Stocks’ Volatility Is Worrisome Sign – WSJ.com

Many investors are entering this week with fresh hopes the worst is over, after last week’s sudden stock-market rebound. But history suggests that in times of market turmoil, there is a risk that big, sudden gains like last week’s will prove temporary respites before stocks fall again. Head-snapping volatility, both steep drops and sharp gains, most often comes in times of market trouble. It suggests that, despite the bounce last week, the market isn’t healthy, says economic historian Richard Sylla of New York University’s Stern School of Business. “Financial markets become more volatile in periods of stress. People don’t know which way things are going to go, so you get these big up and down movements as people pile in and get out,” he says.

via Stocks’ Volatility Is Worrisome Sign – WSJ.com.

DJ Asia update

Dow Jones India 30 Titans index displays a bullish divergence on 13-week Twiggs Money Flow, suggesting reversal to an up-trend. Breakout above 166 would complete a double bottom.

Dow Jones India 30 Titans

Dow Jones Singapore Index advanced cautiously towards the first line of resistance at 218. 21-Day Twiggs Money Flow holding below zero indicates medium-term selling pressure. Expect the primary down-trend to continue. Reversal below 202 would confirm.

Dow Jones Singapore

Japan is closed but South Korean buyers also displayed caution with narrow gains while 21-day Twiggs Money Flow again holds below zero.

Dow Jones South Korea

Dow Jones Shanghai index edged lower after resuming trading Monday. Declining 13-week Twiggs Money Flow indicates strong selling pressure.

Dow Jones Shanghai

Dow Jones HongKong index formed a doji star indicating hesitancy. Reversal below 340 would warn of a down-swing to 300. 63-Day Momentum declining below zero suggests a strong down-trend.

Dow Jones HongKong

ASX 200 trend channel

The ASX 200 index is testing its upper trend channel. Low volume is typical for a Monday — before US and European markets open for the week — but the low range indicates caution on the part of buyers. Reversal below 4100 would indicate a down-swing to the lower trend channel, while follow-through above 4200 would suggest a bear market rally to 4500. The primary trend remains down, however, and reversal below 4000 would warn of a decline to 3500*.

ASX 200 Index

* Target calculation: 4000 – ( 4500 – 4000 ) = 3500

FTSE 100 buyers scarce

The FTSE 100 index encountered resistance at 5400. Low volume indicates that buyers were scarce and another test of support at 5000 is likely. We are in a primary down-trend and failure of support would signal a decline to 4400*.

FTSE 100 Index

* Target calculation: 5000 – ( 5600 – 5000 ) = 4400

The DAX index is starting to rally on the weekly chart, with 13-week Twiggs Money Flow indicating medium-term buying pressure. Expect a test of 6000, but again we are in a primary down-trend and another test of 5000 is likely. Failure of support would signal a decline to 4000*.

German DAX Index

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

TSX 60 finds support

Canada’s TSX 60 index found support between 620 and 650. A rally to test resistance at 730 is indicated, but the primary trend is down and 13-week Twiggs Money Flow continues to signal selling pressure. Reversal below 650 would warn of a decline to 580*.

TSX 60 Index

* Target calculation: 650 – ( 720 – 650 ) = 580

NASDAQ bullish divergence

NASDAQ 100 index respected primary support at 2040 before rallying strongly on the weekly chart. Bullish divergence on 13-week Twiggs Money Flow indicates buying pressure. Breakout above 2340 would complete a double bottom. Reversal below 2000 is less likely, but would warn of a decline to 1700*. A word of caution: we are in a highly volatile market — do not act on signals without confirmation from other indexes.

NASDAQ 100 Index

* Target calculation: 2000 – ( 2300 – 2000 ) = 1700

Fedex reflects slowing economy

A 30 percent decline on the Fedex weekly chart reflects the slowing rate of economic activity. Recovery above resistance at $70 suggests another bear market rally, but the primary trend is down. Declining 13-week Twiggs Money Flow, below zero, indicates long-term selling pressure.

Fedex

* Target calculation: 70 – (80 – 70 ) = 60

The weekly chart of Deutsche Post AG indicates similar weakness in Europe. We may see a rally test resistance at €11.00 but the primary trend is down and reversal below €9.00 would offer a target of €7.00*.

Deutsche Post DHL

* Target calculation: 9 – ( 11 – 9 ) = 7

IMF stress tests China/Australia bust – macrobusiness.com.au

I don’t wish to be too alarming. These are stress tests and scenarios not yet reality. But, there is logic in the thought that we currently face the possibility of the final two scenarios happening simultaneously. That is, a Western recession triggered by European and US austerity (not to mention financial tumult) and a Chinese real estate pop.

via IMF stress tests China/Australia bust – macrobusiness.com.au | macrobusiness.com.au.

Merkel, Sarkozy Claim Broad Agreement to Shore Up Banks – WSJ.com

German Chancellor Angela Merkel and French President Nicolas Sarkozy said Sunday that they have reached broad agreement on a plan to shore up Europe’s battered banks and restore stability to the euro zone.Speaking to reporters in the Berlin chancellery ahead of a working dinner as aides and ministers from both governments looked on, Mrs. Merkel and Mr. Sarkozy provided few details of the plan, pledging to unveil a comprehensive solution to the nearly two-year-old euro zone debt crisis by the end of the month. The plan will include a sweeping recapitalization of European banks endangered by a possible sovereign default in Greece as well as changes to existing European treaties to accelerate integration of the 17 euro-zone countries.

via Merkel, Sarkozy Claim Broad Agreement to Shore Up Banks – WSJ.com.