Analysis of major stock markets around the world.
The S&P 500 is headed for resistance at 1575, after repeated tests of support at 1540. Breakout above 1575 would test 1600*, but reversal below 1540 remains as likely and would warn of a correction. Although ripe for a correction, 13-week Twiggs Momentum troughs above zero continue to reflect a strong primary up-trend.
* Target calculation: 1475 + ( 1475 – 1350 ) = 1600
The ASX 200 broke medium-term support at 4950, signaling the start of a correction for Australian stocks. Reversal of 21-day Twiggs Money Flow below zero confirms medium-term selling pressure.
Initial target for a correction is the rising trendline around 4700. Even correction back to 4500 does not disrupt the primary up-trend and would present buying opportunities for investors.
* Target calculation: 5000 + ( 5000 – 4500 ) = 5500
The yield on 10-year Treasury Notes retreated below 2.00%. Falling bond yields indicate the expected time horizon for low short-term interest rates is lengthening — a negative reflection on the economy.
The first line of support for $TNX is 1.70%; breach would signal another attempt at 1.40%. Bullish divergence on 13-week Twiggs Momentum indicates that a base is forming and primary support is unlikely to be broken.
The S&P 500 retreated from its 2007 high at 1575.
* Target calculation: 1530 + ( 1530 – 1485 ) = 1575
Bearish divergence on 21-day Twiggs Money Flow continues to warn of mild selling pressure. Breach of support at 1530 — and the rising trendline — would warn of a correction.
The Russell 2000 Index is stronger, having broken clear of its 2007 high at 860. A correction that respects the new support level (860) would confirm a strong primary up-trend.
While there are structural flaws in the US economy, QE from the Fed has forced investors to increase risk in search of yield. The current advance shows no signs of ending.
The S&P 500 managed to close at a new high, with most fund managers reporting good results for the quarter, but does this signal a new bull market or a last-gasp effort to lock in performance bonuses before the market subsides into a correction?
While markets may be rising, there is strong risk aversion.
“@bespokeinvest: Utilities P/E now up to 16.75, higher than the P/Es of Tech, Financials, Industrials, Health Care, Energy and Materials.”
— Downtown Josh Brown (@ReformedBroker) March 28, 2013
This is definitely not a classic bull market.
One also needs to be wary of September and March quarter-ends. They often represent significant turning points, with new highs (red arrows) and new lows (green arrows) frequently proving unsustainable.
* Target calculation: 1530 + ( 1530 – 1485 ) = 1575
While there is no sign of divergence on 13-week Twiggs Money Flow, which would indicate unusual selling pressure, it is important to remain vigilant over the next quarter rather than blindly follow the herd. Bearish (TMF) divergence or reversal of the S&P 500 below 1500 would warn of a correction.
The ASX 200 rallied above 5000 at Monday’s opening but gradually retreated to close at 4990. While failure to hold above the short-term support level is disappointing, an early break above 5000 on Tuesday would suggest a rally to 5150.
The weekly chart shows the importance of medium-term support at 4950. Failure would signal a correction to test the rising trendline around 4700. Slight bearish divergence on 13-week Twiggs Money Flow warns of mild medium-term selling pressure. The index remains in a strong primary up-trend and only a breach of the rising trendline would threaten this.
* Target calculation: 5000 + ( 5000 – 4500 ) = 5500
Dow Jones Japan Index was tentative Monday, the inside day indicating hesitancy. Recovery above 70.50 would signal continuation of the primary advance, while penetration of the rising trendline would warn of a correction.
Dow Jones Hong Kong Index met resistance at its former support level. The Hang Seng Index is testing medium-term support at 22000. Failure appears likely and would test primary support — and the rising trendline — at 21000.
The Shanghai Composite Index found support at 2250 for the third week in a row. Rising 13-week Twiggs Money Flow indicates buying pressure. Respect of support would be a bullish sign: a shallow trough followed by breakout above 2450 would signal a primary up-trend. Failure of support, while less likely, would test primary support at 1950/2000.
* Target calculation: 2450 + ( 2450 – 2250 ) = 2650
India rallied Monday, but failure of support at 18800 would test the primary level at 18000. Declining 13-week Twiggs Money Flow continues to warn of selling pressure. Failure of 18000 would indicate a primary trend reversal.
European stocks are under pressure, with Dow Jones Europe Index again likely to test support at 270. Failure would warn of a reversal, while breakout above 290 would signal a fresh advance. 13-Week Twiggs Momentum trough above zero would indicate continuation of the primary up-trend.
The FTSE 100 is retracing to test the lower border of the recent flag on the weekly chart. Breach would warn of a correction to test 6000. Respect is less likely, but breakout above 6550 would indicate an advance to 6800*.
* Target calculation: 6400 + ( 6400 – 6000 ) = 6800
European markets may be under pressure, but they have not buckled. Expect further tests of support, but so far the primary up-trend is not threatened.
The S&P 500 continues to find support above 1540 on the daily chart. Breakout above 1565 would signal another advance. A higher trough on 21-day Twiggs Money Flow would indicate medium-term buying pressure. Breach of the rising trendline is unlikely at present but would warn of a correction. Target for the current advance is 1600*.
* Target calculation: 1530 + ( 1530 – 1485 ) = 1575
VIX Volatility Index remains near its 2005 lows at 0.10. This does not offer much reassurance as volatility can rapidly spike. Breakout above the quarterly high at 0.20 would be a warning sign.
Bellwether transport stock Fedex dipped below $100 after an earnings disappointment. Reversal below the rising trendline at $85 would warn that the broader economy is slowing.
The Nasdaq 100 continues to struggle with resistance at 2800. Declining relative strength against the S&P 500 illustrates how blue chips are being favored over tech stocks. Bearish divergences on both 13-week Twiggs Momentum and 13-week Twiggs Money Flow warn of another correction. Reversal below the latest rising trendline would strengthen the signal. Follow-through above 2900 is unlikely at present, but would signal an advance to 3300*. Only breach of primary support at 2500 would signal a reversal.
* Target calculation: 2900 + ( 2900 – 2500 ) = 3300
While there are structural flaws in the US economy, the market is gaining momentum and the current advance shows no signs of ending.
The ASX 200 weakened towards the close and is testing medium-term support at 5000. Breakout below 4980 would warn of a correction. Declining 21-day Twiggs Money Flow, indicating medium-term selling pressure, makes this likely. The index is in a strong primary up-trend and a 5 or 10 percent correction would not alter this. It is merely a case of one step back then two steps forward.
* Target calculation: 5000 + ( 5000 – 4500 ) = 5500
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.
Japan found relief from the overnight selling. Dow Jones Japan Index is back testing resistance at 70. Breakout would signal continuation of the primary advance.
Dow Jones Hong Kong Index is undergoing a correction but found support at yesterday’s low of 464.
India is falling today. The Sensex is likely to re-test support at 18800. Breakout above 20200 would signal a primary advance to 21000*, but bearish divergence on 13-week Twiggs Money Flow continues to warn of selling pressure. Reversal below 19000 would warn of a correction to the primary trendline at 18000. Failure of 18800 would confirm.
* Target calculation: 20 + ( 20 – 19 ) = 21
China is neutral Tuesday, but the Shanghai Composite broke support at 2250 on Monday, warning of a down-swing to primary support at 1950/2000.
* Target calculation: 2450 + ( 2450 – 2250 ) = 2650
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.
