The Nasdaq 100 is consolidating in a narrow band below resistance at 2400 on the weekly chart, suggesting an upward breakout. Follow-through above 2450 would confirm the target of 2800*. 13-Week Twiggs Money Flow continues to signal buying pressure after an earlier bullish divergence.
* Target calculation: 2400 + ( 2400 – 2000 ) = 2800
The Dow Industrial Average is consolidating below 12300. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Breakout above 12300 would offer a target of 12800*. Failure of support at 11600 is less likely, but would mean another test of primary support at 10600.
* Target calculation: 12200 + ( 12200 – 11600 ) = 12800
The S&P 500 is similarly consolidating between 1220 and 1300. Expect strong resistance at 1350.
Comparing to early 2008, the S&P500 displays a similar pattern, with the index testing resistance at 1400. We are close to a watershed: reversal below medium-term support (1220) would be a strong bear signal, while follow-through above recent highs would dispel fears of another bear market.
Hi Colin,
I really enjoy reading your Trading Diary. It has provided an “incredible” amount of timely information (and intuition) about the world markets as well as the USA markets.
I especially enjoy your technical analyses, which realistically interpret both possible bull and bear outcomes. I had one observation that symmetrical triangles seems to be developing with the major indices (DJ, S&P) on daily, starting around October 26. It could also be leaning towards a bearish descending triangles as well. What do you think?
Best wishes,
Joe
I agree. It looks like a symmetrical triangle (or pennant) to me.
I don’t get it. Your headline on the Nasdaq is bearish but all of your interpretations are bullish??
Apologies for the confusion. The headline really relates to the concluding paragraph.
Hi Colin,
Do you think you may be drawing a rather long bow in comparing the S&P500 to mid 2008? To me, it’s somehing like it but not enough to draw a direct comparison.
Thanks for your analysis,
Regards
John
There is no guarantee that what happened in 2008 will repeat in 2011. What is interesting though is the similarity between the two patterns. They could diverge at any moment but the longer they stay in sync, the more likely we are to see another decline. Not necessarily as severe as 2008 but enough to cause further pain.