Gold Bounces

Gold bounced off support at $1240/ounce, ending the week with a strong rally. Penetration of the descending trendline would indicate the down-trend has weakened, while breakout above $1300 would suggest another advance. Twiggs Trend Index close to zero still indicates hesitancy.

The greenback is weakening which is bullish for gold. Dollar Index reversal below 93 (and the rising trendline) would indicate another test of primary support at 91. A major Trend Index peak below zero would warn of another primary decline with a target of 87*.

* Target calculation: 91 – (95 – 91) =87

Australia’s All Ords Gold Index is headed for another test of long-term resistance at 5000. Breakout would signal a primary advance.

A weakening Aussie Dollar would strengthen demand for gold stocks. Respect of resistance at 77.5 US cents by the current bear rally would warn of a decline to test primary support at 73.5.

Falling Aussie Dollar boosts Gold stocks

The Aussie Dollar is tanking, falling from a September high of 81 US cents to below 76 US cents. Test of support at 73.50 is likely.

The All Ords Gold Index ($XGD) responded to the weakening Aussie Dollar, despite a lackluster performance from gold. Breakout above 5000 would signal a new primary advance, offering a target of 5650*.

* Target calculation: 5000 + ( 5000 – 4350 ) = 5650

Australia: ASX rallies

Iron ore is falling.

And the broader DJ-UBS Commodity Index is testing support at 82. Breach would signal a decline to test the 2015 low at 74.

But the Aussie Dollar rallied Friday, the large engulfing candle suggesting another test of resistance at 75 US cents.

Miners finished strongly, with the ASX 300 Metals & Mining index reflecting short-term buying pressure. 13-Week Twiggs Money Flow recovered above zero.

The ASX 200 is testing resistance at 5800. A 21-day Twiggs Money Flow trough above zero indicates medium-term buying pressure. Breakout above 5800 is likely and would suggest another test of 5950/6000.

Banks also rallied, with the ASX 300 Banks index headed for a test of 8500. Expect strong resistance.

Perhaps this UBS report had something to do with it.

I believe that the latest rally is a secondary reaction and that the ASX is headed for a down-turn, with miners and banks leading the way. But it’s no use arguing with the (ticker) tape.

A prudent speculator never argues with the tape. Markets are never wrong, opinions often are.

~ Jesse Livermore

Aussie meets resistance

The Aussie Dollar met resistance at the former support level of 75 US cents, with a tall shadow on Tuesday’s shooting star candlestick pattern. Respect of resistance is likely and would warn of another test of support at 73.50. Breach of support would offer a target of 72, putting pressure on ASX stocks as international investors retreat.

The Aussie tends to take its direction from commodities. At present iron ore displays a weak rally that coincides with the rally on AUDUSD. Reversal through support at 60 is likely, and would warn of a decline to 50.

Broad commodity indexes like the DJ-UBS Commodity Index are consolidating in a rectangle, between 82 and 90 on the chart below. Commodities have been trending lower since 2011, as shown yesterday. Breakout above 90 is unlikely but would signal a primary up-trend. Breach of support is more likely and would indicate a decline to test support at the January 2016 low, between 72 and 74.

Australian Dollar during the 1997 Asian financial crisis

Performance of the Australian Dollar during the Asian financial crisis. The falling Dollar acted as a buffer, protecting the Australian economy from the Asian contagion.

A similar 25% fall from today’s 72 US cents would offer a target of 54 US cents. No science to this. Simply speculation.

ASX 200 rallies despite weaker AUD

The Australian Dollar followed through below support at $0.8650, confirming a (primary) decline with a target of $0.80*. Declining 13-week Twiggs Momentum below zero strengthens the bear signal. Recovery above $0.8650 is unlikely.

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

The ASX 200 respected support at 5300. Follow-through above 5450 would suggest a fresh advance. A 21-day Twiggs Money Flow trough at zero indicates short-term buying pressure. Reversal below 5300, however, would test primary support.

The ASX 200 Financial sector (ex-REITs) is the largest constituent of the ASX 200 index. 13-Week Twiggs Money Flow oscillating above zero suggests healthy buying pressure despite the Murray Inquiry’s likely call for increased bank capital [AFR]. The sector index successfully tested support at 7050, indicating another test of 7400.

ASX under pressure

The S&P 500 continues to test resistance at 2050, the upper bound of the broadening wedge. Rising 13-week Twiggs Money Flow suggests buying pressure. Breakout would offer a target of 2250*. Reversal below 2000 is less likely, but would warn of another correction.

* Target calculation: 2050 + ( 2050 – 1850 ) = 2250

The CBOE Volatility Index (VIX) indicates low risk typical of a bull market.

Dow Jones Euro Stoxx 50 is testing resistance at 3140. Breakout would indicate an advance to 3300. 13-Week Twiggs Money Flow oscillating around zero suggests indecision. Respect of 3140 would test primary support at 3000.

The Shanghai Composite Index retraced to test support at 2440, while declining 13-week Twiggs Money Flow indicates medium-term selling pressure. Reversal below the rising trendline at 2400 would warn of a correction, while respect would suggest trend strength.

Hong Kong’s Hang Seng Index is weaker. Reversal below 23000 would warn of a test of primary support at 21200/21500. Twiggs Money Flow (13-week) reversal below zero would also be a strong bear signal.

The ASX 200 is undergoing another correction. Respect of support at 5250/5300 would indicate reasonable trend strength, but declining 21-day Twiggs Money Flow suggests medium-term selling pressure. With both Energy and Metals & Mining sectors under pressure, a test of primary support at 5120/5150 is likely.

The Aussie Dollar is also falling, having reversed below primary support at $0.8650 to signal a decline to $0.80*.

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

ASX rallies while Aussie Dollar finds support

The Australian Dollar is consolidating between (primary) support at $0.8650 and resistance at $0.8900. Respect of support suggests another test of $0.89, while a failed swing (reversal below $0.8850) would warn of a downward breakout. Continuation of the primary down-trend is likely and breach of $0.8650 would signal a decline with a target of $0.80*.

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

The ASX 200 is headed for a test of 5660. Retracement is likely, but respect of support at 5440 would strengthen the bull signal. Rising 21-day Twiggs Money Flow continues to indicate medium-term buying pressure. Reversal below 5440 is unlikely, but would warn of a test of 5250.

The ASX 200 VIX continues to indicate low risk typical of a bull market.

ASX breaks resistance

The Australian Dollar continues to test resistance at $0.8900. Tall shadows in the past few weeks suggest committed sellers. Breach of primary support at $0.8650 would warn of another decline. 13-Week Twiggs Momentum below zero also indicates a primary down-trend.

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

ASX 200 broke resistance at 5440, suggesting another test of 5660. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Reversal below 5440, however, would warn of a test of support at 5250.

The ASX 200 VIX below 15 continues to indicate low risk typical of a bull market.

Aussie Dollar and ASX find support

The Australian Dollar is testing resistance at $0.8900, but the primary trend is down. Breakout would suggest a bear rally, while respect would warn of another decline. 13-Week Twiggs Momentum below zero indicates a primary down-trend. Breach of primary support at $0.8650 would offer a target of $0.80*.

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

ASX 200 penetrated its descending trendline, suggesting the correction is over. The index would be further buoyed by a rally of the Aussie Dollar. Bullish divergence and recovery of 21-day Twiggs Money Flow above zero indicates medium-term buying pressure. Breach of resistance at 5350 would strengthen the bull signal. Reversal below 5250, however, would warn of a test of primary support at 5000/5050.

* Target calculation: 5350 – ( 5650 – 5350 ) = 5050

The ASX 200 VIX at 15.5 continues to indicate low risk typical of a bull market. A significantly higher trough is unlikely, but would be a bearish sign.

Aussie & Euro rally, but for how long?

The Aussie Dollar continues to pressure primary support at $0.8650. 13-Week Twiggs Momentum below zero indicates a primary down-trend. Respect of resistance at $0.89 would strengthen the signal. Breach of primary support would confirm, offering a target of the 2010 low at $0.80.

* Target calculation: 87 – ( 94 – 87 ) = 80

The Euro retraced to test its new resistance at $1.28. Declining 13-week Twiggs Momentum (below zero) confirms a strong down-trend. Respect of resistance would warn of another decline, while breach of medium-term support at $1.25 would target the 2010/2011 lows of $1.20.

* Target calculation: 1.28 – ( 1.40 – 1.28 ) = 1.16

ASX and Aussie Dollar rally

The Australian Dollar found support at $0.8650/$0.8700. Respect of resistance at $0.8900, however, would suggest another decline. 13-Week Twiggs Momentum below zero warns of a primary down-trend. Breach of primary support at $0.8650 would offer a target of $0.80*.

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

The ASX 200 rallied in line with short-term buoyancy on the Aussie Dollar. Bullish divergence on 21-day Twiggs Money Flow and recovery above zero indicates medium-term buying pressure. But the trend remains down and failure of (short-term) support at 5120 would warn of a test of primary support at 5000/5050. Breach of the declining trendline is unlikely, but would suggest that the correction is ending. Follow-through above 5350 would confirm.

* Target calculation: 5350 – ( 5650 – 5350 ) = 5050

The ASX 200 VIX continues to indicate low risk typical of a bull market.

Aussie Dollar and ASX find short-term support

The Australian Dollar found support at $0.8650/$0.8700 and is likely to retrace to test the new resistance level at $0.8850/$0.8900. Declining 13-week Twiggs Momentum (below zero) signals a primary down-trend. Respect of resistance is likely and breach of primary support ($0.8650) would offer a target of $0.80*.

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

The ASX 200 is also retracing and likely to test resistance around 5350. Peaks below zero on 13-week Twiggs Money Flow warn of long-term selling pressure. Respect of resistance is likely and would warn of a test of 4900/5000*.

* Target calculation: 5350 – ( 5700 – 5350 ) = 5000

The ASX 200 VIX is rising, but remains at levels typical of a bull market.

Aussie under the pump but ASX finds support

The Aussie Dollar is now testing support at $0.89 after negative projections from Nouriel Roubini’s team. Reversal of 13-week Twiggs Momentum below zero warns of a primary down-trend, but expect further support at $0.8650/$0.8700. Breach would confirm a target of $0.80*.

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

The ASX 200 is testing support at 5300/5350. Long tails on the last two candles suggest short/medium-term buying pressure, but 13-week Twiggs Money Flow below zero warns of long-term selling pressure. Recovery above 5450 would suggest another rally, while breach of 5300 would warn of a fall to 4900/5000*.

* Target calculation: 5350 – ( 5700 – 5350 ) = 5000

The ASX 200 VIX is rising, but remains at levels typical of a bull market.

Aussie dollar leads ASX lower

The Australian Dollar found short-term support at $0.90 after last week’s fall. Reversal of 13-week Twiggs Momentum below zero warns of another decline, but expect support at $0.89/$0.90 and at $0.8650/$0.8700. Breach of the latter would confirm a target of $0.80*.

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

The ASX 200 is testing a wide band of support between 5420 and 5460. Reversal of 21-day Twiggs Money Flow below zero warns of strong selling pressure. Breach of the rising trendline would suggest a correction to test the primary trendline around 5000. Support levels are indistinct because of frequent back-filling, however, and could establish anywhere between 5300 and 5450.

The ASX 200 VIX is rising, but levels below 20 are typical of a bull market.

Aussie Dollar & Yen break support

Dollar strength is affecting not only gold and commodities, but even the strongest of the currency crosses.

The Aussie Dollar broke support at $0.92 against the greenback, warning of a correction. Expect support at $0.89. Reversal of 13-week Twiggs Momentum below zero, however, suggests a primary down-trend — confirmed if primary support at $0.87 is penetrated. Recovery above $0.925 is unlikely, but would indicate a false break.

The greenback similarly broke through resistance at ¥105.50 against the Japanese Yen. Rising 13-week Twiggs Momentum above zero signals a primary up-trend. Reversal below ¥105 is unlikely, but would warn of another test of ¥104.

* Target calculation: 105.5 + ( 105.5 – 101 ) = 110

The Euro is already in a primary down-trend against the Dollar. Declining 13-week Twiggs Momentum, below zero, confirms a strong down-trend. Expect support at $1.2750/$1.2800, but a rally is unlikely to break the descending trendline and resistance at $1.31.

* Target calculation: 1.35 – ( 1.40 – 1.35 ) = 1.30

Two questions for Australian investors

Two questions for Australian investors:

1. Does the graph below show an up-trend?
2. Would it be a good time to buy this stock?

If your answer to both questions is NO, then why would you consider selling when we invert the price scale? The chart is the ASX 200 index. Use View >> Invert Price Scale, or Ctrl+I shortcut key to invert the chart.

* Target calculation: 5550 + ( 5550 – 5350 ) = 5750

The chart below is not inverted. The ASX 200 VIX tends to behave inversely to the index. A value of 12.2 suggests low risk typical of a bull market.

The Australian Dollar is retracing to test support at $0.92. Respect would indicate that buyers continue to dominate. Recovery above resistance at $0.94 would suggest an advance to $0.97. Follow-through above $0.945 would confirm. Breach of $0.92 remains unlikely, but would warn of a test of primary support at $0.8650/$0.87.

ASX 200: Three targets converge

The ASX 200 broke resistance at 5590/5600 and is set for a further advance. Recovery of 13-week Twiggs Money Flow above the descending trendline would confirm long-term buying pressure. Convergence of targets, calculated for different time frames, at 5750/5850 also strengthens the signal:

• 5250 + (5250 – 4650) = 5850
• 5450 + (5450 – 5050) = 5850
• 5550 + (5550 – 5350) = 5750

Reversal below 5540 is most unlikely, but would warn of a correction.

ASX 200 VIX near 10 continues to indicate a bull market.

The Australian Dollar is consolidating in a narrow range below resistance at $0.94, suggesting an upward breakout. Only concerted action by the RBA would be likely to counter this. Follow-through above $0.945 would confirm a rally to $0.97. Reversal below $0.92 is most unlikely, but would warn of a test of primary support at $0.8650/$0.87.