Brazil’s Bovespa Index again found short-term support at 54000. Narrow consolidation is a bullish sign, suggesting upward breakout above 58000. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. This is a strong rally for a bear market, but is not a sign yet that a base is forming.
South Africa’s Johannesburg Overall Index also made a reasonable rally before retreating below 30000. Penetration of the rising trendline would indicate another test of support at 28400.
Japan’s Nikkei 225 Index broke support at 8600, signaling a down-swing to test the 2009 low of 7000*. 13-Week Twiggs Money Flow respect of the zero line warns of selling pressure.
* Target calculation: 8600 – ( 10200 – 8600 ) = 7000
South Korea’s Seoul Composite Index fared better, consolidating between 1700 and 1900. Failure of support is more likely (this is a bear market) and would offer a target of 1500*.
* Target calculation: 1700 – ( 1900 – 1700 ) = 1500
Dow Jones Industrial Average rallied on unconfirmed news reports that China is set to buy sovereign debt from troubled Italy. Light volume indicates an absence of selling pressure. This is a bear market, however, and rallies are likely to be of short duration, while breach of support would lead to sharp falls.
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
DJ Europe Index broke support at 225, signaling another down-swing to the 2010 low at 205. The calculated target is lower at 195.
* Target calculation: 230 – ( 265 – 230 ) = 195
Dow Jones India 30 Titans Index is headed for another test of support at 152. 21-Day Twiggs Money Flow holding below zero indicates selling pressure. Failure of support would warn of a down-swing to 136*.
* Target calculation: 152 – ( 168 – 152 ) = 136
Dow Jones Singapore Index is testing the band of support between 220 and 215. Low volume indicates weak support. Failure of 215 would offer a target of 200*.
* Target calculation: 220 – ( 240 – 220 ) = 200
The TSX 60 Index retreated to test its rising trendline at 705. Penetration would warn of a test of primary support at 665. And failure of support would signal another down-swing with a target of 600*.
* Target calculation: 665 – ( 735 – 665 ) = 595
The ASX 200 fell sharply, headed for a test of its key support level at 4000. Low volume indicates weak support and downward breakout would signal a primary down-swing to 3500*.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
The German DAX Index broke support at 5500 to warn of a down-swing to 4500*. Declining 13-week Twiggs Money Flow below zero indicates strong selling pressure.
* Target calculation: 5500 – ( 6500 – 5500 ) = 4500
In France, the CAC-40 Index reversed below support at 3000, led by a sell-off in French banks. Expect support at the 2009 low of 2500, though the calculated target is even lower. 13-Week Twiggs Money Flow again signals strong selling pressure.
* Target calculation: 3000 – ( 3700 – 3000 ) = 2300
The FTSE 100 is consolidating above 5000, but is likely to be dragged lower if major European trading partners fall. Breach of support would offer a target of 4400*.
* Target calculation: 5000 – ( 5600 – 5000 ) = 4400
10-Year Treasury yields fell to their lowest level in more than 50 years on Friday, responding to heightened uncertainty in Europe. The flight to safety warns of further stock market weakness in the week ahead.
Greece will run out of money within weeks if it can’t end a standoff with the International Monetary Fund and the EU. In a last-ditch effort to overcome the impasse with its international lenders, Greece’s government said Sunday that it would impose a new property tax to cover a €2 billion shortfall in budget targets this year. Investors worry that if the dispute goes unresolved, Greece could suffer a messy default, with untold consequences for Europe’s banks.
French banks’ overall exposure to Greece is about €65 billion, according to the Bank of International Settlements.
