Gold Dips Below $900
By Colin Twiggs
March 11, 2009 12:30 a.m. ET (3:30 p.m. AET)
Spot gold failed to follow through after forming a short-term pennant formation on the hourly chart. The metal reversed below support at $930 and is now testing the band of support between $890 and $900.
Reversal above $900 in the next few days would warn of a bear trap, while further losses would break the rising trend channel, warning of a down-swing to $700. In the long term, breakout above $1000 would offer a target of $1200 — calculated as 900 + ( 1000 - 700 ) from the large descending broadening wedge over the last 12 months. Penetration of $700 is unlikely in the present climate.
West Texas Crude is headed for a test of resistance at $50 per barrel. OPEC talk of further production cuts may provide support at current price levels, but are unlikely to reverse the primary down-trend. A fall below the recent rising trendline would signal another test of support between $33 and $35 per barrel. In the long term, penetration of support would warn of a down-swing to test the 2003 low of $20. The target is calculated as 35 - (50 - 35).
The Dow broke upwards from its narrow trend channel, indicating a rally to test the new resistance level at 7500. The up-tick in volume signals selling pressure. Sharp rallies such as this are typical of a bear market and seldom follow through. The primary down-swing target remains at 6000; calculated as 7500 - ( 9000 - 7500 ).
The FTSE 100 is likewise retracing to test resistance at 3800. The target for the primary down-swing remains at 3000; calculated as 3800 - (4600 - 3800).
The Nikkei 225 is testing primary support at 7000. Narrow consolidation warns of a downward breakout with a target of 5000; calculated as 7000 - (9000 - 7000). The global contraction and stronger yen have caused a sharp fall in exports, with January 46 percent below a year earlier (Bloomberg). Expect further weakness.
The best way to destroy the capitalist system is to debauch the currency.
By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
~ John Maynard Keynes