Dow Slips, Dollar Strengthens
By Colin Twiggs
August 12, 2010 5:30 a.m. EDT (7:30 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.
Dow Jones Industrial Average
The Dow fell sharply in early trading, retreating from the upper border of the broadening wedge formation. Twiggs Money Flow penetrated its rising trendline, warning of another correction. Reversal below the former primary support level at 9900 would confirm the primary down-trend. Upward breakouts in a bear market are notoriously unreliable, with roughly two-thirds of such breakouts ending in a bull trap.
US Dollar Index
The US Dollar Index rallied off support at 80. Penetration of the descending trendline indicates that the down-trend is weakening. The signal would be strengthened if Twiggs Momentum rises above zero. Reversal below 80 would signal a primary down-trend.
Gold
Gold is consolidating above short-term support at $1190; expect a test of resistance at $1220. Respect would re-test primary support at $1160, while breakout would indicate an advance to $1260. Twiggs Momentum (21-day) respect of the zero line from below, however, would warn of a primary down-trend.
* Target calculation: 1220 + ( 1220 - 1060 ) = 1380
Crude Oil
Crude retreated below its rising trendline, warning of a bull trap. A 21-day Twiggs Momentum reversal below zero would confirm the signal.
* Target calculation: 80 + ( 80 - 70 ) = 90
Euro
The euro is retracing to test the new support level at $1.25. Respect would confirm the primary up-trend, while failure would indicate another test of primary support at $1.19. A Twiggs Momentum (21-day) trough above the zero line would also confirm the up-trend.
UK Pound Sterling
The pound is retracing to test the new support level at $1.55. Respect would confirm the advance with a target of $1.67*. A Twiggs Momentum (21-day) trough above the zero line would strengthen the up-trend. Reversal below the rising trendline, however, would warn of trend weakness.
* Target calculation: 1.55 + ( 1.55 - 1.43 ) = 1.67
Japanese Yen
The dollar is testing primary support at ¥85. A small bullish divergence on Twiggs Momentum suggests a rally to test resistance. Failure of primary support, however, would offer a target of ¥75*.
* Target calculations: 85 - ( 95 - 85 ) = 75
Australian Dollar
The Aussie dollar retreats as global uncertainty rises, reversal of the carry trade depressing the little battler and strengthening the greenback. Expect a test of support at $0.8750. Failure would test primary support at $0.8100, while respect would indicate an advance to $0.9350. A Twiggs Momentum (21-day) trough above the zero line would confirm the primary up-trend. In the long term, breakout above $0.9350 would offer a target of parity.
* Target calculation: 0.93 + ( 0.93 - 0.81 ) = 1.05
Elections should be held on April 16th — the day after we pay our income taxes. That is one of the few things that might discourage politicians from being big spenders.
~ Thomas Sowell