- S&P 500 advance to 2000 likely.
- Europe warns of correction.
- China further consolidation expected.
- ASX 200 hesitant.
US market sentiment remains bullish, while Europe hesitates on Portuguese banking worries. As Shane Oliver observed: “Could there be a correction? Yes. Is it start of new bear mkt? Unlikely. Bull mkts end with euphoria, not lots of caution like there is now…”
The S&P 500 found support between 1950 and 1960, as evidenced by long tails on the last two candles, and is likely to advance to the psychological barrier of 2000. 21-Day Twiggs Money Flow recovery above the descending trendline would confirm that short-term selling pressure has ended. Expect retracement at the 2000 level, but short duration or narrow consolidation would suggest another advance. Reversal below 1950 is unlikely, but would warn of a correction to 1900 and the rising trendline.
* Target calculation: 1900 + ( 1900 – 1800 ) = 2000
CBOE Volatility Index (VIX) remains at low levels indicative of a bull market.
Dow Jones Euro Stoxx 50 broke support at 3200/3230, warning of a correction to the primary trendline at 3000. Solvency doubts over struggling Portuguese Banco Espirito Santo have roiled European markets. Descent of 21-Day Twiggs Money Flow below zero indicates medium-term selling pressure. Recovery above 3230 is unlikely at present.
* Target calculation: 3150 + ( 3150 – 3000 ) = 3300
China’s Shanghai Composite Index displays strong medium-term buying pressure, with 21-day Twiggs Money Flow troughs above zero. Follow-through above 2060 would indicate another test of 2090. Breach of primary support is unlikely at present, but would signal a decline to 1850*. Further ranging between 2000 and 2150 is expected — in line with a managed “soft landing”.
* Target calculation: 2000 – ( 2150 – 2000 ) = 1850
The ASX 200 found support at 5450 and appears headed for another test of resistance at 5550. 21-Day Twiggs Money Flow oscillating around zero, however, continues to indicate hesitancy. Reversal below 5450 would signal another test of 5350, while breakout above 5550 would suggest a long-term advance to 5800*.
* Target calculation: 5400 + ( 5400 – 5000 ) = 5800
S&P now 390 days above the 130 MA. At this 3:1 ratio, I have no interest in being long or getting long for a position trade. This market needs significant sideways or regressive action before I can be interested again.
What is the longest period that the index has ever closed above the 130-day MA? And why 130-day and not 150-day or 200-day?
It is the tightest (shortest time series) MA that would contain this past year and a half run. Only very occasionally a market (stock or otherwise) will get beyond that ratio. At the very least, a break of that MA (130 day), would be my final signal to cash in with particular respect to that MA ratio. Yes, it would be interesting to see what has happened in the past once the market achieved this ratio after say 100 day (or 250 day) minimum time series length. Could the market break and violate that containment MA and then regroup and go to new highs? Yes, but I would prefer to rejoin it after it starts to reprove itself to the upside when and if it might. The containment ratio is the key metric in this analysis method.
Last close below the index was February 3rd, whether EMA or SMA.