Dollar Rally Causes Declines
By Colin Twiggs
October 27, 2009 5:30 a.m. ET (8:30 p.m. AET)
The US Dollar Index rallied after finding support at 75, causing a decline in gold and oil prices. Breakout above resistance at 76 would signal a test of 77.50, penetration of the declining trendline indicating that the primary down-trend is slowing. A rise above 77.50 is unlikely, but would indicate that the down-trend has ended.
* Target calculation: 76.00 - ( 77.50 - 76.00 ) = 74.50
The Dow retreated below short-term support at 9900, indicating a test of 9500. Bearish divergences on Twiggs Money Flow (21-day & 13-week) warn of a secondary correction. Failure of support at 9500 would confirm. Recovery above 10100 is unlikely, but would signal another primary advance.
Spot gold broke through short-term support at $1045, before consolidating above $1035. The short candle indicates hesitancy and is likely to be followed by a down-swing to test $1000. Recovery above $1070 is unlikely at present, but would indicate an advance to $1100*.
* Target calculation: 1000 + ( 1000 - 900 ) = 1100
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Bearish divergence on Twiggs Money Flow (21-day) warned of selling pressure on the Market Vectors Gold Miners Index [GDX] ahead of weakness in the spot price. Reversal below $43 would confirm the secondary correction. Divergences between gold miners and physical gold often forewarn of changes in the spot price.
Spot silver is also testing support — at $17. Reversal above $18 is unlikely, but would offer a target of $19*. Breakout below $17 would warn of a secondary correction; failure of support at $16 would confirm.
* Target calculation: 18 + ( 18 - 17 ) = 19
Platinum mirrors the pattern on gold and silver. Failure of short-term support at $1330 would signal a test of $1260.
Crude oil is retracing to test short-term support between $72 and $75. Respect would signal a primary advance to $85*. The primary up-trend continues. Failure of support at $66 remains unlikely, but would signal a reversal.
* Target calculation: 75 + ( 75 - 65 ) = 85
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