Analysis of major stock markets around the world.
Canada’s TSX 60 rallied to 850 before finding resistance. Reversal below 820 would warn of a primary down-trend. Retreat of 13-week Twiggs Momentum below zero would strengthen the bear signal. Follow-through of the index above 865 is less likely, but would indicate another test of 900.
The S&P 500 is likely to retrace to test the new support level at 2000. Respect would confirm a fresh advance with a target of 2150*. Rising 13-week Twiggs Money Flow indicates buying pressure. Reversal below 2000 is unlikely, but would warn of a bull trap (correction).
* Target calculation: 2000 + ( 2000 – 1850 ) = 2150
CBOE Volatility Index (VIX) at 14 continues to indicate low risk typical of a bull market.
The Nasdaq 100 is in a similar situation, having broken resistance at 4100. Retracement that respects support at 4000 would confirm a fresh advance, offering a target of 4500*. Recovery of 13-week Twiggs Money Flow above 35% would flag buying pressure.
* Target calculation: 4100 + ( 4100 – 3700 ) = 4500
Gold broke support at $1200/$1180 per ounce, signaling another (primary) decline. 13-Week Twiggs Momentum peaks below zero strengthens the signal. The long-term target is $1000*. Recovery above 1200 is unlikely, but would warn of a bear trap.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000
The new reporting season is under way and fund managers are now looking for opportunities rather than selling off under-performers.
Dow Jones Industrial Average made a new high, above 17300, signaling a primary advance. Reversal below 17000 and the rising trendline is most unlikely, but would warn of another correction. Target for the advance is 18000*.
* Target calculation: 17000 + ( 17000 – 16000 ) = 18000
The S&P 500 similarly made a new high, signaling a fresh advance. Rising 13-week Twiggs Money Flow (above zero) indicates medium-term buying pressure. Target for the advance is 2150*. Reversal below 2000 and the rising trendline is unlikely, but would signal another correction.
* Target calculation: 2000 + ( 2000 – 1850 ) = 2150
CBOE Volatility Index (VIX) at 14 indicates low risk typical of a bull market.
Dow Jones Euro Stoxx 50 continues to advance above its former primary support level at 3000. Long tails on the weekly candlesticks and recovery of 13-week Twiggs Money Flow above zero indicate buying pressure. Expect another test of 3300. Reversal below 3000 is less likely, but would signal a primary down-trend.
* Target calculation: 3000 – ( 3300 – 3000 ) = 2700
China’s Shanghai Composite Index rallied above its recent high at 2400, confirming a primary up-trend. Target for the new advance is 2500*. and the rising trendline, warning of a correction. Rising 13-week Twiggs Money Flow trough (above zero) indicates medium-term buying pressure; completion of a trough high above zero would signal trend strength.
* Target calculation: 2400 + ( 2400 – 2300 ) = 2500
Japan’s Nikkei 225 Index broke resistance at 16300, signaling an advance with a long-term target of 18000*. Reversal below 16000 is unlikely, but would warn of another correction.
* Target calculation: 16000 + ( 16000 – 14000 ) = 18000
The ASX 200 is headed for a test of resistance at 5660. Brief retracement at 5440 and rising 21-day Twiggs Money Flow (above zero) both indicate medium-term buying pressure. Reversal below 5440 is unlikely, but would indicate a test of 5250. I have lowered the target to 6000* because of constant back-filling in recent months.
* Target calculation: 5650 + ( 5650 – 5300 ) = 6000
The new reporting season is under way and fund managers are now looking for opportunities rather than selling off under-performers.
Dow Jones Industrial Average made a new high, above 17300, signaling a primary advance. Reversal below 17000 and the rising trendline is most unlikely, but would warn of another correction. Target for the advance is 18000*.
* Target calculation: 17000 + ( 17000 – 16000 ) = 18000
The S&P 500 similarly made a new high, signaling a fresh advance. Rising 13-week Twiggs Money Flow (above zero) indicates medium-term buying pressure. Target for the advance is 2150*. Reversal below 2000 and the rising trendline is unlikely, but would signal another correction.
* Target calculation: 2000 + ( 2000 – 1850 ) = 2150
CBOE Volatility Index (VIX) at 14 indicates low risk typical of a bull market.
Dow Jones Euro Stoxx 50 continues to advance above its former primary support level at 3000. Long tails on the weekly candlesticks and recovery of 13-week Twiggs Money Flow above zero indicate buying pressure. Expect another test of 3300. Reversal below 3000 is less likely, but would signal a primary down-trend.
* Target calculation: 3000 – ( 3300 – 3000 ) = 2700
China’s Shanghai Composite Index rallied above its recent high at 2400, confirming a primary up-trend. Target for the new advance is 2500*. and the rising trendline, warning of a correction. Rising 13-week Twiggs Money Flow trough (above zero) indicates medium-term buying pressure; completion of a trough high above zero would signal trend strength.
* Target calculation: 2400 + ( 2400 – 2300 ) = 2500
Japan’s Nikkei 225 Index broke resistance at 16300, signaling an advance with a long-term target of 18000*. Reversal below 16000 is unlikely, but would warn of another correction.
* Target calculation: 16000 + ( 16000 – 14000 ) = 18000
The ASX 200 is headed for a test of resistance at 5660. Brief retracement at 5440 and rising 21-day Twiggs Money Flow (above zero) both indicate medium-term buying pressure. Reversal below 5440 is unlikely, but would indicate a test of 5250. I have lowered the target to 6000* because of constant back-filling in recent months.
* Target calculation: 5650 + ( 5650 – 5300 ) = 6000
Market capitalization as a percentage of (US) GNP is climbing and some commentators have been predicting a reversion to the mean — a substantial fall in market cap.
But corporate profits have been climbing at a similar rate.
Wages surged as a percentage of value added in the first quarter (2014) and profit margins fell sharply, adding fresh impetus to the bear outlook. But margins recovered to 10.6% in the second quarter.
Further gains in the third quarter would suggest that profits are sustainable. Research by Morgan Stanley supports this view, revealing that improved profit margins are largely attributable to the top 50 mega-corporations in the US:
Mega cap companies (the largest 50 by size) have been able to pull their margins away from the smaller companies through globalization, productivity, scale, cost of capital, and taxes, among other reasons. We argue against frameworks that call for near-term mean reversion and base equity return algorithms off the concept of overearning. Why? The margins for the mega cap cohort in the last two downturns of 2001 and 2008 were well above the HIGHEST margins achieved during the 1974-1994 period. To us, this is a powerful indication that the mega cap cohort is unlikely to mean revert back to the 1970s to 1990s average level.
(From Sam Ro at Business Insider)
Also interesting is The Bank of England’s surprise at the lack of inflation in response to falling unemployment. One would expect wage rates to rise when slack is taken up in the labor market, but this has failed to materialize. It may be that unemployment is understated — and a rising participation rate will keep the lid on wages. If this happens in the US it would add further support for sustainable profit margins.
The Australian Dollar continues to test resistance at $0.8900. Tall shadows in the past few weeks suggest committed sellers. Breach of primary support at $0.8650 would warn of another decline. 13-Week Twiggs Momentum below zero also indicates a primary down-trend.
* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80
ASX 200 broke resistance at 5440, suggesting another test of 5660. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Reversal below 5440, however, would warn of a test of support at 5250.
The ASX 200 VIX below 15 continues to indicate low risk typical of a bull market.
Germany’s DAX is testing resistance at 9000. Reversal below 8900 would suggest another decline with a target of 8000*. 13-Week Twiggs Money Flow below zero warns of long-term selling pressure; a peak below zero would confirm a primary down-trend. Recovery above 9000 is unlikely, but would suggest a rally to 9800.
* Target calculation: 9000 – ( 10000 – 9000 ) = 8000
The Footsie has also run into resistance, at 6400/6500. Respect would signal a decline to 6100*. Declining 13-week Twiggs Money Flow indicates medium-term selling pressure, but nowhere near as weak as the DAX.
* Target calculation: 6500 – ( 6900 – 6500 ) = 6100
Dow Jones Industrial Average penetrated its descending trendline, suggesting that the correction is over. Recovery above 17000 would signal an advance to 18000* — confirmed if follow-through above resistance at 17300. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Respect of resistance at 17000 is unlikely, but would warn of another test of 16350.
* Target calculation: 17000 + ( 17000 – 16000 ) = 18000
The Nasdaq 100 recovered above its descending trendline and resistance at 4000, signaling an advance to 4500*. Follow-through above 4100 would confirm. Recovery of 13-week Twiggs Money Flow above 35% would flag buying pressure. Reversal below 4000 is unlikely, but would warn of a test of another test of the rising trendline.
* Target calculation: 4100 + ( 4100 – 3700 ) = 4500
The new reporting season is under way and fund managers are now looking for opportunities rather than selling off under-performers.
The S&P 500 broke resistance at 1900 and 1925. Penetration of the descending trendline suggests that the October correction is over. Recovery of 21-Day Twiggs Money Flow above zero indicates medium-term buying pressure. Expect a test of resistance at 2000 followed by consolidation or retracement to confirm support at 1925. Narrow consolidation below 2000 would be a bullish sign.
* Target calculation: 2000 + ( 2000 – 1850 ) = 2150
CBOE Volatility Index (VIX) at 16 again indicates low risk typical of a bull market.
The Nasdaq 100 recovered above resistance at 4000, indicating a fresh advance. Penetration of the descending trendline signals that the correction is over. Completion of a 13-week Twiggs Money Flow trough high above zero would indicate long-term buying pressure. Reversal below 4000 is unlikely, but would warn of another test of support.
* Target calculation: 4100 + ( 4100 – 3800 ) = 4400
Dow Jones Euro Stoxx 50 recovered above its former primary support level at 3000, suggesting a bear trap. The primary trend remains downward, but recovery of 13-week Twiggs Money Flow above zero would suggest another test of 3300.
* Target calculation: 9000 – ( 10000 – 9000 ) = 8000
China’s Shanghai Composite Index retreated below support at 2340/2350 and the rising trendline, warning of a correction. A 13-week Twiggs Money Flow trough above zero would confirm the primary up-trend, while reversal below zero would warn of a bear market.
The ASX 200 recovered above resistance at 5250 and 5350 and the descending trendline, indicating that the correction is over. Breach of resistance at 5450 would signal another test of 5650. Bullish divergence and rising 21-day Twiggs Money Flow (above zero) indicate medium-term buying pressure. Reversal below 5350 is unlikely, but would indicate another test of 5120.
