Gold's three trends
By Colin Twiggs
June 30th, 2011 11:00 p.m. ET (1:00 p:m AET)
Our Monthly gold chart displays a strong bull-trend since 2001. Confined in a narrow trend channel, with 50-week Momentum holding high above the zero line, there are no signs of a reversal.
The Weekly chart shows a strong primary trend since May 2009. Momentum is declining, however, and a fall below 5% would warn of trend weakness. Breakout below the trend channel would confirm and signal a test of the lower border on the monthly trend channel — around $1150.
The Daily spot price respected the new resistance level at $1510. That and the break of the ascending trendline both warn of a correction to test the lower border of the weekly trend channel — above $1400. Declining 21-day Momentum strengthens the signal.
* Target calculation: 1575 + ( 1575 - 1475 ) = 1675
The Weekly chart of AMEX Gold Bugs Index ($HUI), reflecting unhedged gold stocks, is consolidating between 490 and 530 after a false break below support. Recovery above 530 would indicate another test of 600, while failure of support would warn of a primary down-trend — suggesting a similar fate for gold. Bearish divergence on Momentum (63-day) and penetration of the rising trendline both warn of a reversal.
Silver is testing support at $33. Failure would confirm the down-trend signaled by 21-day Momentum holding below zero — again with bearish implications for gold.
The Dollar Index is consolidating in a triangle formation below resistance at 76.00/76.50. Breach of short-term support at 74.50 indicates another test of primary support at 73. Momentum oscillating in a narrow band around zero reflects the absence of a trend. Breakout from the triangle will indicate future direction.
* Target calculation: 73 - ( 76 - 73 ) = 70
The CRB Commodities Index broke medium-term support at 335 on the Weekly chart but then retreated above the new resistance level. Reversal below 335 would confirm the primary down-trend — first signaled by bearish divergence on 63-day Momentum. Recovery above 350 is unlikely but would indicate another advance. The direction of the dollar is again likely to have a strong influence.
Brent crude similarly retreated after breaking support at $108/barrel. Bearish divergence on 21-day Momentum, however, indicates continuation of the down-trend. Respect of the descending trendline would confirm.
The euro is testing resistance at $1.45. Breakout would indicate another test of $1.50. Twiggs Momentum (21-day) close to zero indicates no clear trend, but a rise above 2% would suggest a rally.
* Target calculation: 1.40 + ( 1.40 - 1.30 ) = 1.50 or 1.40 - ( 1.50 - 1.40 ) = 1.30
The Weekly chart shows the Swiss franc continuing its primary up-trend against both the dollar and the euro. Twiggs Momentum (63-day) holding above zero indicates trend strength. Respect of medium-term support at $1.17 would confirm.
* Target calculation: 1.00 + ( 1.00 - 0.80 ) = 1.20
The pound continues to test support at $1.60. Failure would test primary support at $1.53. Declining 21-day Momentum suggests weakness.
* Target calculation: 1.63 + ( 1.63 - 1.53 ) = 1.73
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The dollar continues to consolidate in a narrow range above support at ¥80 — a bearish sign. Failure of support would signal a decline to ¥75*, but would also spur further BOJ efforts to halt appreciation of the yen. Twiggs Momentum below zero indicates a down-trend.
* Target calculation: 80 - ( 85 - 80 ) = 75
The kiwi dollar broke long-term resistance at $0.82 against the greenback and is now retracing to test the new support level. Respect would indicate a fresh advance, while reversal below $0.80 would signal a correction to test the long-term trendline. Bearish divergence on Twiggs Momentum favors a correction.
* Target calculation: 81 + ( 81 - 78 ) = 84
The Aussie dollar rallied to test resistance at $1.075 against the greenback. Breakout would indicate a fresh advance, while reversal below $1.05 would signal a correction to the long-term trendline at $0.98. Momentum close to zero shows no clear trend. Weaker commodity prices would be a bearish sign.
* Target calculation: 1.10 + ( 1.10 - 1.05 ) = 1.15
The bravest are surely those who have the clearest vision of what is before them, glory and danger alike, and yet notwithstanding, go out to meet it.
~ Thucydides (c. 460 BC - c. 400 BC)