Nymex oil may have a prolonged sideways consolidation between $38 and $48 but charts suggest that, long-term, it has further to fall.» Read More
Global events like heightened Korean tensions and a spreading European debt contagion may have supported the U.S. dollar in recent days, as investors flee risk assets for the safety of the greenback; but the uptrend has already been in place for a few weeks now, ever since the Federal Reserve announced its second round of quantitative easing on November 3.
The reaction is seen as counter intuitive, and, according to technical analysis, shows the reversal from the prolonged downtrend has the potential to develop into a significant trend change.
Takeovers provide a range of different trading opportunities. Many investors closely scrutinize the financials of the predator and the prey to decide the merits of the offer. Others, like Warren Buffet, play the arbitrage opportunities, trading today’s value against a known, or estimated future value. This is the classic investors play and the objective is to buy in now in anticipation of the 'takeover dance'. This dance starts with a takeover offer. Its followed by a ritualistic rejection of the offer as being undervalued or inadequate. The third step is an increase in the offer, followed by a possible coy refusal. Sometimes there is a third round of offers. It’s a predictable market axiom, and often a profitable dance.
Gold prices powered to a new record high of $1,410 on Tuesday, extending its record-breaking rally to a third day, as safe-haven buying prompted by renewed budget problems in Ireland more than offset a sharp dollar bounce.
Prices were also bolstered by the Fed's easing - spot gold has risen almost 6 percent since the U.S. central bank unveiled plans to buy $600 billion worth of Treasurys last week.
Have traders missed the rally, or does this market still have further upside?
In my recent discussion on the prospect of the Australian dollar reaching parity with the U.S. dollar , I indicated that I will go short on the Aussie when, and if, I receive a "parity invite".
Well, the invitation has arrived. Am I sticking to my guns, or will I attend as a reluctant guest?
Lets get one confusion out of the way - trading is not about being right. Trading is about being profitable. We take the action we think will be profitable, and if it proves otherwise, we quickly change our position. We may be wedded to our partners, but traders are not wedded to their positions.
In this party, I am a "banquet bug", so-called invited guests who turn up for no other purpose than to enjoy the hospitality and eat as much free food as possible. In this case, the surge in the Australia dollar certainly offers this opportunity.
So what is the evidence that suggests a retreat in the Australia dollar? And conversely, what are the signals that suggest a continuation of the upward trend of up to $0.20 above parity, as some forecasters have predicted?
I love gold.
I have mined for physical gold deep underground, fossicked for it in alluvial plains in central Australia, but I find that it is most easily turned into a profit trading COMEX and its derivatives.
Having said that, I am not blinded by love so I would begin to worry as gold moves towards the target price of $1,355. When that happens, I will need to identify the conditions that will predict either one of the following scenarios.
Momentum is weakening before reaching $1,355.
Momentum and trend reversal signals around the $1,355 level.
Continuation patterns around $1,355 that suggest the uptrend may continue.
The U.S. dollar index is not listening to the talk coming out of the U.S. mid-term elections. The greenback has continued to trend lower, now hovering at eight-month lows, despite Washington's threat to introduce a bill to pressure Beiing to revalue the yuan, in a bid to appease voters.
As recently as three weeks ago we remained bullish on oil. This view has now changed with a confirmation of a longer term chart pattern.
Nymex oil is now showing a bearish pattern. There are still additional moves required to fully confirm the pattern but the development of bearish pressure is increasing.
Daryl Guppy is an independent technical analyst who appears frequently on CNBC Asia.