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Gold, Oil, Currencies & Interest Rates

By Colin Twiggs
June 19, 2007 4:00 a.m. EST (6:00 p.m. AEST)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment advice. Full terms and conditions can be found at Terms of Use.

Gold

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.

gold chart

Source: Netdania





Crude Oil

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]).

crude oil






Currencies

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.

euro us dollar

Source: Netdania

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.

us dollar yen

Source: Netdania

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]).

us dollar yen

Source: Netdania





Treasury Yields

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 term.

The rising yield differential (10-year minus 13-week treasury yields) is a healthy sign for the economy.

10 year treasuries and yield differential

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.

13-week treasuries and yield differential





Stock Markets

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.

sp 500 tests all time high

Wright Model

Probability of recession in the next four quarters fell to 38 per cent according to the Wright Model.

wright model



A common thread that runs through most major religions is the Golden Rule:

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.



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