Gold Breaks Rising Trendline
By Colin Twiggs
November 20, 2007 2:00 a.m. ET (6:00 p.m. AET)
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Gold broke through the rising (green) trendline, warning of a
secondary correction. Penetration of short-term support at $775
would confirm the signal.
The euro remains bullish against the dollar and we can expect gold to recover and follow this in the medium-term.
The primary up-trend is strong, and the long-term target of $900 [725+(725-550)] remains. A secondary correction is likely to find support at the 2006 high of $730/$725.
December Light Crude respected support at $90/barrel and is headed for a test of resistance at $97.50. Breakout would present a short-term target of $105, but the $100 barrier is likely to intercede. While not expected, reversal below $90 would warn of a secondary correction.
The euro formed a pennant, signaling continuation of the up-trend. Upward breakout would offer a target of $1.50 [1.4650+(1.4700-1.4350)]. Breakout below the rising (green) trendline is not expected — and would warn of a secondary correction.
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The dollar is testing support at 109 against the yen — from the 2006 low. Failure would signal a test of long-term support at 100.
The Australian dollar is testing support at $0.8750. Failure would complete a head and shoulders pattern with a target of $0.8100 [0.8750-(0.9400-0.8750)], while recovery above $0.9100 would indicate another test of resistance at $0.9400. The long-term target of parity now appears remote and would only be revived by a rise above $0.9400.
Weakness of the Aussie dollar is attributable to the unwinding of large carry trades. The cross-rate with the yen shows the full effect, with hedge funds effectively buying the yen and selling high-yielding currencies such as the Australian dollar to cancel their exposure. Failure of short-term support at 96 would offer a target of 92 [96-(100-96)] which coincides with the target for the completed double top pattern [100-(108-100)]. It would also mean that support at 87.50 against the USD is unlikely to hold.
Until government administrators can so identify the interests
of government with those of the people and refrain from
defrauding the masses through the device of currency
depreciation for the sake of remaining in office, the wiser
ones will prefer to keep as much of their wealth in the most
stable and marketable forms possible - forms which only the
precious metals provide.
~ Elgin Groseclose.
To understand my approach, please read Technical Analysis & Predictions in About The Trading Diary.