Gold Hints Major Top in Place, Dollar Gains as Stocks and Oil Extend Losses

MSCI WORLD STOCK INDEX – Prices have dropped to resistance-turned-support at a previously broken rising trend line set from May’s swing top, now at $1091.80, having been rejected on a challenge of horizontal resistance at $1120.55. Support is reinforced by the 50% Fibonacci retracement of the 7/1-8/5 upswing at $1092.60. Continued selling targets the 61.8% Fib at $1076.93, while $1120.55 remains as near-term resistance.

US DOLLAR INDEX – Prices have set a new swing one-month high following a rebound from resistance at 82.12, the 23.6% Fibonacci retracement of the 6/7-8/6 downswing. From here, the bulls aim to challenge resistance at the 38.2% Fib (83.37). The 82.12 level remains as near-term support.

CRUDE OIL – Prices have extended losses having taken out the bottom of a rising channel established since late May, with the bears now challenging the 61.8% Fibonacci retracement of the 5/19-8/4 really at $73.66. A break below this boundary exposes the 76.4% Fib at $71.46. The broken channel bottom, now at $75.43 stands as near-term resistance.

GOLD – Prices continues to track higher in a narrow rising channel en route to test horizontal resistance at $1243.27 having taken out the barrier at $1215.47, which has now been re-cast as support.A break past this boundary exposes the record high at $1265.30. Looking on the weekly chart however, we notice clear negative RSI divergence that hints a major top may be taking shape. Confirmation of a long-term bearish reversal in line with our fundamental outlook requires a weekly close below a rising trend line set from the swing bottom in late 2008.

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