Dow Breaks Primary Support, Gold Rising
By Colin Twiggs
November 26, 2007 9:00 p.m. ET (1:00 p.m. AET)
The Dow broke through primary support at 12800 (the August 2007 low), signaling the start of a primary down-trend.
As discussed in Saturday's newsletter, the US economy is at risk of entering a prolonged recession if the public's faith in the security/stability of the banking system is shaken.
Gold is a safe harbor in times of financial upheaval and I expect the metal to continue its primary up-trend for the foreseeable future. The long-term target is $900.
The euro and gold are advancing side-by-side against the dollar. A gold breakout above $845 is likely — and would offer a short/medium-term target similar to the long-term target of $900: 845+(845-775)=915.
January 2008 Light Crude displays a bullish narrow consolidation above the new support level of $96.5. Expect resistance at the $100 barrier, but the calculated target is higher at $103: 96.5 + ( 96.5 - 90 ).
June 2008 Light Crude presents a similar long-term target above $100/barrel.
The euro is headed for a test of $1.50 after completing a short-term pennant. Breakout below the rising (green) trendline is not expected — and would warn of a secondary correction.
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The dollar broke through support at 109 against the yen and is headed for a test of long-term support at 100.
The Australian dollar broke through support at $0.8750, completing a head and shoulders reversal with a target of $0.8100. Recovery above $0.9100 is not expected — and would indicate another test of $0.9400.
Unwinding carry trades continue to weaken the Aussie dollar. The cross-rate with the yen broke through short-term support at 96 and is headed for a target of 92 [96-(100-96)]. Failure of support at 92 would signal a test of long-term support at 86 (and further weakness against the USD).
The first requisite of a sound monetary system is that it put
the least possible power over the quantity or quality of money
in the hands of the politicians.
~ Henry Hazlitt.
To understand my approach, please read Technical Analysis & Predictions in About The Trading Diary.