treasury yield respected resistance at the 2006
high of 5.25%. Short retracement or a narrow consolidation
would be a bullish sign. Higher long-term yields raise the
required rate of return on equity investments and place
downward pressure on Price-Earnings (PE) ratios in the longer
The rising yield differential (10-year minus 13-week treasury yields) is a healthy sign for the economy.
Short-term (13-week) treasury yields continue to fall, signaling a strong flow from long-term to short-term treasuries in anticipation of future rate hikes.
The Hang Seng made a strong breakout above 21000 - so the influence from China is now positive. The Dow Industrial Average consolidated in a narrow range on low volume, a positive sign for the index. Breakout above 13700 is now likely. A fall below support at 13300 is not expected and would warn of a secondary correction.
Probability of recession in the next four quarters fell to 38 per cent according to the Wright Model.
A common thread that runs through most major religions is the
What is hateful to you, do not do to your neighbor: that is the whole Torah; all the rest of it is commentary...
~ The Talmud
Do unto others as you would have them do unto you.
~ The Gospel of Matthew
Hurt no one so that no one may hurt you.
~ The Farewell Sermon of Muhammad
What you do not wish upon yourself, extend not to others.
~ The Analects of Confucius
This is the sum of duty; do naught unto others what you would not have them do unto you.
~ Mahabharata (Hindu)
Hurt not others in ways that you yourself would find hurtful.
~ Udana-Varga (Buddhist)
To understand my approach, please read Technical Analysis & Predictions in About The Trading Diary.