The FTSE 100 continued on its downward path, approaching its calculated target at 5100*. Expect some retracement this week, but I would not place much reliance on support at 5100 — strongly suspecting that we will see a test of the June 2010 low at 4800.
* Target calculation: 5600 – ( 6600 – 5600 ) = 5100
The German DAX index has already passed its initial target of 6500 and is headed for a test of 5600.
* Target calculation: 6500 – ( 7600 – 6500 ) = 5400
The Dow Jones New Zealand Index ($NZDOW) gapped down at Monday’s open, foretelling a miserable day for Asian markets.
A friend at golf yesterday, who still holds a number of stocks, asked if they are likely to fall any further. My answer was that holding on to stocks in this market is like standing in front of a stampeding herd in the hope that it will stop before it reaches you. There may be a short retracement early in the week, but strong selling is expected to overwhelm buying support. On August 3rd I gave the probability of a down-turn as 75 percent. The odds are now about as close to 100 percent as you can get.
The S&P 500 followed through below support at 1250, confirming the primary down-trend. Friday’s brief rally was swamped by further sell orders. The herd has started to move. We are beyond the tipping point.
Posted August 3, 2011 8:00 p.m. ET (10:00 a.m. AET) on Trading Diary.
After several tentative attempts, the ASX 200 broke through support at 4500, following Brazil into a primary down-trend. Wednesday’s follow-through below 4450 confirmed the signal. 21-Day Money Flow below zero indicates selling pressure. Expect retracement to test resistance at 4500, but target for the breakout is 4000*.
* Target calculations: 4500 – ( 5000 – 4500 ) = 4000
Posted August 3, 2011 8:00 p.m. ET (10:00 a.m. AET) on Trading Diary.
The Shanghai Composite Index is testing primary support at 2650 on the weekly chart. Follow-through below 2600 would confirm a primary down-trend. Declining 13-week Twiggs Money Flow again warns of selling pressure.
Posted August 3, 2011 8:00 p.m. ET (10:00 a.m. AET) on Trading Diary.
The FTSE 100 followed through below 5600 after breaking primary support at 5650, confirming a primary down-trend.
The DAX similarly broke primary support at 7000 on the weekly chart and is now testing its earlier support level at 6500 — breach of that would be the final nail in the coffin. Bearish divergence on 13-week Twiggs Money Flow has been warning of selling pressure for several months.
Posted August 3, 2011 8:00 p.m. ET (10:00 a.m. AET) on Trading Diary.
The long tail on today’s candle for the Dow Jones Industrial Average indicates buying support, but 21-Day Money Flow below zero warns of longer term selling pressure. Only recovery above the rising trendline would call the bear signal into question. Follow-through below today’s low at 11700 would confirm the primary down-trend — as would a close below 1250 on the S&P 500.
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