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[RT] Trading Diary: Market Consolidates Ahead Of September 30th



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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.

USA

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)].
US dollar compared to euro and gold
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.
federal funds rate and 13 week t-bill yield

Dow Jones Industrial Average

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.
dow jones industrial average medium-term chart
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.
dow jones industrial average short term chart


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.

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