Author: ColinTwiggs

Batten down the hatches, the storm is here.

Nymex WTI Light Crude futures (March 2016) are testing support at $30 per barrel. There is no indication that this is the bottom and breach of $30 would be likely to test $20 per barrel.

* Target calculation: 30 – ( 40 – 30 ) = 20

Long-term interest rates are falling, with 10-year Treasury yields headed for another test of primary support at 1.5 percent. Breach of 1.7 percent would confirm. The flight from stocks is driving up Treasuries (and yields lower).

Flight to safety is (normally) synonymous with a strong Dollar, so the weakening Dollar Index is a surprise.

China must be selling off Dollar reserves to support the Yuan and restore confidence.

Too late, I’m afraid. That horse has bolted. Loss of confidence in the Yuan is driving demand for gold, with the spot metal rallying to $1200 per ounce. Resistance at the former support level makes retracement likely, but a trough that respects $1100 or narrow consolidation below $1200 would suggest reversal (to an up-trend). Breach of $1200 would offer a target of $1300*.

* Target calculation: 1200 + ( 1200 – 1100 ) = 1300

After forming a lower peak at 18000, Dow Jones Industrial Average is testing primary support at 16000. 13-Week Twiggs Momentum peak at zero warns of a primary down-trend. Breach of support would offer a target of 14000*.

* Target calculation: 16000 – ( 18000 – 16000 ) = 14000

The S&P 500 displays a similar pattern, testing primary support at 1850, with a 13-week Twiggs Momentum peak at zero. Breach of support would offer a target of 1500*.

* Target calculation: 1850 – ( 2150 – 1850 ) = 1550

A monthly chart shows VIX rising for another test of 30. Oscillation between 20 and 30 flags elevated market risk.

Australia’s ASX 200 retreated below primary support at 5000, signaling a primary down-trend. A 13-week Twiggs peak below zero already warns of a decline. Close below 4900 would confirm, offering a short-term target of 4600* and a long-term target of 4000*.

* Target calculation: 4850 – ( 5050 – 4850 ) = 4650; 5000 – ( 6000 – 5000 ) = 4000

Investors who plan to hold stocks through a possible down-turn should stop watching daily prices and listening to news reports. It will only weaken your resolve. I am comfortable with holding stocks with strong dividend streams, but wary of holding growth stocks as they normally suffer the biggest losses.

For traders this is a time of dangerous opportunity. Either shorting sectors likely to be worst hit or waiting for opportunities to buy gold stocks.

Only when the tide goes out do you discover who’s been swimming naked.

~ Warren Buffett

Rallies on the Dow and S&P 500 reflect a more positive outlook for the US economy. But the FTSE 100 has followed China’s Shanghai Composite and India’s SENSEX into bear territory, while Germany’s DAX, Japan’s Nikkei 225 and Australia’s ASX 200 threaten key support levels. There is very little to cheer about at present.

Dow Jones Global Index is testing resistance at the former primary support level of 290. Respect is likely and breach of 270 would confirm another decline. 13-Week Twiggs Momentum peaks below zero flag a strong primary down-trend.

* Target calculation: 290 – ( 320 – 290 ) = 260

Dow Jones Industrial Average recovered above primary support at 16000 but respect of 17000 is likely and would warn of another decline. Breach of 16000 ofers a target of 14000*. 13-Week Twiggs Money Flow oscillating around zero indicates uncertainty.

* Target calculation: 16000 – ( 18000 – 16000 ) = 14000

The S&P 500 recovered above 1900, while rising 21-day Twiggs Money Flow indicates short-/medium-term buying pressure. Expect a test of 2000 but breakout is unlikely. Breach of support at 1900 would signal another decline, with a (medium-term) target of 1700*.

* Target calculation: 1900 – ( 2100 – 1900 ) = 1700

CBOE Volatility Index (VIX) continues to range between 20 and 30 reflecting hesitancy — and the potential to react quickly to bad news.

Canada’s TSX 60 also retraced to test resistance at 750. Respect is likely and breach of 700 would offer a target of 650*. Declining 13-week Twiggs Momentum peaks below zero indicate a strong primary down-trend.

* Target calculation: 700 – ( 750 – 700 ) = 650

Europe

Germany’s DAX is testing primary support at 9500. Peaks below zero on 13-week Twiggs Momentum warn of a primary down-trend. Follow-through below 9300 would confirm.

* Target calculation: 9500 – ( 11500 – 9500 ) = 7500

The Footsie retreated below 6000, signaling a primary down-trend. 13-Week Twiggs Momentum peaks below zero further strengthen the signal. Long-term target for a decline is 5000*.

* Target calculation: 6000 – ( 7000 – 6000 ) = 5000

Asia

Support has given way on the Shanghai Composite Index, strengthening the primary down-trend signaled last August when 13-week Twiggs Momentum crossed below zero. Target for the decline is 2400*.

* Target calculation: 3000 – ( 3600 – 3000 ) = 2400

Japan’s Nikkei 225 Index is testing primary support at 17000. Breach is likely and would confirm the primary down-trend signaled by 13-week Twiggs Momentum below zero.

* Target calculation: 94 – ( 106 – 94 ) = 82

Two failed swings on India’s Sensex (failing to reach the upper trend channel) warn of increasing selling pressure. Declining 13-week Twiggs Momentum peaks below zero confirm this. Follow-through below 24000 would offer a target of 22500*.

* Target calculation: 25000 – ( 27500 – 25000 ) = 22500

Australia

The ASX 200 staged a short rally today but sentiment remains bearish and respect of the recent high at 5050 would warn of another decline. Bullish divergence on 21-day Twiggs Money Flow indicates medium-term buying pressure but the weight of global bear markets is likely to sap any enthusiasm. Reversal below 4850 would offer a medium-term target of 4650*, or 4000* in the long-term.

* Target calculation: 4850 – ( 5050 – 4850 ) = 4650; 5000 – ( 6000 – 5000 ) = 4000

The largest sector, Banks, is already in a primary down-trend, having been singled out for particular attention by the bears. Breach of support at 7500/7600 would warn of a decline to 6600*.

* Target calculation: 7600 – ( 8600 – 7600 ) = 6600

Markets are fundamentally volatile. No way around it. Your problem is not in the math. There is no math to get you out of having to experience uncertainty.

~ Ed Seykota

My newsletters on December 10th and January 14th warned of the approaching storm across global markets. Last week the Dow Jones Industrial Average broke support at 16000, signaling a primary down-trend. Buyers remain present in numbers, however, and this week we have observed a test of new resistance levels. But the weight of the market has shifted to the sell side and a successful breakout is unlikely.

Dow Jones Global Index retraced to test resistance at 290. Respect is likely and would suggest another decline. 13-Week Twiggs Momentum below zero continues to indicate a primary down-trend.

* Target calculation: 290 – ( 320 – 290 ) = 260

Dow Jones Industrial Average recovered above 16000 but follow-through above the previous week’s high at 16600 is unlikely. Reversal below 16000 would signal another decline, with a target of 14000*. A 13-week Twiggs Money Flow peak below zero would warn of long-term selling pressure.

* Target calculation: 16000 – ( 18000 – 16000 ) = 14000

The S&P 500 is consolidating around 1900. Rising 21-day Twiggs Money Flow indicates short-term buying pressure. Upward breakout is unlikely and reversal below 1860 would signal another decline, with a (medium-term) target of 1700*.

* Target calculation: 1900 – ( 2100 – 1900 ) = 1700

CBOE Volatility Index (VIX) oscillating between 20 and 30 reflects a “vigilant” market that would react quickly to bad news. A prolonged period of stability would be needed to restore calm.

Canada’s TSX 60 is retracing to test resistance at 750. The primary down-trend, which commenced with breach of 800, is well under way and respect of resistance is likely. Breach of 700 would indicate another decline, with a target of 600*.

* Target calculation: 700 – ( 800 – 700 ) = 600

Europe

Dow Jones Germany Index is retracing to test resistance at 350. Respect is likely and reversal below 325 would confirm the primary down-trend signaled by 13-week Twiggs Momentum below zero.

* Target calculation: 330 – ( 390 – 330 ) = 270

The Footsie is retracing to test resistance at 6000. Respect would further strengthen the primary down-trend signaled by 13-week Twiggs Momentum below zero. Target for another decline is 5000*.

* Target calculation: 6000 – ( 7000 – 6000 ) = 5000

Asia

Support has given way on the Dow Jones Shanghai Index, strengthening the primary down-trend signaled last August when 13-week Twiggs Momentum crossed below zero. Target for the decline is 300*.

* Target calculation: 400 – ( 500 – 400 ) = 300

Dow Jones Japan Index continues to test primary support at 90. Breach would confirm the primary down-trend signaled by 13-week Twiggs Momentum below zero.

* Target calculation: 94 – ( 106 – 94 ) = 82

India’s Sensex is testing the bottom of the trend channel at 24000. Expect retracement to test long-term resistance at 26000. Respect is likely and would suggest another test of the lower channel border.

* Target calculation: 26500 – ( 30000 – 26500 ) = 23000

Australia

Having breached primary support at 5000, the ASX 200 has shown surprising resilience, retracing to test the new resistance level. Bullish divergence on 21-day Twiggs Money Flow indicates medium-term buying pressure. But the weight of the global bear market is likely to ensure that any attempted rally fails and reversal below 4900 would confirm another decline. Target for the decline is 4600 (medium-term), or 4000* in the long-term.

* Target calculation: 5000 – ( 6000 – 5000 ) = 4000

Of course there is always a reason for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn’t go into explanations. The reason for what a certain stock does today may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now – not tomorrow. The reason can wait. But you must act instantly or be left.

~ Jesse Livermore