- DAX and FTSE find support, but remain in a down-trend
- China is bullish, but Japan bearish
- US stocks find support and continue to indicate a bull market
- ASX respects primary support
The S&P 500 found support at 1820 and is testing resistance at 1900. Breach of resistance would suggest that the correction is over. 21-Day Twiggs Money Flow below zero, however, continues to warn of medium-term selling pressure. Respect of resistance is more likely, indicating another test of support at 1800*.
* Target calculation: 1900 – ( 2000 – 1900 ) = 1800
CBOE Volatility Index (VIX) retreated to 22, indicating moderate risk, but nowhere near the 30+ levels typical of a bear market.
Dow Jones Industrial Average recovered above resistance (the former support level) at 16300, the long tail indicating short-term buying pressure. Follow-through above the descending trendline would signal that the correction is over. Recovery above the recent highs at 25% on 13-week Twiggs Money Flow would suggest that buyers have regained control.
Germany’s DAX is retracing to test resistance at 9000. Respect would confirm a primary down-trend. 13-Week Twiggs Momentum below zero strengthens the bear signal. Target for the decline is 8000*. Recovery above 9000 remains unlikely, but would warn of a bear trap.
* Target calculation: 9000 – ( 10000 – 9000 ) = 8000
The Footsie displays a similar long tail, indicating buying pressure. Recovery above 6500 is unlikely, but would warn of a bear trap. Respect of resistance would offer a target of 6000*.
* Target calculation: 6400 – ( 6800 – 6400 ) = 6000
China’s Shanghai Composite Index is testing support at 2340/2350. Breach would warn of a correction. But the primary up-trend remains and rising 13-week Twiggs Money Flow signals medium-term buying pressure.
Japan’s Nikkei 225 Index plunged through support at 14800, warning of a test of primary support at 13900/14000. Reversal of 13-week Twiggs Money Flow below zero indicates (long-term) selling pressure.
The ASX 200 recovered above resistance at 5250 and the descending trendline, suggesting that the correction is over. Bullish divergence and a rising 21-day Twiggs Money Flow (above zero) indicates medium-term buying pressure. Recovery above 5350 would confirm that buyers are back in control, while reversal below 5250 would indicate another test of 5000/5050.
* Target calculation: 5350 – ( 5650 – 5350 ) = 5050
ASX 200 VIX remains below 20, indicating low risk typical of a bull market.
You write: ” Although we may see further tests of support, this is likely to be followed by a surge in buying from long-term investors”.
What makes you state that ?
Strong support on Dow and S&P 500. Breach of descending trendline on ASX 200. October sell-off nearing an end. US reporting season has started. Fund managers will revert to accumulation of stronger performing stocks.
QUOTE: The daily media cycle fuels indecision. There are always interests best served by opposing views of the market. Those not in the market would love to see it fall. And those in the market, or who derive an income from market activity, want it to rise. Most will seize on any evidence that supports their view and promote it for all they are worth. Any attempt at objectivity is lost. Treat with suspicion any source that does not present both sides of an argument before delivering a conclusion. UNQUOTE
Colin, it may be the wine talking (2 very large glasses of SSB while watching the hail pelt down outside) but this is just about the most sensible and succinct bit of writing on the dilemma facing self-funded retirees that I’ve ever read. Well said. Only the promise of dividends keeps my cursor off the “sell” icon. And yes, I want it to rise too. A little helium please? 🙂
Frank
Wouldn’t be dead for quids.
Thank you Frank,
The media’s priority is selling newspapers/advertising. The more sensational a story, the more eyeballs it will attract. They are happy to seize on anything that will attract attention. Objectivity is secondary. Investment managers and brokers thrive in a bull market so their bias is towards generating excitement. Again, objectivity is secondary.
I was intrigued by the Charles Schwab study in the US that found the class of investors who performed best were clients who had forgotten they had an account. It pays not to respond to the media/stock market cycle.
Looks like no comment to Randall, Colin? Very insightful question that also may show exposure of everybody to emotional bias, also those who, like Incredible Charts ????, caution against it. Come on Colin, surely you can spin something there to Randall !!
Keep up the good work
I play a lot of golf on weekends. Sometimes replies only get posted Monday. We are all subject to emotional bias. No one is immune. The most susceptible are those who think they are infallible.
My technical analysis of the Nikkei 225 index should bounce back up to fill the 15,200 gap this week, ie Tuesday or Thursday. Tonight’s action should be down in the Nikkei futures market that opens in like what, 10 minuets? I will go short at the open of a pop in the futures.
Well, heck, the Nikkei 225 futures hit the 15225, just 25 higher than my statement of the gap fill. I did not get short because my smart phone got dumb and would hold a charge and had to go back to the factory for a new battery module. Now I am back home on the computer and see the 225 futures are down more than 140 at 15010 and that would have been a great trade. But hey, there are always going to be great trades, all one has to do is see them, act on them and then reap the reward.