Europe inches closer to the point when the artificial levee, built to protect European banks from market forces, is breached. Germany and France delay the inevitable while they attempt to restore bank balance sheets — by widening interest margins at the expense of depositors and transferring risky bonds to the European Central Bank . They do their utmost to avert a Greek default, because of contagion risk to the rest of the euro-zone, but their actions merely encourage more strident demands from Greece. If the levee breaks, damage will be that much greater because of the build-up of market forces behind the artificial barrier.
Spain’s Madrid General Index broke support at the 2009 low of 700, signaling another primary decline with an immediate target of 600*. Reversal of 13-week Twiggs Money Flow below zero reinforces the signal.
* Target calculation: 750 – ( 900 – 750 ) = 600
Italy’s MIB Index broke primary support at 13000, confirming the earlier signal from 63-day Twiggs Momentum and offering a long-term target of 10000*. Recovery above 13500 is unlikely but would warn of a bear trap.
* Target calculation: 13500 – ( 17000 – 13500 ) = 10000
Germany’s DAX broke support at 6500 and is testing the rising trendline. Support remains strong, with 13-week Twiggs Money Flow holding above zero, but breach of the rising trendline and breach of short-term support at 6200 would indicate a test of primary support at 5400.
France’s CAC-40 is also headed for a test of primary support at 2800. Reversal of 13-week Twiggs Money Flow below zero warns of selling pressure. Failure of primary support would offer a long-term target of 2000*.
* Target calculation: 2800 – ( 3600 – 2800 ) = 2000
The FTSE 100 found short-term support at 5300 but breach of the rising trendline and 63-Day Twiggs Momentum below zero warn of a primary down-trend. Failure of primary support at 5000/5050 would offer a long-term target of 4000*.
* Target calculation: 5000 – ( 6000 – 5000 ) = 4000
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.
