Gold, Oil, Currencies & Interest Rates

By Colin Twiggs
September 5, 2007 1:30 a.m. EST (3:30 p.m. AEST)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment advice. Full terms and conditions can be found at Terms of Use.

Gold

Spot gold respected primary support at $640 and is now headed for resistance at $690. The metal has been ranging between resistance at $690 and support at $640 for the past 6 months; only a failed swing or breakout will indicate resumption (or reversal) of the long-term trend.

Source: Netdania

Crude Oil

December Light Crude rallied sharply to close above $73, indicating that the correction is over. Expect a test of resistance at $76, while reversal below today's low would suggest a failed breakout.

Currencies

The euro is consolidating between resistance at $1.37 and short-term support at $1.3550. Expect a breakout above $1.37, while reversal below $1.3550 would warn of another test of primary support at $1.3250. The primary up-trend remains intact.

Source: Netdania

The dollar is consolidating between 114 and 117 against the yen (astride the former primary support level of 115). Breakout above 117 would signal a bear market rally, while a fall below 114 would signal continuation of the primary down-trend.

Source: Netdania

The Australian dollar is headed for another test of resistance at 0.8350. Breakout above 0.8350 would place the primary down-trend in question, while a fall below 0.8000 would confirm.

Source: Netdania

Treasury Yields

Ten-year treasury yields are testing support at 4.50%. Failure of support at 4.50%/4.40% would indicate that the downward trendline from the 20-year super-cycle is intact. Recovery would indicate further consolidation between 4.50% and 5.25%.

The yield differential (10-year minus 13-week treasury yields) remains close to zero, while concern over tightening bank credit and the non-bank commercial paper market remains.

Short-term (13-week) treasury yields are headed for another test of resistance at 4.40%. Respect of this level would indicate that safety remains a priority in financial markets.

Merrill Lynch project a 60% chance of recession and have down-graded a number of bank stocks, but the real impact of the sub-prime crisis will not be visible until September quarter results are available.

Stock Markets

The Dow Jones Industrial Average advanced cautiously above resistance at 13400, low volume and weak closes indicating hesitancy on the part of buyers. The breakout signals that the correction is ended, though cautious traders may await further confirmation. Reversal below 13000, though not expected, would warn that the signal is false and the correction is not yet over.

The Nikkei is testing resistance at the former primary support level of 16600; respect of this level would confirm a strong down-trend. Breakout above 6200 signaled the end of the FTSE 100 secondary correction. Narrow consolidation below 6400 would be a bullish sign, despite low volume; while reversal below 6200 would warn of another test of primary support at 6000.

The Hang Seng is in a bullish consolidation above support at 23500, while the Shanghai Composite continues its strong advance. Weak closes and low volume, by contrast, signal hesitancy on the ASX All Ordinaries.

Wright Model

Probability of recession in the next four quarters remains at a low 26 per cent according to the Wright Model.

...I never argue with the tape. To be angry with the market because it unexpectedly or even illogically goes against you is like getting mad at your lungs because you have pneumonia.

~ Jesse Livermore in Reminiscences of a Stock Operator by Edwin Lefevre.

To understand my approach, please read Technical Analysis & Predictions in About The Trading Diary.