Gold & Euro Find Support
By Colin Twiggs
July 8, 2008 4:00 a.m. ET (6:00 p.m. AET)
The S&P 500 made a clear break below support at 1270, signaling another primary down-swing. The target is 1100 [1270-(1430-1270)=1110]. Declining Twiggs Money Flow indicates selling pressure. Recovery above 1300 is now most unlikely — and would warn that the breakout has failed.
Spot gold made a failed breakout above resistance at $940, but Monday's long tail indicates (short-term) buying support. Recovery above $950 would signal a test of $1000. A fall below $910 would warn of a test of primary support at $850.
West Texas Intermediate Crude is testing short-term support at $140/barrel. Respect of support would offer a target of $135+(135-122)=$148; failure would test the rising trendline at $131.
In the longer term, reversal below $131 is unlikely — and would warn of a secondary correction. Primary support remains at $100/barrel.
The euro made a failed break above $1.5800, but Monday's long tail indicates short-term support. Recovery above $1.58 would warn of another attempt at $1.60; while reversal below Monday's low would test primary support at $1.53. In the longer term, expect strong resistance at $1.60 — and equally strong support at $1.53.
The monthly chart shows the greenback rallying after a failed break below 100 yen, but the bearish descending triangle continues.
In the shorter term, the dollar successfully tested support at 106 yen and is headed for resistance at 109. Breakout would confirm the end of the primary down-trend, but we need to be cautious of the new up-trend: V-shaped bottoms are prone to failure. Reversal below 106 would warn of a test of primary support at 100/96.
The Australian dollar is consolidating in a narrow band between $0.9500 and $0.9700: a bullish sign. Breakout would signal a test of parity. In the longer term, the rising wedge is a bearish pattern and reversal below $0.9300 would signal a secondary correction.
The Aussie successfully tested support at 100 yen and breakout above 104 would signal an advance to 108. Reversal below 100 is now unlikely — and would test 90/88.
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