China’s Shanghai Composite Index monthly chart displays controlled descent rather than free-fall, declining in layers of roughly 200 points since early 2010. After breaking support at 2000, expect a decline to 1800*. Oscillation of 63-day Twiggs Momentum below zero reflects the primary down-trend. Recovery above 2000 is most unlikely but would suggest a bear trap.
* Target calculation: 2000 – ( 2200 – 2000 ) = 1800
The Shenzhen Composite Index offers a target of 600* after breaking support at 800 on the monthly chart. 13-Week Twiggs Money Flow below zero indicates selling pressure.
* Target calculation: 800 – ( 1000 – 800 ) = 600
Hong Kong’s Hang Seng Index respected resistance at 22000. Bearish divergence on 13-week Twiggs Money Flow warns of medium-term selling pressure. Reversal below 21000 would indicate a test of the rising trendline at 20000. Recovery above 22000 is unlikely at present but would signal an advance to 24000*
* Target calculation: 22 + ( 22 – 20 ) = 24
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.