Gold Bugs double bottom
By Colin Twiggs
September 6th, 2012 1:30 a.m. ET (3:30 p:m AET)
The Dollar Index is testing primary support at 81.00. Downward breakout would warn of reversal to a primary down-trend. Fall of 63-day Twiggs Momentum below zero would strengthen the warning, while respect of zero would continue the primary up-trend.
* Target calculation: 82 + ( 82 - 78 ) = 86
The Gold Bugs Index, representing un-hedged gold stocks, responded by forming a double-bottom. Breakout above 460 would signal primary advance to 530*. Recovery of 63-day Twiggs Momentum above zero would strengthen the signal.
* Target calculation: 460 + ( 460 - 390 ) = 530
Spot Gold respected its new support level at $1640 and is advancing toward $1800 per ounce*. Recovery of 63-day Twiggs Momentum above zero indicates a primary up-trend. Expect some resistance at $1700 but reversal below $1640 is unlikely.
* Target calculation: 1650 + ( 1650 - 1500 ) = 1800
The CRB Non-Energy Commodities Index shows commodities responding to the weaker dollar. Short retracement followed by breakout above 296 indicates a test of primary resistance at 305. Recovery of 63-Day Twiggs Momentum above zero suggests a primary up-trend. Breakout from the trend channel indicates the primary down-trend is over, but no clear (primary) up-trend has yet formed.
Brent Crude is consolidating between $112 and $116 per barrel. Narrow consolidation suggests an upward breakout and test of $126. 63-Day Twiggs Momentum recovery above zero strengthens the bull signal. Reversal below $112 is unlikely, but would signal another test of support at $100.
In a crisis, moral hazard concerns have to be put on one side, as central banks recognise in a financial crisis. The fire engine does not drive slowly to the fire to encourage others to be careful.
~ Simon Wren-Lewis, commenting on the ECB