Gold and commodities fall

By Colin Twiggs
October 24th, 2012 11:00 p.m. ET (2:00 p:m AET)

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The Dollar Index is consolidating between 79 and 80. Upward breakout would test resistance at 81.00/81.50 — penetration of the descending trendline indicating the correction has ended — but the primary trend is downward and breach of support at 79 would signal another decline. A 63-day Twiggs Momentum peak below zero would strengthen the bear signal.

* Target calculation: 79 - ( 81 - 79 ) = 77

Inflation expectations are easing, with spot gold undergoing a correction since breaking support at 1750. Expect short-term support at 1700 and penetration of the descending trendline would indicate another test of $1800 per ounce*. A 63-day Twiggs Momentum trough above zero is likely — and would signal a primary up-trend, while breakout above $1800 would confirm.

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

The DJ-UBS Commodity Index also reflects an easing inflation outlook, breaking medium-term support at 145 to signal a correction. 63-Day Twiggs Momentum is unlikely to remain above zero but a shallow trough would be a bullish sign.

Brent Crude is also falling, having broken support at $108 per barrel. Expect a test of $100. Reversal of 63-day Twiggs Momentum below zero would strengthen the bear signal.

* Target calculation: 108 - ( 117 - 108 ) = 99

Nymex WTI Light Crude is similarly headed for a test of primary support at $76/$78 per barrel. The 63-day Twiggs Momentum peak below zero warns of a primary down-trend.

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~ Ed Seykota