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Gold & Oil Test Support

By Colin Twiggs
December 4, 2007 2:30 a.m. ET (6:30 p.m. AET)

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.

Dow Jones Industrials

The Dow completed an inside day with low volume on Monday, signaling (short-term) uncertainty. A rise above 13500 would indicate that the secondary correction is over and a test of 14200 is likely. Reversal below 13300, on the other hand, would warn of another test of primary support at 12800.

dow jones industrial average

In the longer term, a close below 12800 would confirm the start of a bear market — my last newsletter explains why I consider this likely — while breakout above 14200 would signal another primary advance.

Gold

The dollar strengthened across the board against gold, oil and major currencies. Further rate cuts by the Fed, however, are likely to undermine the recovery.

Gold broke its rising (green) trendline, indicating a loss of momentum. Breakout from the triangle formation will indicate future direction: a fall below $775 would signal the start of a secondary correction; while upward breakout would offer a short/medium-term target of $900 [830+(845-775)=900].

The primary up-trend continues.

spot gold

Source: Netdania





Crude Oil

January 2008 Light Crude retraced to the rising (green) trendline. Reversal above $90 would signal that the primary advance is likely to continue, while breakout below the trendline would confirm the start of a secondary correction.

crude oil

The primary up-trend is intact, with the first line of long-term support at $80/barrel.

crude oil weekly chart






Currencies

The euro retraced to the rising (green) trendline. Breakout below this level would warn of a secondary correction, while respect of the trendline would herald another test of resistance at $1.50.

euro us dollar short-term

Source: Netdania





The dollar made a failed breakout below support at 109 against the yen. A higher second trough that respects support (or recovery above 112) would be a bullish sign, while reversal below 109 would confirm the test of long-term support at 100.

us dollar yen

Source: Netdania





The Australian dollar is again testing support after a failed breakout below $0.8750. A higher trough (respecting 0.8750) would be a bullish sign, while a fall below 0.8650 would warn that the secondary correction is likely to continue.

australian dollar compared to us dollar

Source: Netdania



In the long run, the gold price has to go up in relation to paper money. There is no other way. To what price, that depends on the scale of the inflation — and we know that inflation will continue.

~ Nicholas L. Deak.

To understand my approach, please read Technical Analysis & Predictions in About The Trading Diary.



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