Gold Finds Support
By Colin Twiggs
December 7, 2009 6:30 p.m. ET (10:30 a.m. AET)
The US Dollar Index is testing resistance at 76. Breakout above the upper trend channel would warn that the down-trend is weakening — and a base forming. Until then, the primary trend remains down, fueling higher crude oil and precious metal prices.
I incorrectly identified the support level for gold as $1150 in yesterday's newsletter. While there was short-term support at $1150, subsequent action clearly shows medium-term support at $1140 — the low from November 27. Recovery above $1160 would test resistance at $1200, but failure of support is more likely and would offer a target of $1060*. The primary trend remains up, but this may well be the start of a top formation.
* Target calculation: 1140 - ( 1220 - 1140 ) = 1060
Crude oil continues in a downward flag/broadening wedge consolidation, indicating continuation of the up-trend. Upward breakout would offer a target of 97*; downward breakout is less likely, but would warn of a correction back to primary support at $65.
* Target calculation: 80 + ( 82 - 65 ) = 97
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