Bellwether transport stock Fedex completed a double top reversal, breaking through the neckline at $88. Bearish divergence on 13-week Twiggs Money Flow already warns of strong selling pressure. Follow-through below medium-term support at $85 would confirm a primary down-trend. A declining Fedex is associated with lower transport volumes and slowing activity in the broader economy.
Hour and minute charts can be used to improve the timing of your entries (and possibly exits) when compared to taking entry (and exit) signals from daily charts. Here is an example short trade on Australian retailer Harvey Norman [HVN_ax]. The monthly chart shows HVN testing long-term support at $2.00 — the 2009 low. 13-Week Twiggs Money Flow holding below zero signals strong selling pressure, threatening a downward breakout.
The daily chart shows HVN fell as far as $1.80 in December 2011 before recovering above the new resistance level ($2.00) in January. The rallied reached a high of $2.20 but bearish divergence on 21-day Twiggs Money Flow warned of strong selling pressure. The stock reversed below $2.00 in early March — the first short signal — but prudent traders may have waited for further confirmation before taking their full position.
On the hourly chart we can see that HVN retraced to re-test resistance at $2.00, reaching a high of $2.01 before retreating below resistance to confirm the new down-trend. Short entry could be timed to enter on the next 15-minute bar following the reversal: an entry point of $1.99 compared to $1.98 using daily bars.
The banks that are parking their money [about €1 trillion] at the ECB receiving only 0.25% interest are clearly not the same ones that are taking out three-year loans [€1.15 trillion] at 1%. The deposits come largely from northern European banks mainly German and Dutch, and LTRO loans go largely to banks in southern Europe mainly Italy and Spain. In other words, the ECB has become the central counterparty to a banking system that is de facto segmented along national lines. The real problem for the ECB is that it is not properly insured against the credit risk that it is taking on. The 0.75% spread between deposit and lending rates yielding €7.5 billion per year does not provide much of a cushion against the losses that are looming in Greece, where the ECB has €130 billion at stake.
Cynthia Koons: Not only were [Australian] exports down, but imports declined too. Imports of goods for consumption fell 7%, reflecting caution in Australian households. Capital goods imports fell by 5%, a number that should be a particular concern for policy makers: A slowdown in purchases of machinery and equipment could be an early sign that investment in Australia’s resources boom is weakening.
via Heard on the Street: Australia’s Surplus Dreams Are Just That – WSJ.com.
The Euro continues in a primary down-trend, with 63-day Twiggs Momentum respecting the zero line from below. Failure of medium-term support at $1.30 would indicate another test of primary support at $1.26. And breach of $1.26 would warn of a decline to $1.18*.
* Target calculation: 1.26 – ( 1.34 – 1.26 ) = 1.18
The rise above zero on 63-day Twiggs Momentum suggests that Pound Sterling commenced a primary up-trend. But respect of resistance at $1.60 indicates another test of $1.56. Respect of $1.56 would signal another advance, while failure would warn of a primary decline with a target of $1.46*.
* Target calculation: 1.53 – ( 1.60 – 1.53 ) = 1.46
The Greenback is retracing against the Japanese Yen after a strong rally. A short correction is likely and would signal another strong advance; breakout above ¥84 would offer a target of ¥88*. Respect of zero by 63-day Twiggs Momentum would confirm the primary up-trend.
* Target calculation: 84 + ( 84 – 80 ) = 88
The Aussie Dollar broke medium-term support at $1.04 — in response to lower than expected resources exports to China and RBA hints at further rate cuts. Expect a strong correction, testing parity and possibly primary support at $0.97. Reversal of 63-day Twiggs Momentum below zero would indicate trend weakness but suggests a ranging market, with the indicator oscillating around zero, rather than a primary down-trend.
Canada’s Loonie is more resilient because of stronger crude oil prices. 63-Day Twiggs Momentum holding above zero indicates a primary up-trend. Breakout above $1.01 would signal an advance to $1.06. Reversal below $0.995 is less likely but would warn of another correction — especially if crude oil weakens.
* Target calculation: 1.01 + ( 1.01 – 0.96 ) = 1.06
Brent crude continues to consolidate below resistance at $125/$126 per barrel. Upward breakout would signal a primary advance with a long-term target of $150*. Reversal below $122 is less likely but would warn of a correction to test support at $115.
* Target calculation: 125 + ( 125 – 100 ) = 150
The broader CRB Commodities Index is undergoing a correction. Breach of the rising trendline would indicate that the long-term up-trend is weakening. And failure of primary support at 295 would signal a decline to 265*. Respect of the zero line by 63-day Twiggs Momentum (from below) warns of continuation of the primary down-trend.
* Target calculation: 295 – ( 325 – 295 ) = 265
The Dollar Index rallied to test resistance at 80.00. Breakout would indicate respect of the rising trendline and another primary advance. Recovery above 82 would confirm the target of 86*. Respect of the zero line by 63-day Twiggs Momentum would also strengthen the signal.
* Target calculation: 82 + ( 82 – 78 ) = 86
Spot gold responded by testing support at $1600/ounce. Breach of the rising trendline would indicate that the long-term up-trend is weakening. Reversal of 63-day Twiggs Momentum below zero already warns of a primary down-trend. Recovery above $1700 is unlikely but would indicate respect of the rising trendline and continuation of the long-term up-trend.
* Target calculation: 1550 – ( 1800 – 1550 ) = 1300
The Gold Bugs Index, representing un-hedged gold stocks, is in a clear primary down-trend since breaking support at 500. Peaks below zero on 63-day Twiggs Momentum also signal a strong down-trend. Spot gold is likely to follow unless the Fed changes course and announces further quantitative easing.
Brazil’s Bovespa Index is in a primary up-trend but currently undergoing a correction. Respect of the rising trendline would signal a healthy up-trend, while 13-week Twiggs Money Flow respect of the zero line would strengthen the signal.
* Target calculation: 60 + ( 60 – 50 ) = 70
South Africa’s JSE Overall Index indicates medium-term selling pressure on 21-day Twiggs Money Flow. A correction that respects support at 33000 would confirm the primary up-trend, offering a target of 36000*.
* Target calculation: 34.5 + ( 34.5 – 33 ) = 36
Dow Jones Europe Index respected resistance at 260, suggesting another correction. Declining 13-week Twiggs Money Flow indicates medium-term selling pressure; but a trough that respects the zero line would signal a primary up-trend. Respect of support at 240 would also suggest an up-trend.
* Target calculation: 260 + ( 260 – 210 ) = 310
The FTSE 100 is headed for a test of support at 5600. Respect of support would confirm the primary up-trend, as would a 13-week Twiggs Money Flow trough above zero.
* Target calculation: 5500 + ( 5700 – 5100 ) = 6300
