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Market Consolidates Ahead Of September 30th
By Colin
Twiggs
September 29, 2007 4:00 a.m. ET (6:00 p.m. AET)
These extracts from my trading diary are for educational
purposes and should not be interpreted as investment advice. Full terms and
conditions can be found at Terms of Use.
The extent of stock-pumping by fund managers to improve
their quarter-end results is difficult to gauge, but all should become clear
as positions are unwound over the next few days.
The dollar has fallen to
new lows against the euro and gold and oil have responded accordingly, with
gold rising to $743.80/ounce and December light crude at $80.48/barrel. There
may yet be another retracement to test support at $730/ounce, but the
long-term target for gold is $900 [730+(730-565)
].
A falling dollar may stimulate exports, but the subprime
credit squeeze is likely to endure for some time. Declining yields on 3-month
treasury bills reflect ongoing concern with all but the best borrowers in the
financial markets: investors are prepared to accept a discount of 140 basis
points over the equivalent rate on AA financial paper. The surge in the
effective federal funds rate is larger than at previous month-ends, indicating
that banks are feeling the credit squeeze, even with extra liquidity injected
by the Fed.
Despite the credit squeeze the Dow Jones Industrial Average is
close to its all-time high of 14000. Breakout above 14000 would signal a test
of the upper trend channel and a target of 15000 [14000+(14000-13000)].
Respect of resistance (at 14000) would warn of a test of primary support at
12800/13000.
Twiggs Money Flow signals short-term accumulation, but
long-term distribution. A rise above the July high, however, would indicate
buying strength.
Short Term: The index is consolidating between 13700
and 14000. Expect a test of support after the quarter-end. Respect would be a
bull signal, while failure would warn of another correction.
It is part of the unceasing human endeavour to prove that the
spirit of man can transcend the flaws of his nature.
~ Aung San
Suu Kyi: 1991 Nobel Peace Prize Winner and political detainee in Myanmar
(Burma) for the past 17 years.
To understand my approach, please read Technical Analysis & Predictions in About The Trading
Diary.
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