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Everyone is voting in the U.S. and at 8:15 pm there is no
clear indication of who will run the country for the next two years. At the
very least, if the Democrats can't walk away with control of the House they
should begin to look for another way to make a living. I don't think they
have a chance of gaining control of the Senate but I'll be the first to admit
that I haven't followed the races closely. In all honesty, I don't see that
either party will make much difference. After some early fireworks in the
dollar, gold, and the Dow things settled down into the close. If anyone was
surprised that the Dow rallied yesterday and today, they shouldn't be. Let's
take a look and see what tomorrow has in store for us:
US$ - The December US$ ended the session down .32 to
close at 85.24 but traded as low as 84.92 which is a new intraday low for
this move down. There is absolutely no mystery to the dollar here. Critical
support is at 84.87 and it must hold or we will more than
likely go down to test the 80.50 low by year's end. The resistance is at 85.69
and 86.64. There will also be some resistance from the 50-dma
at 85.78 but the real battle is at the Fibonacci numbers mentioned above.
Take a look at the Daily Chart for the dollar:
We were three days off the low before today's
decline and I will be very interested to see if we can follow through to the
downside tomorrow. In the daily chart we can see that the RSI, histograms,
and MACD are in oversold territory. I would not be surprised to see a rally
back up to 86.00 as we complete the right shoulder in a head-and-shoulders
formation. I am short the dollar and will stay that way.
DJIA -The Dow followed yesterday's strong rally
with a decent day. The Dec. DJIA managed to rally 55 points to close out the
day at 12,188 and just one point shy of last week's closing high. We did
though manage to make another new intraday high of 12,220. Support is at
12,167 12,121, and 12,072. There is no real resistance until we hit 12,356.
The Dow was weak for six straight sessions and then turned up yesterday as
the present administration painted the tape in order to have a new high the
day of the election. The Transportation, Banking, and Consumer indexes all
rallied while the Housing Index gave up ground. Now I want to focus on the
Daily Chart of the S & P 500 Index below and expound on a couple of
things I mentioned in the monthly newsletter:
 
You see the six straight down days with the blue
arrow #6 pointed at last Friday. Today saw the second day of a rally that
takes us back to 1382.84 as of today's close. This rally that began on Monday
is extremely important. Normally I would think that we would see a lower high
followed by a significant decline. The key word here is normally.
I have my doubts due to the fact that we never saw a true blow-off to the
upside. Rather we had a slow grinding move to the upside. Therefore I suspect
that we could make a higher high and that higher high will come about after
the price goes vertical. I was long the Dec DJIA future from 12,100 and used
today's rally to exit at 12,200. Not what I expected but you don't always win
big. I am on the sidelines with the DJIA for the moment.
GOLD - Given the elections today, I felt three
things were certain: the Dow would make a new high, oil would stay below
60.00, and gold would not close up. Gold opened up on the Globex and trade up
most of the session. Then we sold off into the close. The December Gold ended
the session down 0.2 to close out the day at 627.7 after trading as high as
631.2. Fibonacci support is at 627.1 and 616.5 while resistance
is at 648.9 and 684.7. Take
a look at gold's daily chart:
Gold has clearly broken out to the upside and ready
to change the 640.64 high as well as he Fibonacci resistance level mentions
above. You can also see what could appear to be a completed reverse
head-and-shoulders formation here and the neckline would come in at +/-
605.3. Consolidation and accumulation continue. There will be volatile
declines for two or three days, but the trend as up. I am long gold and
will stay that way.
SILVER - It was a slow day in the silver market
Tuesday. The December Silver fell 8.5 to end the session at 1267.5. There is
support for silver at 1254.2, 1244.4, and 1233.1 while the
resistance is at 1270.2 and then nothing until we hit 1332.5. Silver
is stronger than gold right now and is pulling away from the 50-wma at an
increasing rate. Silver has not gone vertical yet as it just grinds away to
the upside. This has the potential to do some real damage to the upside, and
it may be sooner rather than later. I really don't see where silver is doing
anything wrong here so I will just sit tight! I am long silver and will
stay that way.
GOLD STOCKS - Today was another good
day for gold stocks today as they slowly gain ground. The gold stocks appear
to be taking the lead from gold. That's important because the stocks
typically lead gold up when the rally picks up a head of steam. The HUI
rallied 1.84 points to end the day at 328.74 as we put distance between
support at the 50-dma at 318.73 and the Fibonacci numbers at 312.52 and
325.45. Take a look at the daily chart of the HUI below:
There is resistance at 336.23 and then nothing until
we get to 349.48, and old high. Both gold and the Dow are headed up and that
could provide an explosive boost for the gold stocks. There is nothing to do
here but sit tight. If the Dow remains firm, gold stocks should break out. I
am long BVN, CDE, GG, GLG, NEM, RGLD, and SLW and see no reason to change. I
will sit tight and stay long gold stocks.
8
November 2006
Enrico
Orlandini
Website : Dow Theory Analysis
Dow Theory Analysis S.A.C.
Lima, Peru
Phone:
001-51-56-973-5599
Email: ebo@dowtheoryanalysis.com
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