The NZ50 Index is retracing to test 3300, but 13-week Twiggs Money Flow deep below zero warns of strong selling pressure. Respect of resistance is likely, followed by another test of support at 3100.
* Target calculation: 3300 – ( 3600 – 3300 ) = 3000
India’s Sensex Index closed lower Friday on average volume. 13-Week Twiggs Money Flow continues below zero, warning of selling pressure. Breakout below Tuesday’s low of 16500 would confirm the decline to 16000*.
* Target calculation: 17500 – ( 19000 – 17500 ) = 16000
The Singapore Straits Times Index fared better. Recovery above 2900 would indicate a bear rally, but resistance at 3000 is expected to hold.
* Target calculation: 2800 – ( 3000 – 2800 ) = 2600
Japan’s Nikkei 225 Index displays a wide pennant formation, suggesting continuation of the down-trend. 21-Day Twiggs Money Flow deep below zero indicates selling pressure. Breakout below 8800 would offer a target of 7800*. Upward breakout is less likely, but would test resistance at 9300/9400.
* Target calculation: 8800 – ( 9800 – 8800 ) = 7800
The Seoul Composite Index displays a similar pennant. Friday’s red candle on stronger volume confirms selling pressure. Downward breakout is likely and would offer a target of 1500*.
* Target calculation: 1800 – ( 2100 – 1800 ) = 1500
Question from Flint:
If this is an example of a dead cat bounce then what would we look for in a real bounce… .
The best example I can find is the mini-crash of October 1997. The Dow gapped down sharply following a fall in Asian markets, but met with strong buying support the next day. The total correction of 12% did not reach the 6400 level from start of the year. The long-term rising trendline was not tested and 63-Day Twiggs Momentum declined but failed to break below zero. Volume doubled in the week following the crash, confirming buying support.
The 2011 crash is not specific to one region as with the 1997 Asian crisis. The index had not made much progress for the year and the fall of 17% broke well below the starting level of 11500. The long-term rising trendline was breached and 63-Day Twiggs Momentum dropped sharply below zero. Volume doubled in the week following the crash, as in 1997, but this is a completely different scenario: it would take similar volume for 4/5 successive weeks to stop the bear market in its tracks.
Despite the global bear market, Dow Jones Shanghai Index rallied above resistance at 330, with bullish divergence on 21-day Twiggs Money Flow indicating buying pressure. Expect a test of 360. In the long term, breakout above 360 would signal reversal to an up-trend.
* Target calculation: 330 – ( 360 – 330 ) = 300
Dow Jones HongKong Index displays a similar bullish divergence on 21-day Twiggs Money Flow, indicating buying pressure. Resistance at 450 is unlikely to hold, leading to a re-test of 480.
* Target calculation: 450 – ( 480 – 450 ) = 420
The Dow Jones Japan Index ($JPDOW) formed a small pennant consolidation, favoring continuation of the down-trend. Follow-through below 50.50 would confirm, whereas recovery above 52.00 would indicate retracement to test 53.30. 21-Day Twiggs Money Flow deep below zero warns of strong selling pressure.
* Target calculation: 54 – ( 58 – 54 ) = 50
DJ South Korea encountered resistance below 400, indicated by a red candle and up-tick in volume. Reversal below 360 would warn of another down-swing.
* Target calculation: 370 – ( 430 – 370 ) = 310
The Dow Jones Taiwan Index fared slightly better, advancing to 186 on light volume. Follow-through on Tuesday would confirm a rally to test resistance at 200.
* Target calculation: 196 – ( 216 – 196 ) = 176
I have used the Dow Jones Index Series as data is 15-minute delayed. I will update the better-known Nikkei and KOSPI indices when these are updated at 7:00 p.m. ET.
The ASX 200 is headed for a test of 4500. Declining volume is typical of such a rally; a surge would indicate increased selling pressure — especially when accompanied by a narrow range or red candle. Expect resistance at 4500 to hold, followed by another test of support at 4000.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
The Bovespa Index rallied strongly off support at 48000 and is likely to test resistance at 58000. Breach of the descending trendline on 13-week Twiggs Money Flow indicates short-term buying pressure. But we are in a bear market and this is unlikely to change in the near future.
* Target calculation: 58000 – ( 72000 – 58000 ) = 44000
Another resource-rich market, the JSE, signals medium-term buying support with a bullish divergence on 13-week Twiggs Money Flow. Recovery above 30000 is likely, but we remain in a bear market and can expect a future test of support at 27000*.
* Target calculation: 30000 – ( 33000 – 30000 ) = 27000
The FTSE 100 closed above 5300, indicating a rally to test resistance at 5600. This behavior is again typical of the early “denial” stage of a bear market. Resistance is likely to hold, leading to another test of 5000. In the longer term, failure of support at 5000 would offer a target of 4400*.
* Target calculation: 5000 – ( 5600 – 5000 ) = 4400
The DAX rallied strongly, headed for a test of 6500 on the weekly chart. The bear market is not over, even if resistance is penetrated.
* Target calculation: 6500 – ( 7500 – 6500 ) = 5500
A CAC-40 recovery above 3250 would signal a rally to test 3700. Expect resistance to hold, followed by another test of 3000*.
* Target calculation: 3000 – ( 3700 – 3000 ) = 2300
The TSX Composite retraced to test the new resistance level at 12750. Declining volume and Friday’s red candle warn that buyers are losing interest. Reversal below 12400 would complete an evening star candlestick reversal.
* Target calculation: 11600 – ( 12800 – 11600 ) = 10400
