Portugal has little choice but to take tough steps. The country sought international help in April after failing to convince investors it was doing enough to shore up its shaky finances. In exchange for a €78 billion, three-year loan, Lisbon promised the European Union and the International Monetary Fund that it would slash its deficit and make structural changes to spur growth in key sectors.
The problem is these efforts are expected to prolong the economic slump at least two years and drive up unemployment, already at 12%.
India Singapore short-term buying
The DJ Total Stock Market (formerly DJ Wilshire) Index for India ($DWIN) gapped down on Monday’s open but closed with a long tail. Short-term buying is unlikely to withstand concerted selling pressure, signaled by 13-week Twiggs Money Flow below zero.
* Target calculation: 1820 – ( 1980 – 1820 ) = 1660
DJ Singapore also closed with a long tail, indicating short-term buying support — confirmed by higher volume. Again this is unlikely to withstand long-term selling pressure for more than a few days.
* Target calculation: 220 – ( 240 – 220 ) = 200
China commits to down-trend
The Dow Jones Shanghai Index reversed below primary support at 328, confirming the primary down-trend signal from the Shanghai Composite Index. The 21-day Momentum peak barely above zero strengthens the bear signal.
* Target calculation: 330 – ( 360 – 330 ) = 300
Dow Jones HongKong Index broke short-term support at 415, indicating a down-swing to its 2010 low at 365. The longer-term 63-day Momentum below zero strengthens the bear signal.
* Target calculation: 415 – ( 445 – 415 ) = 385
Asia slides
The Dow Jones Japan Index closed Monday below last weeks low, indicating a down-swing to 46*. The 21-Day Twiggs Money Flow peak deep below zero warns of strong selling pressure.
* Target calculation: 50 – ( 54 – 50 ) = 46
Dow Jones South Korea Index has already broken short-term support at 380 and is headed for the 2010 low at 330*. 13-Week Twiggs Money Flow below zero confirms strong selling pressure.
* Target calculation: 380 – ( 430 – 380 ) = 330
Dow Jones Taiwan Index has also broken support, at 177, and will test the 2010 low at 168. 13-Week Twiggs Money Flow below zero again warns of strong selling pressure.
* Target calculation: 180 – ( 195 – 180 ) = 165
Bovespa and JSE weaken
The bear rally on the Brazilian Bovespa Index has run out of steam and we can expect another test of support at 48000. 13-Week Twiggs Money Flow below zero signals continued selling pressure. Failure would offer a target of 38000*.
* Target calculation: 48000 – ( 58000 – 48000 ) = 38000
The JSE bear rally respected resistance at 30000. Money Flow is stronger, but reversal below 28000 would offer a target of 26000*.
* Target calculation: 28000 – ( 30000 – 28000 ) = 26000
ASX 200 support weakens
The ASX 200 Index is headed for another test of support at 4000. Volumes are far lower than the previous week, indicating a scarcity of buyers. Unless there is a significant upsurge on Tuesday, we are likely to see a downward breakout, offering a target of 3500*.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
FTSE 100 tests support
The FTSE 100 Index is testing support at 5000. Breakout is likely and would offer a target of 4400*.
* Target calculation: 5000 – ( 5600 – 5000 ) = 4400
Europe crashes
Germany’s DAX Index is testing support at its 2010 low of 5400. 13-Week Twiggs Money Flow below zero warns of further selling pressure. Failure of support would offer a target of 4500*.
* Target calculation: 5500 – ( 6500 – 5500 ) = 4500
France has fallen well past its 2010 low, testing support at 3000. 13-Week Twiggs Money Flow again warns of further selling pressure. Breach of 3000 would test the 2009 low of 2500.
* Target calculation: 3000 – ( 3700 – 3000 ) = 2300
Secondary markets are as badly affected. The Amsterdam AEX Index fell below its 2010 low, while 13-week Twiggs Money Flow below zero warns of selling pressure.
* Target calculation: 300 – ( 340 – 300 ) = 260
TSX 60 headed for long-term support
Canada’s TSX 60 Index is falling sharply, headed for medium-term support at 665, but long-term support at 650 is just below. Breakout below 650 would warn of another down-swing, with a target of 580*.
* Target calculation: 650 – ( 720 – 650 ) = 580
Nasdaq breaks support
The Nasdaq 100 broke support at 2050, warning of a down-swing to 1900*. Follow-through below last week’s low of 2040 would confirm. The latest peak on 21-day Twiggs Money Flow, barely breaking the zero line, indicates strong medium-term selling pressure.
* Target calculation: 2050 – ( 2200 – 2050 ) = 1900
The Dow is headed for a similar test: follow-through below 10600 would confirm a down-swing to 9600*. Higher volumes indicate the presence of buyers and failure of support would prove seller’s dominance.
* Target calculation: 10800 – ( 12000 – 10800 ) = 9600
The S&P 500 is testing support at 1100 on the weekly chart. Failure would signal a test of 1000. 13-Week Twiggs Money Flow below zero warns of further selling pressure.
* Target calculation: 1125 – ( 1250 – 1125 ) = 1000