NASDAQ 100 index respected primary support at 2040 before rallying strongly on the weekly chart. Bullish divergence on 13-week Twiggs Money Flow indicates buying pressure. Breakout above 2340 would complete a double bottom. Reversal below 2000 is less likely, but would warn of a decline to 1700*. A word of caution: we are in a highly volatile market — do not act on signals without confirmation from other indexes.
* Target calculation: 2000 – ( 2300 – 2000 ) = 1700
Buyers appear to be losing interest and spot gold is headed for a test of the key $1750 support level. Failure would complete a double top, warning of a correction to $1500/$1600* (depending on whether you take the base as $1700 or $1750). Respect would indicate another test of $1900.
* Target calculation: 1900 + (1900 – 1750 ) = 2050 and 1750 – (1900 – 1750 ) = 1600
Softening of gold prices from the “stronger” dollar is being offset by demand for gold as a safe haven from the looming euro-zone crisis. Respect of support at 1750 would indicate another test of $1900; confirmed if spot recovers above $1830. The pattern remains bullish at present, but breakout below $1750 would warn of a double top and correction to $1500/$1600* (depending on whether you take the base as $1700 or $1750).
* Target calculation: 1900 + (1900 – 1750 ) = 2050 and 1750 – (1900 – 1750 ) = 1600
Gold miners such as AMEX Gold Bugs Index ($HUI) continue to test support after their recent breakout. Failure of support at 600 would warn of a bull trap and weaker spot prices.
* Target calculation: 600 + ( 600 – 500 ) = 700
Spot gold penetrated short-term support at $1800/ounce and is testing the medium-term level at $1750. Compare the two declines in the current triangle/consolidation, however, and buying pressure (accumulation) is evident. It took two days for price to fall to $1750 during August, with two strong red candles one below the other. On the second downward leg, candle bodies often overlap and it has taken more than two weeks to reach the same target. Recovery above $1830 would signal another test of $1900 and confirm the bullish ascending triangle. Failure of support at $1750, however, would complete a double top, warning of a correction to $1600*.
* Target calculation: 1900 + ( 1900 – 1700 ) = 2100 and 1750 – ( 1900 – 1750 ) = 1600
Gold is rising in a super-trend which has lasted for more than 10 years. The primary trend, however, is accelerating as the debt crisis in Europe evolves. European banks are now in a precarious position and default of a single debtor nation would cause a crisis of confidence. The situation is similar to the 2007 sub-prime crisis which was accompanied by a similar surge in demand for gold.
Two events stand out. In March 2008 the Fed rescue of Bear Stearns reassured the markets, easing demand for gold and resulting in a 30% retreat in the spot price from its peak at $1000/ounce. The second event was the September 15th collapse of Lehman Brothers. Gold surged 20% in a matter of days, as confidence in the Fed’s ability to contain the crisis was shaken, before settling back at $700 by November. It then commenced the current bull run, climbing 170% so far from its 2008 low.
The question is: are we facing a “Bear Stearns” event that will reassure financial markets or another “Lehman”, causing a flight to safety? Current European dis-unity suggests a crisis of confidence and surge in demand for gold.
The daily chart shows a bullish ascending triangle, indicating further accumulation. Breakout above 1900 would signal a fresh advance to 2100*.
* Target calculation: 1900 + ( 1900 – 1700 ) = 2100
The situation can change rapidly, however, and some contrarians believe that gold is over-bought. Reversal below support at $1800 would break the ascending pattern and rising (secondary) trendline. All bets are then off and reversal below $1750 would complete a double top, threatening correction to $1500.
