The September Quarter has ended, bonuses have been determined, and buying pressure is now likely to ease. The S&P 500 is testing resistance after breaking support at 1450. Bearish divergence on 21-day Twiggs Money Flow indicates selling pressure. Respect of 1450 is likely and would indicate a test of 1400.
The Nasdaq 100 weekly chart shows the index testing support at 2800/2750. Bearish divergence on 63-day Twiggs Momentum indicates a weakening up-trend; reversal below zero would warn of a primary down-trend. Failure of support would strengthen the signal. Respect of support is unlikely but would indicate another advance.
* Target calculation: 2800 + ( 2800 – 2450 ) = 3150
Bellwether transport stock Fedex is testing support at $84. Narrow range of last week’s candle indicates selling pressure — as does reversal of 13-week Twiggs Money Flow below zero. Downward breakout would confirm the primary down-trend earlier signaled by 63-day Twiggs Momentum below zero. A Fedex down-trend would warn of slowing activity in the broader economy.
Similar share market patterns seem to have appeared previously but they were not matched by the mysterious (to me) Twiggs money flow indices.
It will be interesting to see what transpires this time
October weakness reminds me of October 2007. Fedex is the canary in the coal mine.
My take is more bullish, I see a substantial move up in US equity markets underpinned by QE3.
Inflation effect of QE3 will be muted. The Fed is trying to offset the deflationary effect of private debt contraction with the inflationary effect of QE3 — to achieve a soft landing.