Equity markets are holding on to recent gains, but low volumes signal uncertainty and the Dow Transport Index indicates a decline in general economic activity. A slump in the housing market, as indicated by the fall in July sales, would add further downward pressure.

The negative yield differential may cause problems in the months ahead.

Crude oil prices are finding support at $71/$72. Along with a weaker dollar, this may spur gold prices.

If the pull-back on the Nasdaq 100 respects the new support level at 1520, then we have confirmation that the index is in an up-trend and may test the recent high of 1760. Failure of support, on the other hand, would be a strong bear signal. Twiggs Money Flow (21-day) edged above zero, but future direction is unclear.

The Dow Jones Transportation Average failed to break out above 4450, respecting resistance and confirming the down-trend. Lead indicators Fedex and UPS display similar weakness.

The Dow Industrial Average pulled back to test support at 11300/11250. Low volumes indicate a lack of serious interest from buyers and sellers and we may see consolidation above the support level.

Medium Term: The target for the recent breakout is close to the recent high of 11650: 11250 + (11250 - 10700) = 11700. Twiggs Money Flow (21-day) is rising, signaling accumulation.

Long Term: The Dow continues in a primary up-trend, with support at 10700.

Low volumes on the S&P 500 indicate uncertainty and we could see a narrow consolidation above 1290 until buyers or sellers regain interest.

Medium Term: The index completed an ascending triangle with the breakout above 1280, with a target close to the recent high of 1330: 1280 + (1280 - 1220) = 1340. Twiggs Money Flow (21-day) is rising, signaling accumulation.

Long Term: The S&P 500 is in a slow up-trend, with primary support at 1220.

Treasury yields

The yield on 10-year Treasury notes is trending lower after respecting resistance at 5.0%. 

Medium Term: There is still some concern over annual inflation, but July figures indicate that pressures may be easing -- relieving upward pressure on long-term yields.

Long Term: The yield differential (10-year T-notes minus 13-week T-bills) is negative and falling, increasing the risk of a down-turn.

Probability of recession in the next four quarters increased to 31 per cent, according to the Wright Model (developed by Fed economist Jonathan H Wright). We will be able to gauge the Fed's ability to arrange a "soft landing" for the economy over the next few months. The last time the Fed succeeded was the modest spike in 1994; a spike that reaches 50% would warn of a stronger down-turn.

Gold

Spot gold is testing support at $600. A rally on the crude oil chart would strengthen gold prices.

Medium Term: The metal has broken out below a large symmetrical triangle. Penetration of support at $600 would signal another down-trend, with a target of $450: (630 - (730 - 550)), below primary support at $540/$550.

Long Term: The primary up-trend appears uncertain.

Crude Oil

After two false breaks below primary support at $72.00, Light Crude could rally if it completes a double bottom with a rise above $73.50. A fall below $71, however, would confirm the down-trend.

Currencies

Slower growth and falling long-term bond yields should weaken the dollar.

The Euro is trending upwards, headed for another test of resistance at 1.30 dollars. A rise above this level would mean a test of the high at 1.35/1.36 (and a bullish sign for gold).

United Kingdom

The FTSE 100 formed a small triangle, with future direction signaled by the breakout: either above 5950 or below 5850.

Medium Term: The intermediate trend is upwards, indicating that a test of resistance at 6130 is more likely than another test of primary support at 5500. Twiggs Money Flow (21-day) is trending upwards, signaling accumulation.

Long Term: The primary up-trend continues.

Japan

The Nikkei 225 is consolidating between 15900 and 16200, a bullish sign, after breaking out above an ascending triangle.

Medium Term: We may see a pull-back to test the new support level at 15700. Twiggs Money Flow (21-day) is rising, signaling accumulation. 

Long Term: The index has reversed to a primary up-trend.

ASX Australia

The All Ordinaries fell back sharply through the new support level at 5000 on strong volume, with weak closes on Monday [M] and Wednesday [W] warning of resistance. Expect some support at 4900, but the breakout reversal is likely to elicit a strong bear reaction -- and a test of primary support at 4800. Twiggs Money Flow (21-day) is close to zero, signaling uncertainty.

Medium Term: The index continues to oscillate in a narrow channel around the linear regression line. Reversal to above 5000 would signal another attempt to test the upper border of the channel; confirmed if price rises above 5100. Twiggs Money Flow (21-day) is rising, signaling accumulation.

Long Term: The All Ordinaries is in a primary up-trend, with support at 4800.