Analysis of major stock markets around the world.
Canada’s TSX 60 index is headed for a test of medium-term resistance at 675. Breakout would also breach of the descending trendline, warning that the correction is over. Rising 21-day Twiggs Money Flow reflects medium-term buying pressure.
* Target calculation: 680 + ( 680 – 640 ) = 720
The S&P 500 closed above medium-term resistance at 1360. I am normally wary of quarter-end prices moves as fund managers have a vested interest in boosting their performance bonuses. But the breakout appears to have a legitimate basis, with Germany’s key concessions at the Euro summit, and should test the 2012 high of 1420. 63-Day Twiggs Momentum holding above zero suggests the primary trend is intact. Reversal below the new support level (1360), however, would indicate a false signal. Falling 10-year treasury yields warn of another flight to safety (unless the Fed is driving down yields through its “Twist” operations) and we need to exercise caution.
* Target calculation: 1360 + ( 1360 – 1300 ) = 1420
Wait for the Nasdaq 100 to break resistance at 2630 and confirm the S&P signal. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure.
* Target calculation: 2650 + ( 2650 – 2500 ) = 2800
Bellwether transport stock Fedex (weekly chart) completed a double top reversal in April but since then has oscillated around the former neckline at $88. 63-Day Twiggs Momentum also recovered above zero. Follow-through above $92 would suggest that the correction is over and broader economic activity is recovering. Reversal below $85 is unlikely but would warn of a primary down-trend.
Since the start of 2007, a cumulative $350 billion has flowed out of stock funds and a little over $1 trillion has moved into bond funds….. In 2011, 45% was in stock funds and 25% in bonds; in 2005, the mix was 55% for stocks and 15% in bonds…..
via AHEAD OF THE TAPE: Stocks Out of Fashion Amid a Bonding With Bonds – WSJ.com.
Comment:~ Low bond yields and higher risk premiums on stocks (stock earnings yield minus bond yield) highlight investors flight to safety. But this is no guarantee that bonds will continue to out-perform stocks. Bond yields must be close to hitting a “floor” and, with no further capital gains, investor returns will be meagre — while stocks grow increasingly attractive.
A monthly chart of the ASX 200 shows how the index tends to peak ahead of the CRB Commodities Index and Australian Dollar but then fall in step with them from there on. The ASX 200 was first to reverse direction in 2011 but commodities now lead the way. Expect Australian stocks — and the Aussie Dollar — to follow commodities lower. Breach of primary support at 3850 would offer a target of 3200*.
* Target calculation: 3800 – ( 4400 – 3800 ) = 3200
On the daily chart, breach of support at 3980/4000 would signal a test of primary support at 3850. Reversal of 21-day Twiggs Money Flow below zero, warning of medium-term selling pressure, increases the likelihood of a downward breakout.
* Target calculation: 4000 – ( 4150 – 4000 ) = 3850
China’s Shanghai Composite Index broke support at 2250, signaling resumption of the primary down-trend. Declining 63-day Twiggs Momentum (below zero) strengthens the signal.
* Target calculation: 2250 – ( 2500 – 2250 ) = 2000
Wait for a break below 880 on the Shenzhen Composite Index to confirm the Shanghai signal. Reversal of 13-week Twiggs Money Flow below zero would indicate selling pressure.
Hong Kong’s Hang Seng Index respected resistance at 20000. Reversal below 18000 would indicate a decline to 16000*. A peak below zero on 63-day Twiggs Momentum would strengthen the bear signal.
* Target calculation: 18000 – ( 20000 – 18000 ) = 16000
Dow Jones Japan Index retreated from resistance at 50 and is headed for a re-test of support at 46. Failure would signal a decline to 42*. 13-Week Twiggs Money Flow below zero indicates selling pressure and a peak below zero would warn of a strong down-trend.
* Target calculation: 46 – ( 50 – 46 ) = 42
India’s Sensex penetrated its declining trendline but almost immediately encountered resistance at 17000. Bullish divergence on 13-week Twiggs Money Flow indicates strong support and breakout above 17000 would suggest a primary advance — confirmed if the peak at 18500 is bested. Reversal below 15800, however, would warn of a decline to 15000*.
* Target calculation: 16000 – ( 17000 – 16000 ) = 15000
Singapore’s Straits Times Index is testing resistance at 2900. Respect of zero by 63-day Twiggs Momentum warns of continuation of the down-trend; breach of support at 2700 would confirm, offering a target of 2500*.
* Target calculation: 2700 – ( 2900 – 2700 ) = 2500
The S&P 500 retracement breached support at 1330, indicating a false breakout. Reversal of 21-day Twiggs Money Flow below zero would warn of a bull trap, while breach of support at 1270 would confirm another decline — with a target of 1160*.
* Target calculation: 1260 – ( 1360 – 1260 ) = 1160
Nasdaq 100 monthly chart shows an intact up-trend despite slowing momentum. Respect of support at 2400 (and the zero line by 63-day Twiggs Momentum) would indicate another primary advance. Penetration of the rising trendline, however, would warn that a top is forming.
* Target calculation: 2800 + ( 2800 – 2400 ) = 3200
Canada’s TSX 60 shows similar weakness, on the daily chart, to the S&P 500. Rising 21-day Twiggs Money Flow, however, indicates support at 640. Respect would suggest that a bottom is forming — strengthened if the index recovers above the declining trendline. Breach of support, on the other hand, would signal a decline to 600*.
* Target calculation: 640 – ( 680 – 640 ) = 600
The FTSE 100 monthly chart shows how the up-trend since 2009 has lost momentum, forming a large top. Reversal below 4800 would complete the reversal, offering a target of 3500*. Recovery above 6000 is unlikely but would indicate resumption of the up-trend.
* Target calculation: 4800 – ( 6000 – 4800 ) = 3600
Germany’s DAX shows a similar loss of momentum on the monthly chart. Breach of medium-term resistance at 6000 would indicate another test of 5000. Recovery above 7200 is unlikely.
The FTSE 100 is headed for resistance at 5600 but 21-day Twiggs Money Flow reversed below zero warning of short-term selling pressure. Failure of support at 5400 would mean another test of primary support at 5250, while respect would confirm the rally to 5600. In the longer term, breach of the descending trendline (at 5600) would indicate that the down-trend has ended.
Dow Jones Europe Index rallied off primary support at 210. Breach of medium-term resistance at 230 would suggest a rally to the primary descending trendline. 13-Week Twiggs Money Flow, however, continues to display long-term selling pressure. Breach of primary support would offer a long-term target of 160*. Breakout above 265 is unlikely but would indicate an advance to 310*.
* Target calculation: 260 + ( 260 – 210 ) = 310; 210 – ( 260 – 210 ) = 160
Dow Jones India 30 Titans broke resistance at 162 and is headed for a test of the descending trendline at 170. Rising 13-week Twiggs Money Flow suggests buying pressure and a test of the February high at 180; breakout would signal a primary up-trend.
* Target calculation: 180 + ( 180 – 150 ) = 210
Dow Jones Singapore Index rallied off support at 220 and is testing medium-term resistance at 230. Breakout would test the March high of 244. A “bounce” off zero by 13-week Twiggs Money Flow indicates medium-term buying pressure.
* Target calculation: 245 + ( 245 – 220 ) = 270
