Gold Rallies As Dow Falls

By Colin Twiggs
April 21, 2009 3:00 a.m. (5:00 p.m. AET)

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

Gold

Spot gold made a false break below short-term support at $865 before reversing to again test resistance at $900, in response to a sharp fall on the Dow. Further weakness on the Dow, accompanied by gold breakout above $900 would signal that (gold) selling pressure is easing. Penetration of the declining trendline would warn of a trend change. Reversal below $865, however, would confirm the down-trend with a target of primary support at $700.

Source: Netdania

Silver

Spot silver made a similar false break below support at $12. A rise above $12.50 would indicate that selling pressure is easing, while breakout above $13 would warn of a trend reversal. Failure of support at $12 remains more likely, however, and would confirm the decline to test primary support at $9. Look for signals from silver to confirm those of gold (and vice versa).

Crude Oil

West Texas Crude also made a false breakout, below support at $47, before reversing to test resistance at $50. Penetration of resistance would warn of a bear trap — confirmed if crude recovers above $55. Reversal below $47, on the other hand, would confirm a down-swing to test primary support at $35.

Source: Netdania

US Dollar Index

The US Dollar Index displays a large rising wedge pattern. Breakout above short-term resistance at 86 indicates a swing to test the upper border, but the bearish formation warns that downward breakout is more likely in the long term. A weaker dollar would increase both crude oil and gold prices.

People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess.

~ Nassim Nicholas Taleb: Ten principles for a Black Swan-proof world