Encouraging breakout
By Colin Twiggs
December 1, 2010 8:30 p.m. ET (12:30 p:m AEDT)
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Stocks rallied, with the S&P 500 making an encouraging breakout above 1200. Expect a test of the recent high at 1225. Follow-through above 1225 would flag another primary advance. Rising Twiggs Money Flow (21-day) continues to indicate buying pressure. Reversal below 1180 is unlikely, but would warn of a secondary correction, testing 1130.
The DJ Global index recovered above recent support at 238. Breakout above 244 would support the S&P signal.
US Dollar Index
The US Dollar Index is retracing to test the new support level at 80. Reversal below the rising trendline would signal another test of primary support at 75.50, while respect would indicate a test of resistance at 83.50. Twiggs Momentum (21-day) is rising, but has not yet established a primary up-trend — that would come from a trough respecting the zero line.
* Target calculation: 76 - ( 80 - 76 ) = 72
Gold
Bearish divergence on Twiggs Momentum (21-day) and penetration of the rising trendline both warn of a correction. Failure of support at $1320 would confirm. Recovery above $1380 is encouraging, but the tall shadow indicates selling pressure. Follow-through above 1420 would signal an advance to 1500*.
* Target calculation: 1420 + ( 1420 - 1340 ) = 1520
Silver
Silver's breakout above resistance at 28 is more encouraging and respect of the new support level would indicate an advance to 31*. Further gains would spur demand for gold.
* Target calculation: 28 + ( 28 - 25 ) = 31
Crude Oil
Brent Crude is headed for resistance at $90/barrel. Breakout would signal a primary advance, offering a target of $110*. Completion of a Twiggs Momentum (21-day) trough above the zero line would strengthen the signal.
* Target calculation: 90 + ( 90 - 70 ) = 110
Euro
The euro is retracing to test resistance at $1.33. Respect would confirm that primary momentum is slowing and indicate a test of primary support at $1.26. A Twiggs Momentum (21-day) peak that respects the zero line would warn of reversal to a primary down-trend.
* Target calculation: 1.41 + ( 1.41 - 1.33 ) = 1.49
UK Pound Sterling
The pound broke support at $1.57 and is retracing to test the new resistance level. Expect a test of primary support at $1.53. Bearish divergence on Twiggs Momentum (21-day) warns of a reversal; a peak that respects zero (from below) would confirm. Recovery above $1.60 is most unlikely, but would warn of a bear trap and advance to $1.66*.
* Target calculation: 1.60 + ( 1.60 - 1.54 ) = 1.66
Japanese Yen
The dollar respected support at ¥83, indicating a test of ¥86. Reversal below the new support level is now unlikely, but would signal another test of ¥80. Momentum is rising, but the primary trend remains downward at present.
* Target calculations: 80 - ( 83 - 80 ) = 77
Australian Dollar
The Aussie dollar is consolidating in a narrow band below the new resistance level at $0.97 — a bearish sign. Breakout below $0.9550 would confirm a decline to $0.92. Recovery above $0.97 is less likely, but would suggest another rally to test parity. Bearish divergence on Twiggs Momentum (21-day) continues to warn of a correction. The primary trend, however, remains upward, with primary support at $0.88.
* Target calculation: 0.97 - ( 1.02 - 0.97 ) = 0.92
Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan "Press on" has solved and always will solve the problems of the human race.
~ Calvin Coolidge