Analysis of major stock markets around the world.
Germany’s DAX formed a narrow line (or consolidation) between 10200 and 10800 over the last quarter, in line with its earlier April/May highs. Declining Twiggs Money Flow is typical during a consolidation and does not have much significance unless it crosses below zero. Breakout above 10800 would signal a primary advance with a target of 11500*. Reversal below 10200, however, should not be ruled out before then.
* Target calculation: 10500 + ( 10500 – 9500 ) = 11500
The Footsie (FTSE 100) found support at 6700 but short candlestick bodies and declining Twiggs Money Flow indicate a dull rally, without much enthusiasm from buyers. Breach of 6700 is likely and would warn of a correction to 6500.
Dow Jones Industrial Average successfully tested the new support level at 18000 and has now broken resistance at 19000, confirming the target of 20000*. Rising Twiggs Money Flow indicates selling pressure has ended. Expect a brief retracement to test support at 19000 but respect is likely.
* Target medium-term: 18000 + ( 18000 – 16000 ) = 20000
Charles Dow, founder of Dow Theory more than a century ago, always waited for confirmation from the Rail Average. Nowadays, railways have diminished in importance and we use the broader Transport Average which currently signals a primary up-trend after a lengthy “line” or narrow consolidation over the last 3 months.
It is also advisable to look for confirmation from the broader S&P 500 and the tech-heavy Nasdaq 100 index.
The S&P 500 broke resistance at 2200, signaling a primary advance with a target of 2300*. Rising Twiggs Money Flow again indicates that selling pressure has ended.
* Target medium-term: 2200 + ( 2200 – 2100 ) = 2300
The Nasdaq 100 recently set an all-time high after breaking resistance at its March 2000 high of 4700. Retracement twice respected the new support level and follow-through above 4900 would confirm another primary advance.
The ASX 200 broke through short-term resistance, a bullish sign, and is testing long-term resistance at 5500. In terms of classic Dow Theory, the primary down-trend is intact until there is a breakout above 5500. Today’s small doji candle indicates hesitancy but bullish divergence on 21-day Twiggs Money Flow signals medium-term buying pressure. Breakout above 5500 would also complete a bear trap, where breach of support is quickly reversed and followed by breakout to a new high. This is a powerful bull signal and would offer a target of 5800* for the primary advance.
* Target medium-term: 5500 + ( 5500 – 5200 ) = 5800
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The ASX 200 is again running into resistance, signaled by a hammer after the recent rally. In terms of Dow Theory, the primary down-trend is intact but retracement that respects the former primary support level of 5200 would suggest a bear trap. Recovery above 5500 is still in doubt but would offer a bull signal.
ASX 300 Banks Index broke out above 8000 but this week’s short candlestick body warns of hesitancy. Expect retracement to test the new support level. Failure of support would warn of a bull trap. Respect of support is as likely, however, and would confirm a primary up-trend with a target of 8800*. Recovery of Twiggs Money Flow above zero is still tentative at this stage.
* Target medium-term: 8000 + ( 8000 – 7200 ) = 8800
Bellwether transport stock Fedex surged to a new high this week, signaling an expected rise in economic activity in the US. A Twiggs Money Flow trough above zero also indicates strong buying pressure.
Dow Jones Industrial Average is testing resistance at 19000. The doji star indicates indecision rather than a reversal. Declining Twiggs Money Flow indicates long-term selling pressure but completion of a trough above zero would negate this. A fall below 18500 would warn of a correction. Follow-through above 19000 is less likely but would indicate a fresh advance.
* Target medium-term: 18000 + ( 18500 – 17000 ) = 19500
The S&P 500 is testing resistance at 2200. The evening star pattern again indicates indecision rather than reversal. Breakout would complete a bullish inverted scallop pattern, which commenced in early July, signaling an advance to 2300. Declining Twiggs Money Flow remains bearish, favoring another retracement.
* Target medium-term: 2100 + ( 2200 – 2000 ) = 2300
Shanghai Composite Index ran into resistance at 3200 after its recent breakout. Expect retracement to test the new support level at 3100. Respect would confirm the target of 3400* for the advance.
* Target medium-term: 3100 + ( 3100 – 2800 ) = 3400
Germany’s DAX is consolidating below 10800 but Twiggs Money Flow still reflects selling pressure. Breakout above 10800 would signal a primary advance with a target of 11500* but another test of 10200 looks equally likely.
* Target calculation: 10500 + ( 10500 – 9500 ) = 11500
The Footsie (FTSE 100) is testing support at 6700. Narrow candlestick bodies for the last two weeks signal indecision, while declining Twiggs Money Flow warns of medium-term selling pressure. Breach of 6700 would warn of a correction to 6500. Respect of support is less likely but would indicate another test of 7100.
