The S&P 500 displays evidence of buying pressure on the daily chart, with brief retracement to test support at 1500 followed by a surge to a new 5-year high. Expect a test of the 2000/2007 highs at 1550/1565.
Troughs above the zero line on 13-week Twiggs Money Flow indicate longer-term buying pressure. Breakout is likely and would signal an advance to 1750*. Reversal below 1500, however, would warn of a widely predicted correction.
* Target calculation: 1550 + ( 1550 – 1350 ) = 1750
Declining 63-day Twiggs Momentum on the Nasdaq 100, however, warns of a reversal. Respect of resistance at 2800 would strengthen the warning, while retreat below 2500 would complete a head and shoulders reversal. Follow-through above 2900 is less likely, but would confirm a bull market signal from the Dow/S&P 500.
These are times for cautious optimism. Central banks are flooding markets with freshly printed money, driving up stock prices, but this could create a bull trap if corporate earnings, capital investment and employment fail to respond.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
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.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.
Your final comment says it all! A good reason for caution.
Cheers
Yes. I will be a lot more optimistic if we have a decent correction.