By Colin Twiggs
June 3, 2010 6:00 a.m. ET (8:00 p:m AET)
Dow Jones Industrial Average
The Dow is at a critical watershed. Having found support at 10000, completion of a bullish divergence on Twiggs Money Flow (13-week) would signal the end of the correction. Failure of support at 9900, however, would warn of a bear market.
US Dollar Index
The US Dollar Index formed a large pennant below 87.5, signaling continuation of the recent advance. Upward breakout would confirm, offering a target of 95*. Failure of support at 85 is unlikely, but would indicate the end of the rally and a test of the lower trend channel.
* Target calculation: 87.5 + ( 87.5 - 80 ) = 95
Gold closed above short-term resistance at the December 2009 high of $1220, but the breakout is not yet convincing. Wait for retracement that respects the new support level or follow-through above $1240. Reversal below $1200 would warn of weakness, and breakout below $1170 would confirm a a down-swing to primary support at $1060. The long-term target for an advance is $1380*.
* Target calculation: 1220 + ( 1220 - 1060 ) = 1380
Crude is retracing for another test of primary support at $70. Failure would signal a primary down-trend with a target of 50*. Twiggs Momentum respecting the zero line from below would warn of a bear trend.
* Target calculation: 90 - ( 90 - 70 ) = 50
The euro formed a bearish pennant above short-term support near $1.22, warning of another down-swing. Downward breakout would confirm, offering a long-term target of parity*. Recovery above $1.27 is unlikely, but would suggest a bear trap.
* Target calculation: 1.25 - ( 1.50 - 1.25 ) = 1.00
The pound is testing the new resistance level at $1.48. Respect would confirm the medium-term target of $1.38, but bullish divergence on Twiggs Momentum (21-day) favors a reversal.
* Target calculation: 1.48 + ( 1.58 - 1.48 ) = 1.38
The dollar is forming a long-term base against the yen, but has yet to show much of an up-trend. Rising Twiggs Momentum confirms the signal. Breakout above ¥95 would signal an advance to ¥100*, while failure of support at ¥88 would warn of further weakness.
* Target calculation: 94 + ( 94 - 88 ) = 100
The Aussie dollar is testing the new resistance level at $0.86. Respect would confirm the primary down-trend, with a target of $0.76*, while recovery above $0.86 would warn of a bear trap. A Twiggs Momentum rally that respects the zero line (from below) would confirm the bear trend.
* Target calculation: 0.81 - ( 0.86 - 0.81 ) = 0.76
I have no right, by anything I do or say, to demean a human being in his own eyes. What matters is not what I think of him; it is what he thinks of himself. To undermine a man's self-respect is a sin.
~ Antoine de Saint-Exupery