ColinTwiggs, Author at the patient investor

June 25, 2013

S&P500 holds strong while Canada and Europe weaken

10-Year Treasury yields broke resistance at 2.50% as bond-holders offload their positions. Expect weak retracement to test the new support level at 2.00%, but recovery above 2.50% is likely and would signal a long-term advance to test resistance at 4.00%. Breakout above 4.00% would end the 31-year secular bear-trend. Rising yields reflect market expectations that the economy will recover, enabling the Fed to curtail further quantitative easing.

10-Year Treasury Yields

The S&P 500 broke support at 1600 and is undergoing a correction to test the long-term rising trendline at 1500. Twiggs Money Flow reflects moderate selling and the primary up-trend looks secure.

S&P 500 Index
My concern is: can the US withstand negative sentiment from global markets? The rising VIX is not yet cause for alarm, with the market shrugging off the last foray above 20, but a spike above 25 would warn of elevated risk.

VIX Index

The TSX Composite broke support at 11900/12000 to signal a primary down-trend. Falling 13-week Twiggs Money Flow continues to warn of selling pressure. Expect a test of the 2012 low at 11250.

TSX Composite Index

The FTSE 100 is testing the rising trendline and support at 6000. Bearish divergence on 13-week Twiggs Money Flow warns of a reversal. Failure of support at 6000 would strengthen the signal.

FTSE 100

Germany’s DAX is headed for a test of the long-term trendline and primary support at 7400/7500. Bearish divergence on 13-week Twiggs Money Flow continues to warn of selling pressure. Breach of 7400 would signal reversal to a primary down-trend.

DAX

June 25, 2013

ASX and Asian selling pressure

Japan’s Nikkei 225 Index respected support at 12500 and its long-term rising trendline, but another test is likely in the week ahead. Follow-through above 13500 would indicate the correction is over, suggesting a re-test of resistance at 16000. Breach of 12500, however, is more likely, with bearish divergence on 13-week Twiggs Money Flow warning of a reversal.

Nikkei 225 Index

Shanghai Composite Index is falling sharply. So far the down-trend has been gradual, with the PBOC looking to manufacture a soft landing. But 13-week Twiggs Money Flow crossing below zero warns of rising selling pressure. Breach of support at 1950 would offer a target of 1600*.

Shanghai Composite Index

* Target calculation: 2000 – ( 2400 – 2000 ) = 1600

India’s Sensex breached its rising trendline, warning that the primary up-trend is weakening. Failure of support at 18000 would signal a primary down-trend. Declining 13-week Twiggs Money Flow indicates trend reversal is likely. Recovery above 19000 is unlikely, but would suggest a fresh primary advance.

BSE Sensex Index

Apart from Japan, the outlook for Asia is bearish.

The ASX 200 is headed for a test of support at 4400, bearish divergence on 13-week Twiggs Money Flow having warned of a reversal. Failure of support at 4400 would re-test the 2011 lows, while respect would be bullish — suggesting another attempt at 5000.

ASX 200 Index

June 20, 2013

Forex: Euro retraces but Sterling weakens on the cross

The euro is retracing to test the new support level at $1.32, respect would confirm the advance to $1.37*.

Euro/USD

* Target calculation: 1.32 + ( 1.32 – 1.27 ) = 1.37

Pound Sterling is testing support at €1.16 against the euro. Failure would indicate a decline to primary support at €1.14 , with a longer term target of €1.10. A 13-week Twiggs Momentum peak below zero would strengthen the bear signal.

The greenback found support at ¥94 against the Yen. The primary trend is still upward and recovery above ¥100 would signal a fresh advance with a target of ¥114*. A 13-week Twiggs Momentum trough above zero would strengthen the signal. Respect of resistance at ¥100, however, would warn of reversal.

USD/JPY

* Target calculation: 104 + ( 104 – 94 ) = 114

Canada’s Loonie respected resistance at $0.99 against the greenback and is headed for another test of support at $0.96. Successive peaks below zero on 13-week Twiggs Momentum indicate a healthy primary down-trend. Breach of $0.96 would offer a target of $0.93*.

Canadian Loonie

* Target calculation: 0.96 – ( 0.99 – 0.96 ) = 0.93

June 19, 2013

Gold falls while Treasury yields rise

Gold is testing primary support at $1340/ounce. Breach of support would signal another primary decline, while follow-through below $1320 would confirm.

Spot Gold
Declining 13-week Twiggs Momentum below zero indicates a healthy primary down-trend. Breach of primary support would offer a target of $1100*.

* Target calculation: 1300 – ( 1500 – 1300 ) = 1100

Silver displays a similar down-trend on the monthly chart, offering a target of $16/ounce*.
Spot Silver

* Target calculation: 26 – ( 36 – 26 ) = 16

Dollar Index

The Dollar Index respected its primary trendline at 80.50 on the weekly chart. Recovery above 81.50 would indicate another test of 84. Declining peaks on 13-week Twiggs Momentum, however, suggest a weak up-trend. Failure of support at 80.50 would warn of another test of primary support at 79.

Dollar Index

Treasuries

Treasuries fell, with yields rising sharply after today’s FOMC announcement. Target for the advance of 10-year Treasury Yields is 2.60%*.

10-Year Treasury Yields

* Target calculation: 2.10 + ( 2.10 – 1.60 ) = 2.60

Crude Oil

Crude is rising despite the stronger dollar, with Nymex WTI breaking resistance at $98/barrel and Brent testing resistance at $106. The spread between the two has narrowed to around $8 and is likely to close further as the US economy recovers faster than Europe. Follow-through of Nymex crude above $100/barrel would confirm a primary up-trend, reflecting a stronger US economy — if the dollar is strengthening.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index, assisted by crude oil, found support at 130 on the weekly chart. Expect a test of the declining trendline at 134, but the primary trend is down and, with China weakening, a test of primary support at 125/126 remains likely.

Dow Jones UBS Commodities Index

June 19, 2013

Forex: Aussie Dollar falls below 93 US cents

The Aussie Dollar fell to below $0.93 within hours of the latest FOMC announcement from the Fed. Breach of support indicates another decline, with a target of $0.90*.

Aussie Dollar/USD

* Target calculation: 0.9330 – ( 0.9660 – 0.9330 ) = 0.9000

The monthly chart shows the Aussie has broken long-term support around $0.95, signaling a decline to $0.80*. Declining 13-week Twiggs Momentum below zero confirms a primary down-trend.

Canadian Loonie

* Target calculation: 0.95 – ( 1.10 – 0.95 ) = 0.80

It is not just a stronger greenback, the Aussie is also falling against the crosses. Canada’s Loonie broke resistance at parity to the Australian Dollar, signaling a primary up-trend.

Canadian Loonie

June 17, 2013

ASX: Following China into a down-trend

The S&P 500 is testing resistance at 1650, but declining 21-day Twiggs Money Flow warns of continued selling pressure. Breakout would signal an advance to the upper trend channel, around 1700. Reversal below 1600, however, remains likely and would indicate a correction to 1500.
S&P 500 Index

China’s Shanghai Composite Index broke primary support at 2170 on Thursday. Follow-through below 2150 would signal a decline to the 2012 low of 1950*.

* Target calculation: 2150 – ( 2350 – 2150 ) = 1950

The ASX 200 is retracing to test its new resistance level at 4900. Respect would confirm the primary down-trend — as would a peak below zero on 21-day Twiggs Money Flow.

ASX 200 Index

The ASX Small Ordinaries Index, reflecting retail investor interest in the market, continues its primary down-trend. Breach of the 2012 low at 2040 warns of a decline to 1700*.

ASX Small Ords Index

* Target calculation: 2050 – ( 2400 – 2050 ) = 1700

June 16, 2013

Europe: Broad selling pressure

The FTSE 100 encountered selling pressure at 6750, indicated by bearish divergence on 13-week Twiggs Money Flow, and is correcting towards the rising trendline and support at 6000 on the monthly chart. Respect would signal a healthy primary up-trend.

FTSE 100 Index

Germany’s DAX is experiencing strong selling pressure. Medium-term support at 8000 is unlikely to hold, but respect of support at 7500, and the rising trendline, would still signal a healthy up-trend.
DAX Index

Spain’s Madrid General Index also displays selling pressure, with bearish divergence on 13-week Twiggs Money Flow. Reversal below 800 would warn of another test of the 2012 low at 600, confirmed if 750 is broken.
FTSE 100 Index
Italy’s MIB Index found support at 16000 on the daily chart and there is an absence of selling pressure, but the weight of other European markets may drag the index lower. Penetration of the rising trendline would signal a test of primary support at 15000. Recovery above 17000, however, would suggest another primary advance.
FTSE 100 Index

June 16, 2013

Canada: TSX threatens down-trend

Canada’s TSX Composite is testing primary support at 11900 on the weekly chart. Breakout would signal reversal to a primary down-trend, confirming the warning from a bearish divergence on 13-week Twiggs Money Flow. Respect of support is unlikely, but would indicate another attempt at 13000.

TSX Composite Index

June 16, 2013

S&P500 up-trend despite test of support at 1600

A monthly chart shows 10-year Treasury yields continue to respect support at 2.00%, confirming the primary up-trend. Expect resistance at 2.50%, but the long-term (multi-year) target is 4.00%, where the 2009 high coincides with a descending trendline from the 31-year secular bear-trend. Rising yields reflect market expectations that the economy is recovering and the Fed will curtail further quantitative easing.

10-Year Treasury Yields

The S&P 500 is headed for a re-test of support at 1600, but recovery above 1650 would signal another advance — testing the upper channel around 1700. Declining 21-day Twiggs Money Flow continues to signal selling pressure.

S&P 500 Index
Breach of support at 1600 would warn of a correction to test the long-term rising trendline at 1500, but that would not alter the healthy primary up-trend.

The VIX is rising, but remains in the green zone, below 20, suggesting a healthy up-trend.

S&P 500 Index

June 12, 2013

Forex: Aussie resistance, Yen falls

The Aussie Dollar rallied to $0.955 on the 2-hour chart before encountering selling pressure. Expect a test of the 2011 low at $0.94. Breach would indicate another decline. The next target is $0.90*, with a long-term target of $0.80*. Breakout above $0.955 is unlikely, but would re-test resistance at $0.98.

Aussie Dollar/USD

* Target calculations: 0.94 – ( 0.98 – 0.94 ) = 0.90 and 0.95 – ( 1.10 – 0.95 ) = 0.80

Canada’s Loonie, however, respected support at $0.96, heading for another test of resistance at $0.99 or parity. 13-Week Twiggs Momentum below zero suggests continuation of the down-trend. Respect of resistance would indicate another decline, with a target of $0.94*.

Canadian Loonie

* Target calculation: 0.97 – ( 1.00 – 0.97 ) = 0.94

The euro broke resistance at $1.32 and is headed for $1.37*. Breakout is some way off, but would offer a target of $1.47*.

Euro/USD

* Target calculation: 1.37 + ( 1.37 – 1.27 ) = 1.47

Pound Sterling broke resistance at $1.56, signaling an advance to $1.63*. Recovery of 13-week Twiggs Momentum above zero would strengthen the bull signal.

* Target calculation: 1.56 + ( 1.56 – 1.50 ) = 1.62

The greenback continues a strong correction against the Yen, but this is a secondary movement and the primary up-trend is unaltered. A 13-week Twiggs Momentum trough above zero would strengthen the signal. Recovery above resistance at ¥100 would signal a fresh advance with a target of ¥113*. Long-term target for the advance is the 2007 high at ¥125*.

USD/JPY

* Target calculations: (a) 104 + ( 104 – 95 ) = 113; (b) 100 + ( 100 – 75 ) = 125