Dollar down-trend, gold and commodities rally

By Colin Twiggs
September 13th, 2012 1:30 a.m. ET (3:30 p:m AET)

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The Dollar Index broke primary support at 81.00 and the rising trendline on the weekly chart, signaling reversal to a primary down-trend. Fall of 63-day Twiggs Momentum below zero strengthens the signal. Expect retracement to test the new resistance level at 81.00/82.00. Respect is likely and would confirm the primary down-trend.

* Target calculation: 81 - ( 84 - 81 ) = 78

Spot Gold continues its advance toward $1800 per ounce*. Recovery of 63-day Twiggs Momentum above zero indicates a primary up-trend.

* Target calculation: 1650 + ( 1650 - 1500 ) = 1800

The 4-hour chart shows gold advancing in even steps of $30: from $1590 to $1630, $1660, $1690, and $1720. Each sharp jump is followed by several days consolidation, before another breakout. Occasional false starts — above $1700 — and reversals — below $1650 — keep traders on their toes, but this is a strong trend and should yield good results.

The Gold Bugs Index, representing un-hedged gold stocks, broke out of its double-bottom to signal a primary advance to 530*. Recovery of 63-day Twiggs Momentum above zero strengthens the signal.

* Target calculation: 460 + ( 460 - 390 ) = 530

The CRB Commodities Index is also rising in response to the weaker dollar. Recovery of 63-Day Twiggs Momentum above zero suggests a primary up-trend. Expect a test of the 2012 high at 325.

Brent Crude continues to consolidate between $112 and $116 per barrel. Upward breakout would test $126. 63-Day Twiggs Momentum recovery above zero strengthens the bull signal. Reversal below $112 is unlikely, but would signal another test of support at $100.

In theory there is no difference between theory and practice.
In practice there is.

~ Yogi Berra