Dow Jones Industrial Average put in a strong blue candle last week, but 13-week Twiggs Money Flow bearish divergence continues to warn of a reversal. Exercise caution until there is a breakout above the August high of 37% on TMF following an index breakout above 15660. Failure of primary support at 14500 would confirm a reversal, but continuation of the up-trend now seems as likely.
The S&P 500 displays a similar bearish divergence on the daily chart, indicating selling pressure. 21-Day Twiggs Money Flow is now rising and follow-through above the July high at 23% would negate the warning. As would breakout above 1710 on the index chart, signaling a long-term advance to 1900*. Respect of resistance remains as likely, however, and reversal below 1670 would test the then primary support level at 1630.
* Target calculation: 1710 + ( 1710 – 1630 ) = 1890
Despite the bearish divergences, VIX below 20 continues to suggest a bull market.
A low VIX = equals shorting value not bullishness
Since its inception, VIX has enjoyed two extended periods below 0.15:
Both coincided with bull markets.
