E-mini jumps on Putin order for troops to return to bases (Reuters).
Breakout above 1850 is a bullish sign. S&P 500 follow-through above 1860 would signal an advance to 1950.
Canada: TSX 60 tests 2011 high
Canada’s TSX 60 encountered strong selling at the 2011 high of 820. Follow-through below 814 would test medium-term support at 800. Reversal of 21-day Twiggs Money Flow below zero indicates medium-term selling pressure. Breach of the rising trendline is unlikely, but would warn of another test of primary support at 770. Breakout above 820 is less likely, but would signal an advance to 840*.
* Target calculation: 805 + ( 805 – 770 ) = 840
S&P 500 persistent selling
The S&P 500 broke out above 1850, but the tall shadow/wick reflects persistent selling. The E-mini (Mar 2014) is currently sitting just above 1840. Index breakout below this level would warn of another correction. Follow-through above 1860 is now unlikely, but would signal an advance to 1950*. The long-term trend remains bullish, with repeated 21-day Twiggs Money Flow troughs above the zero line.
* Target calculation: 1850 + ( 1850 – 1750 ) = 1950
CBOE Volatility Index (VIX) is likely to rise because of developments in the Ukraine, but below 20 reflects a bull market.
Nasdaq 100 reversal below 3600 would warn of a test of primary support at 3400. Decline of 13-week Twiggs Money Flow below its recent low would strengthen the signal. Breakout above 3700 seems less likely, but would offer a target of 3800*.
* Target calculation: 3600 + ( 3600 – 3400 ) = 3800
Dollar and treasury yields weaken
The yield on ten-year Treasury Notes is testing support between 2.60 and 2.65 percent. Breach would continue the correction to primary support at 2.50 percent. Bearish divergence on 13-week Twiggs Momentum warns of weakness. Breach of 2.50 would offer a target of 2.00 percent, while recovery above 2.75 would indicate an advance to 3.50 percent* — confirmed if there is a breakout above 3.00 percent.
* Target calculation: 3.00 + ( 3.00 – 2.50 ) = 3.50
Lower yields would suggest dollar weakness. A monthly chart shows the Dollar Index ranging between 80.00 and 81.50 over the past four months. Breach of the rising trendline indicates trend weakness and a break of support at 80.00 would test primary support at 79.00. Breach of primary support, and/or a 13-week Twiggs Momentum peak below zero, would signal a primary down-trend.
* Target calculation: 81.5 + ( 81.5 – 79 ) = 84 or 79 – ( 84 – 79 ) = 74
S&P 500 at 1850
The S&P 500 continues to encounter stout resistance at 1850. The narrow range, however, reflects buyers commitment. Follow-through above 1860 would signal an advance to 1950*. Reversal below 1825 is less likely, but would warn of another correction. The long-term trend remains bullish, with repeated 21-day Twiggs Money Flow troughs above the zero line.
* Target calculation: 1850 + ( 1850 – 1750 ) = 1950
CBOE Volatility Index (VIX) below 20 continues to indicate low risk typical of a bull market.
S&P 500 meets resistance
The S&P 500 encountered stout resistance at 1850, highlighted by today’s false breakout. Follow-through above 1860 would indicate that buyers out-number sellers, signaling an advance to 1950*. Reversal below 1825 is unlikely, but would warn of another correction. The long-term trend remains bullish, with repeated 21-day Twiggs Money Flow troughs above the zero line.
* Target calculation: 1850 + ( 1850 – 1750 ) = 1950
CBOE Volatility Index (VIX) below 20 reflects low risk typical of a bull market.
Dow Jones Industrial Average is weaker. Large bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Reversal below 16000 would warn of a correction to test primary support at 15400.
* Target calculation: 16500 + ( 16500 – 15500 ) = 17500
The Nasdaq 100, on the other hand, remains bullish. Reversal below 3600, especially after last week’s doji star candlestick formation, would warn of a test of primary support at 3400. Decline of 13-week Twiggs Money Flow below its recent low would strengthen the signal. Breakout above 3700, however, would offer a target of 3800*.
* Target calculation: 3600 + ( 3600 – 3400 ) = 3800
Nasdaq big picture
You don’t often see buying pressure as good as the Nasdaq 100, with 21-day Money Flow holding above zero for more than a year (posted in response to a reader comment that the Nasdaq breakout looked phony).
Declining US commercial bank loans?
Sober Look highlights the sharply declining ratio of commercial bank loans and leases to bank deposits.
Its only when we examine the detail, however, that we note cash reserves have ballooned in the last 10 years. And most of those cash reserves are deposits at the Fed which now (post-GFC) earn interest. Adjust total deposits at commercial banks, for the excess reserves deposited back with the Fed, and the current ratio of 1:1 looks a lot healthier.
As I pointed out in November, most new money created by the Fed QE program is being deposited straight back with the Fed as excess reserves. We need to adjust bank deposits for this effect to obtain a true reflection of bank lending activity.
Canada: TSX 60 buying pressure
Canada’s TSX 60 is testing the January high at 806. Higher troughs on 13-week Twiggs Money Flow suggest strong buying pressure. Breach of the rising trendline is unlikely, but would warn of another test of primary support at 770. Expect long-term resistance at the 2011 high of 820*.
* Target calculation: 780 + ( 780 – 740 ) = 820
New lows on the TSX 60 VIX flag a strong bull market.
Nasdaq leads market higher
The Nasdaq 100 broke through its January high, signaling an advance to 3800*. Retreat below the (secondary) rising trendline is unlikely, but would test primary support at 3400. Another 13-week Twiggs Money Flow trough high above zero indicates strong buying pressure.
* Target calculation: 3600 + ( 3600 – 3400 ) = 3800
The S&P 500 is testing similar resistance at 1850. Breakout would signal an advance to 1950*. Respect is unlikely, given the Nasdaq breakout, but would warn of another correction. Completion of a 13-week Twiggs Money Flow trough above zero would be a bullish sign.
* Target calculation: 1850 + ( 1850 – 1750 ) = 1950
CBOE Volatility Index (VIX) below 20 suggests low risk typical of a bull market.
