GOLD PULLBACK
By David Banister

Back in latter June I forecast a big top in Gold, mostly due to the 5 wave structures up from the October 2008 lows to June highs, and the 5 waves up from February lows to June highs converging. We then dropped from 1243 at the time of the forecast to $1155, which was one of my potential “A wave down” rally pivots. I expected a counter-trend rally or “B” wave up to 1212-1225. So, all of that worked out pretty well, until we hit $1238. Now, $1238 is a 78% Fibonacci re-tracement of the drop from $1265 to $1155. Normally, a re-tracement in a weaker market or sector is capped at 61.8% or 50%.
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Dear Traders,

According to Intrade, a website where you can bet on events, the Democrats have a 62.5 % chance of losing control of the House of Representatives in the 2 November US election. That means the opposition party, the Republicans will take control and Obama’s big government, increased regulation, higher taxes, small business unfriendly, socialist agenda will be blocked.
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DOW CAUTION
By Daryl Guppy

The head and shoulder pattern that has developed in the DOW has been technically invalidated by the weekly close above 10,600. The head and shoulder pattern is a powerful reversal pattern that has around 80% reliability. When the pattern develops then eight times out of ten the pattern continues to develop and achieve its downside targets.

If the definition of the head and shoulder pattern is less rigorous then the results become less reliable. The head and shoulder pattern is created by a series of three rallies and retreats developing over several months. This is not a short term pattern of behavior. It captures the broad macro-economic changes in economic activity.
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INDEX BRIEFS – HANG SENG, HONG KONG
By Daryl Guppy

The valid pattern is the Hang Seng is the trading band. The move below the trading band was the key signal. The width of the trading band, projected downwards, provided the target support level near 19,500. This was achieved, and acted as a rebound point. This creates a much broader trading band stretching from 19, 500 to 23,000. This trading band pattern will continue to dominate the Hang Seng movement.
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