Gold, Oil, Currencies & Interest Rates
By Colin Twiggs
August 7, 2007 3:30 a.m. EST (5:30 p.m. AEST)
Spot gold is retracing after a down-swing to $660, mid-way between resistance at $690 and support at $640. A rally to test the upper border of the large consolidation would be a bullish sign, suggesting an upward breakout. No rally would mean that a downward breakout is equally likely.
December Light Crude gapped down sharply to test the medium-term rising trend line. Expect some support at $71, with stronger support at $67. Failure of $67 would signal a test of the January 2007 low of $55.
The euro found support at $1.37/$1.36 and has rallied to test resistance at the earlier high of $1.3850. Breakout would offer a target of $1.41 (1.385+[1.385-1.36]), coinciding with the medium term target (1.37+[1.37-1.33]). Respect of resistance is less likely - and would signal a test of the rising trendline.
The dollar is consolidating after a sharp fall against the yen. A test of primary support at 115/114.50 remains likely.
The Australian dollar is consolidating at the rising trendline after a sharp fall against the greenback. Breakout below 0.8450 would signal trend weakness, warning of a possible reversal, but an upward breakout remains equally likely, signaling another test of resistance at 0.89.
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The ten-year treasury yield is approaching a watershed, with a
well-defined trend from 2003 to 2007 testing the downward
trendline from the 20-year super-cycle. The super-trend will
hold if the double top (2006 to 2007) is completed by a fall
below 4.40%. Otherwise, a rise above 5.25% would signal that
the (super cycle) down-trend has ended. It is far too early to
call the start of a new up-trend in the super cycle.
The yield differential (10-year minus 13-week treasury yields) remains close to zero - a negative sign for the economy.
Short-term (13-week) treasury yields continue to soften, reflecting the flow out of equities.
The Dow Jones Industrial Average is consolidating between 13200 and 13500. Sharp swings and high volume signal indecision - the opposite of a dull market offering safe entry at the end of the reaction. A fall below 13200 would signal a test of support at 12800. I would be cautious of a rise above 13500 because of the volatility.
The Australian All Ordinaries rallied strongly after the up-swing in the US, but ended with a weak close as further sellers entered the market. Volume is low, which is a good sign, but we need further reassurance - like one or two weeks of consolidation. Twiggs Money Flow whipsawing around the zero line signals indecision.
Probability of recession in the next four quarters remains steady at 31 per cent according to the Wright Model.
There is the plain fool, who does the wrong thing at all times
everywhere, but there is the Wall Street fool, who thinks he
must trade all the time. No man can always have adequate
reasons for buying or selling stocks daily - or sufficient
knowledge to make his play an intelligent play.
~ Jesse Livermore in Reminiscences of a Stock Operator by Edwin Lefevre.
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