Bear Trap Or Down-Trend?
By Colin Twiggs
February 11, 2010 11:30 p.m. ET (3:30 p:m AET)
Gold, crude and the resource-based Australian Dollar all broke through primary support levels before immediately reversing — warning of a possible bear trap. Further confirmation is needed, for either the bear trap or the new down-trend.
The US Dollar Index is in a primary up-trend, largely as a result of a weaker euro. Having reached its medium-term target of 80.5*, expect retracement to test the latest support level at 78.5 (the last peak). Reversal below the rising trendline is unlikely, but would warn of trend weakness.
* Target calculation: 78.5 + ( 78.5 - 76.5 ) = 80.5
Gold broke through support at $1080 to signal a primary down-trend, but immediate recovery above the new resistance level warns of a bear trap. Breakout above the declining trendline would confirm the trap, while reversal below $1080 would ratify the down-trend. Twiggs Momentum (63-day) breakout above the declining trendline would re-inforce the bull signal.
Crude retreated below primary support at $72, warning of a primary down-trend. Immediate recovery above the new resistance level warns of a bear trap. Breakout above the declining trendline would confirm the trap, offering a target of $80, while reversal below $72 would establish the down-trend.
The euro is in a strong primary down-trend. Talk of Greece being rescued by France and Germany may help to stem the decline at the $1.36 support level. Expect a test of the declining (orange) trendline. Breakout above the declining trendline on Twiggs Momentum (63-day) may provide advance warning of a trend change.
The greenback is undergoing a correction against the yen, after making a new high in early January. Recovery above ¥ 93 would confirm a primary up-trend. Look for early warning from Twiggs Momentum Oscillator (63-day) crossing above the declining (red) trendline.
The Aussie dollar broke through primary support at $0.875, but rallied sharply above the new resistance level. Recovery above the declining trendline signals a bear trap, offering a target of $0.93. Twiggs Momentum Oscillator (21-day) recovery above its January high would indicate a primary up-trend, while respect of the zero line (from below) would favor continuation of the down-trend.
The spirit, the will to win and the will to excel are the things that endure. These qualities are so much more important than the events that occur.
~ Vince Lombardi (1913 - 1970).