Commodity blow-off shakes market
By Colin Twiggs
May 5th, 2011 9:00 p.m. ET (11:00 a:m AET)
The CRB Commodities Index broke out of its trend channel, warning that the trend has lost momentum and is close to an end. The Australian Dollar reacted accordingly.
An early sign of weakness was the blow-off of silver after the accelerating up-trend met profit-taking at $50.
Another contributing factor is the weakening of Asian markets, especially China. The Shanghai Composite Index reversed below 3000 and its rising trendline, warning of a correction. Failure of support at 2850 would test support at 2650, threatening a primary trend reversal. Bearish divergence on 21-day Twiggs Money Flow indicates selling pressure.
Gold has been shaken by the fall in commodities, especially silver and crude. Penetration of the rising trendline would warn of a correction to test the long-term trendline around $1400.
* Target calculation: 1430 + ( 1430 - 1310 ) = 1550
The Gold Miners Index often leads the physical metal and has penetrated its long-term trendline, warning of a reversal. Breach of support at 53.00 would confirm. Bearish divergence on 21-day Twiggs Money Flow indicates selling pressure.
The Dollar index recovered slightly, but remains in a strong down-trend, headed for a test of support at 71*.
* Target calculation: 76 - ( 81 - 76 ) = 71
Brent crude also experienced a blow-off and is headed for a test of the long-term trendline around $100/barrel.
The euro retraced sharply. Penetration of support at $1.42 would warn of a correction to test the long-term trendline.
* Target calculation: 1.40 + ( 1.40 - 1.30 ) = 1.50
The pound broke is testing the new support level at $1.64. respect would signal an advance to the 2009 high at $1.70*. Another Twiggs Momentum trough above zero would confirm trend strength.
* Target calculation: 1.63 + ( 1.63 - 1.53 ) = 1.73
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The dollar is testing long-term support between ¥79 and ¥80. Respect of support would indicate that the BOJ has succeeded in its attempt to protect exporters. Failure would offer a target of 75*.
* Target calculation: 80 - ( 85 - 80 ) = 75;
The kiwi dollar encountered resistance above $0.80. Expect a test of the rising trendline and support at $0.76.
The Aussie dollar broke broke its medium-term trendline, warning of a correction. Failure of support at $1.06 would confirm, offering a target of $1.02.
Thus with all things — some are increased by taking away; while some are diminished by adding on.
~ Lao Tzu: Tao Te Ching