Gold Tests Key Support Level
By Colin Twiggs
July 22, 2010 6:00 a.m. ET (8:00 p:m AET)
The US Dollar Index found short-term support at 82.5. Penetration of the rising trendline indicates weakness. Twiggs Momentum respect of the zero line (from below) would warn of reversal to a primary down-trend.
Gold is headed for a test of key support at $1170. Failure would warn of another test of primary support at $1060. Recovery above resistance at $1220 is less likely, but would indicate an advance to $1380*; breakout above $1260 would confirm. Large bearish divergence on Twiggs Momentum, however, warns of reversal to a primary down-trend.
* Target calculation: 1220 + ( 1220 - 1060 ) = 1380
Crude is headed for another test of resistance at $80. Breakout would signal an advance to the upper border of the broadening wedge. Reversal below primary support at $70, however would signal a primary down-trend with an initial target of 60*. Twiggs Momentum respect of the zero line (from below) would be a bear signal.
* Target calculation: 70 - ( 80 - 70 ) = 60
The euro found short-term resistance at $1.30 and is retracing to test support at $1.25. Penetration of the descending trendline indicates the primary down-trend is weakening. Respect of support would strengthen the chance of a reversal, but confirmation would only come from a higher trough followed by a new high. Reversal below the rising trendline, however, would indicate another test of $1.19 and offer a long-term target of $1.10*. Twiggs Momentum crossed to above zero but a shallow peak would indicate continuation of the primary down-trend.
* Target calculation: 1.20 - ( 1.30 - 1.20 ) = 1.10
The pound also signals a weakening down-trend against the dollar, testing resistance at $1.55. Bullish divergence on Twiggs Momentum indicates that a primary reversal is likely. Expect retracement to test support at $1.48, but respect of that level would make a strong bull signal. Failure is less likely, but would warn of another test of primary support at $1.43.
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The dollar is headed for a test of primary support at ¥85. Failure would offer a target of ¥75*, but expect strong support at the 1995 low of ¥80. Declining Twiggs Momentum confirms the strong down-trend; further peaks that respect the zero line from below would strengthen the signal. Recovery above the descending trendline is unlikely, but would indicate that the down-trend is weakening.
* Target calculations: 85 - ( 95 - 85 ) = 75
The Aussie dollar is testing resistance at $0.885 after a short retracement, indicating that upward breakout and an advance to $0.94 is likely. Reversal below the rising trendline, however, would warn of trend weakness. Twiggs Momentum needs to continue rising (above 5%) to provide evidence of an up-trend; reversal below zero would be a bear signal.
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