Gold breakout

By Colin Twiggs
March 2nd, 2011 1:30 a.m. ET (5:30 p:m AEDT)

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

Gold broke through resistance at $1420, signaling an advance to $1520*. The metal is now retracing to test the new support level; respect would confirm the signal. A Twiggs Momentum (21-day) trough above zero would add further confirmation.

* Target calculation: 1420 + ( 1420 - 1320 ) = 1520

US Stocks

The S&P 500 index is testing support at 1300; failure would warn of a correction.

US Dollar Index

The Dollar Index is testing medium-term support at 77 and failure would threaten primary support at 76. Breach of primary support would offer a target of 71*. Recovery above 79, however, would complete a double bottom and suggest a rally to 81.

* Target calculation: 76 - ( 81 - 76 ) = 71

Silver

Silver continues its strong rally: a bullish sign for gold.

* Target calculation: 31 + ( 31 - 27 ) = 35

Crude Oil

Nymex WTI crude is testing the psychological barrier of $100/barrel and, with the ongoing turmoil in Libya, is likely to shortly reach its target of $105.

* Target calculation: 85 + ( 85 - 65 ) = 105

Commodities

The CRB Commodities Index continues its strong up-trend, suggesting an upward breakout and fresh advance for the Australian dollar.

Euro

The euro is testing medium-term resistance at $1.3850. Breakout is more likely and would test $1.42, but reversal below $1.37 would warn of another test of $1.3450. A Twiggs Momentum trough above zero would confirm a strong up-trend.

UK Pound Sterling

The pound is testing resistance at $1.62, but bearish divergence on Twiggs Money Flow warns of selling pressure. Breakout above $1.62 would test the 2009 high of $1.70*, while respect would indicate another test of the long-term trendline.

* Target calculation: 1.62 + ( 1.62 - 1.53 ) = 1.71

Japanese Yen

The yen continues to range between ¥80 and ¥84 against the dollar. Twiggs Momentum oscillating around the zero line indicates uncertainty; decline below -2% would warn of another down-swing. Breach of support at ¥80 would signal a fall to ¥76*, while breakout above ¥84 would indicate a primary advance to ¥88*.

* Target calculation: 84 + ( 84 - 80 ) = 88; 80 - ( 84 - 80 ) = 76;

Australian Dollar

The Aussie dollar is headed for another test of medium-term support at $1.00 against the greenback. Bearish divergence on Twiggs Money Flow warns of further profit-taking, but rising commodity prices suggest that the primary up-trend will continue. Breakout above $1.02 would offer a target of $1.08*.

* Target calculation: 1.02 + ( 1.02 - 0.96 ) = 1.08

If one has no affection for a person or a system, one should feel free to give the fullest expression to his disaffection so long as he does not contemplate, promote, or incite violence.

~ Gandhi during his trial for "exciting disaffection toward His Majesty's Government" (18 March 1922)