ColinTwiggs, Author at the patient investor

February 10, 2014

Commodities follow Shanghai Composite

Copper prices, bellwether for the global economy, have been consolidating in a narrow band for almost a year. Breakout above $7500/tonne (and the descending trendline) would indicate a primary up-trend. Reversal below support at $6800/tonne, however, would offer a target of $6000. Narrow oscillation of 13-week Twiggs Momentum around zero reflects the current indecision.

Copper

The monthly chart below illustrates how the Shanghai Composite Index tends to lead broad commodity prices by up to 12 months. The Dow Jones-UBS Commodity Index is testing its descending trendline, but another decline on the Shanghai Index would likely cause further weakness. Recovery above 135 is unlikely at present, but would suggest a primary up-trend.

Dow Jones UBS Commodities Index

February 10, 2014

ASX 200 hammer

The ASX 200 recovered above 5200 Monday after a last week’s hammer candlestick flagged support. Follow-through above the descending trendline would suggest another advance. Breakout above 5400 would confirm. A 13-week Twiggs Money Flow trough above zero would strengthen the signal. Failure to break the descending trendline would warn of another decline, however, and breach of 5000 would signal a primary down-trend.

ASX 200

The ASX 200 VIX retreated to below 15, reflecting low market risk.

ASX 200

February 10, 2014

India: Sensex finds support

India’s Sensex found support at 20000. Respect would indicate another test of the 2007 and 2010 high of 21000. A 13-week Twiggs Money Flow trough above zero would strengthen the signal. Failure of support is less likely, but would test the rising trendline (around 19000).

Sensex

* Target calculation: 21000 + ( 21000 – 20000 ) = 22000

February 10, 2014

Shanghai rally

Declining 13-week Twiggs Money Flow (not shown) warns of long-term selling pressure on China’s Shanghai Composite Index, but the daily chart shows medium-term buying pressure. The index is currently testing 2080 on Monday, after the lunar new year last week, but the primary trend remains down. Respect of resistance at 2120 would reinforce this. Breach of support at 1950 is unlikely at present, but would test the 2008 low of 1700*.

Shanghai Composite Index

* Target calculation: 1950 – ( 2200 – 1950 ) = 1700

February 10, 2014

Japan: Dollar supports Nikkei

The US Dollar found support at ¥101 against the Yen. Recovery above the May high at ¥104 would suggest a healthy up-trend, while breakout above ¥106 would offer a target of ¥110*. Divergence on 13-week Twiggs Momentum remains bearish, but another trough above zero would reverse this. Breach of support at ¥101 now seems unlikely, but would warn of trend weakness.

Nikkei 225

* Target calculation: 106 + ( 106 – 102 ) = 110

A rising Dollar/Yen exchange rate would assist Japanese stocks. The Nikkei 225 found support at 14000 on the monthly chart. Recovery above 15000 would suggest another advance, while breakout above 16000 would confirm. Reversal of 13-week Twiggs Money Flow below zero, however, would warn of a primary down-trend.

Nikkei 225

February 10, 2014

Footsie finds support

The FTSE 100 found support at 6400 and the rising trendline. Recovery above 6600 would indicate another test of 6850. Rise of 13-week Twiggs Money Flow trough above 17% (the most recent high) would strengthen the signal. Failure of support at 6400 is unlikely, but would warn of a primary down-trend.

FTSE 100

* Target calculation: 6700 + ( 6700 – 6400 ) = 7000

February 10, 2014April 18, 2024

DAX finds support

The Euro retraced from resistance at $1.39 but appears unlikely to penetrate the rising trendline (having recently signaled a primary advance). Breach would warn of of trend weakness, but recovery above $1.39 is more likely and would signal an advance to $1.46*.

Euro

* Target calculation: 1.37 + ( 1.37 – 1.28 ) = 1.46

The dragonfly candlestick on Germany’s DAX indicates strong support at 9000. Recovery above 9400 would suggest the correction is over and breakout above 9800 would signal a fresh advance with a target of 10600*. Reversal below 9000 is unlikely, but would warn of a correction to the primary trendline. Completion of another 13-week Twiggs Money Flow trough high above zero would signal strong long-term buying pressure.

DAX

* Target calculation: 9800 + ( 9800 – 9000 ) = 10600

Retreat of DAX Volatility below 20 suggests low risk indicative of a bull market.

DAX

February 9, 2014April 18, 2024

S&P 500 finds support

The S&P 500 hammer candlestick on the weekly chart indicates support at 1750 and the secondary trendline. Follow-through above 1800 would strengthen the signal, suggesting an advance to 2000*. Breakout above 1850 would confirm. Recovery of 13-week Twiggs Money Flow above 40% (the most recent high) would indicate that the correction is over. Breach of 1750 seems unlikely, but would warn of a test of the primary trendline, around 1700.

S&P 500

* Target calculation: 1850 + ( 1850 – 1700 ) = 2000

CBOE Volatility Index (VIX) retreated below 20, suggesting low risk typical of a bull market.

VIX Index

February 6, 2014

Gold and silver bottom?

The Gold Bugs Index broke its descending trendline on the weekly chart and shows a bullish divergence on 13-week Twiggs Momentum. Both suggest reversal to a primary up-trend, but first we are likely to see a re-test of support at 190. Respect of 190 followed by recovery above the recent high at 225 would strengthen the reversal signal.

Gold Bugs Index

Spot gold displays a similar penetration of the descending trendline and bullish divergence on 13-week Twiggs Momentum, suggesting that a bottom is forming. Follow-through above 1280 would strengthen the signal. Reversal below 1240, however, would warn of another test of primary support at 1180. Breach of 1180 is unlikely, but would offer a target of 1000*.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

The silver chart, consolidating above primary support at $18/ounce, is mimicking gold. Recovery above $20.50 would also suggest that a bottom is forming.

Spot Silver

February 5, 2014

Crude: Nymex WTI down-trend

Nymex Light Crude is headed for another test of resistance at $100/barrel. Respect of resistance is likely, given the primary down-trend, and would suggest another test of primary support at $92/barrel. Breach of primary support would offer a target of $84/barrel*. Recovery above $100 is unlikely and another 13-week Twiggs Momentum peak below zero would strengthen the bear signal. Brent crude is headed for another test of support at $104/barrel. Breach would join Nymex crude in a primary down-trend.

Brent Crude and Nymex Crude

* Target calculation: 92 – ( 100 – 92 ) = 84