Bellwether transport stock Fedex found support at $154, the long tail and rising 13-week Twiggs Money Flow indicating buying pressure. Expect a test of $165. Reversal below $150 is unlikely, but would warn of a test of primary support at $130. Continuation of the primary up-trend signals improvement for the broad economy.
* Target calculation: 165 + ( 165 – 150 ) = 180
The S&P 500 is testing its new resistance level at 1900/1910. Last week’s long tail indicates short-term buying pressure but declining 13-week Twiggs Money Flow continues to warn of long-term selling pressure. Recovery above 1910 would suggest that the correction is over, while penetration of the descending trendline would strengthen the signal.
* Target calculation: 1900 – ( 2000 – 1900 ) = 1800
Someone asked why I felt the correction was over, when there are so many bearish signs on the charts. My answer in brief was:
- Strong support on the Dow and S&P 500;
- Breach of descending trendline on the ASX 200;
- October sell-off nearing an end;
- US reporting season has started and fund managers will revert to accumulation of stronger performing stocks.
I could have added that our market filters continue to indicate low to moderate risk.
I am also suspicious of breaks of support after the bear traps of 2010 and 2011.
Breaches are indicated by red arrows, recoveries by green.
Investors remain extremely skittish after the 2009 crash and likely to jump at shadows.
CBOE Volatility Index (VIX) has retreated below 20%, suggesting low risk typical of a bull market. Recovery above 20% is not likely, but a (significantly) higher trough would warn of rising risk.
The Nasdaq 100 rallied off support at 3700. Follow-through above 3900 would suggest another test of 4100. Recovery above 4000 and the descending trendline would strengthen the signal. Divergence on 13-week Twiggs Money Flow indicates mild selling pressure. Reversal below 3700 and the rising (secondary) trendline would warn of a test of primary support at 3400.
* Target calculation: 3750 – ( 4100 – 3750 ) = 3400
Hello Colin. Have you looked at the Dow / S&P 500 on a monthly chart? I use standard monthly MACD 12,26,9. It looks like 2007 all over again! I appreciate all the time and effort you put into the newsletters you send out. They have really helped me become a better trader.
Martin,
Monthly MACD is a useful trend indicator but prone to occasional whipsaws like 2006 and 2011.
Why do you say this looks like 2007, when the MACD lines have not crossed?
Beware of indicator readings for incomplete months. To hide, select View >> Incomplete Periods >> Other Indicators >> Hide.