There are currently two players destabilizing global financial markets — like elephants in a lifeboat. One is the Bank of Japan, with markets uncertain as to how massive expansion of the monetary base will play out. The second is the Fed, where hints of a taper were enough to send the market into a panic, forcing the Fed to tone down its rhetoric. Emphasis now is on marginal rather than sizable decreases in QE.
Gold broke resistance at $1400, respecting primary support at $1320 and headed for another test of $1500. Uncertainty is high with the metal as likely to break resistance at $1500, signaling a primary up-trend, as to break primary support, which would offer a target of $1200*.
* Target calculation: 1350 – ( 1500 – 1350 ) = 1200
Treasury Yields
Ten-year treasury yields broke resistance at 2.10%, signaling a primary up-trend. First, expect retracement to test the new support level at 2.00/2.05 percent. Breach of that level would warn of another test of primary support at 1.60%. I do not believe that rising yields indicate a resurgence of inflation expectations, but rather anticipation of the Fed taper of quantitative easing. No one wants to be left holding bonds when yields start rising.
Crude Oil
Brent Crude is headed for another test of resistance at $106/barrel. Respect would indicate a down-swing to $92*, while failure would signal reversal to an up-trend. Nymex WTI respected resistance at $98 and is expected to re-test resistance at $85/barrel. A classic pair trade, the spread between the two is likely to narrow as the European economy under-performs.
Commodities
Commodity prices continue to fall, with the Dow Jones/UBS Commodity Index headed for primary support at 125/126. But signs of a base forming on the Shanghai Composite Index are likely to lift commodity prices. A Shanghai breakout above 2500 or penetration of the declining trendline would indicate a test of 150 for $DUBS.
Colin, I believe it is a near certainty that gold will make a lower low on it’s current projective path,and for all the wrong reasons… The accumulative naive will believe what’s being served up…and a deep misunderstanding of the collective global strife which is misinformatively being pent up… Let’s face it..there is a global governmental and collective incentive for precious metals to take the medicine…oh that castor oil tastes like tar…but swill it is the order of the doctor. I strongly believe that there is a case ( technically) for gold to breech the $1,000.oo support level…if you are so inclined to review, I did state this on your site when gold peaked at $1900 + intraday….a lot of reasons for a technical correction…but there are always other inclined reasoning to help it’s on the way…at the time it was my contention that gold had gone parabolic and a healthy retracement was in order..the means reverts to the means…and gold did get ahead of itself…it was also my contention at the time that gold could drop all the way back to major support at $1,000 …given that this was a worse case panic correction price..it is also possible that gold could in fact make a false break below $1,000 say 950 or such…if that did happen,it of course would be a major Darwian flush blowout which I am sure would perpetuate a new gold rush. This is all technical rhetoric that may or may not come to pass…however, I did state that this was a distinct possibility on your site many moons ago. The precious metals market is manipulated as you well know…however, my technical analysis has taught me that it may well come to pass…and it is only at that time,with the false break to the low..well that is when the fooled become emboldened, the flushout…this will occur at the same moment that the mesmerised masses will realise that they have been well and truely shafted…but alas,they will require one last shafting before being rifted from their stupor…and that stupor is the belief that the western democratic world is in fact democratic…when that realisation kicks in…then gold will run with the bulls through Spain and every other country… the key question we ask ourselves is this…. how long can the democratic governments hold their ‘subjects’ spellbound ?