Category: Stock Markets

Analysis of major stock markets around the world.

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ASX 200: Tall blue candles and short red ones

The ASX 200 is once again testing resistance at 5540/5560. Oscillation of 21-day Twiggs Money Flow around zero indicates hesitancy, but tall blue candles followed by short red candles suggests continuation of the rally. Breakout above 5560 would offer a target of 5700*. Reversal below 5450 is unlikely but would mean all bets are off and another test of support at 5370 is on the cards.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX close to 10 indicates low risk typical of a bull market.

ASX 200

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Asia: India leads but China & Japan improving

China’s Shanghai Composite Index retraced to test the new support level at 2050. A 21-day Twiggs Money Flow trough above zero signals strong medium-term buying pressure. Respect of support is likely and would signal a rally to 2090/2100. Failure is unlikely, but would test primary support at 1990/2000.

Shanghai Composite Index

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

Divergence on Japan’s Nikkei 225 (21-day Twiggs Money Flow) warns of medium-term selling pressure and another test of support at 15000. Respect of 15000 would confirm a rally to 16000*. Failure is unlikely, but would warn of another test of primary support at 14000.

Nikkei 225

* Target calculation: 15000 + ( 15000 – 14000 ) = 16000

India’s Sensex reached its target of 26000. Expect retracement to test the new support level at 25700/26000, but a 21-day Twiggs Money Flow trough above zero signals strong buying pressure. Breach of support is unlikely, but would warn of a correction to 25000. Further advances are likely, with a medium-term target of 27000.

Sensex

* Target calculation: 21000 + ( 21000 – 16000 ) = 26000

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Canada: TSX 60 rally continues

Canada’s TSX 60 is also performing strongly, with 21-day Twiggs Money Flow indicating medium-term buying pressure. Expect a test of the 2008 high at 900. Reversal below support at 855 is unlikely, but would warn of a correction.

TSX 60

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Dow breaks 17000

Dow Jones Industrial Average broke medium-term resistance at 17000 — after reaching 16000 in November last year. Expect retracement to test the new support level at 16950/17000. Mild divergence on 21-day Twiggs Money Flow warns of weak selling pressure. Reversal below 16750 is unlikely, but would indicate a correction.

Dow Jones Industrial Average

* Target calculation: 16500 + ( 16500 – 15500 ) = 17500

The Nasdaq 100 is on a bit of a tear, with rising 21-day Twiggs Money Flow indicating medium-term buying pressure. Respect of the rising trendline would suggest a rally to 4000*. Penetration of the trendline is unlikely, but would warn of a correction.

Nasdaq 100

* Target calculation: 3700 + ( 3700 – 3400 ) = 4000

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Europe: Selling pressure

Dow Jones Euro Stoxx 50 is testing support at 3200/3230. Declining 21-day Twiggs Money Flow indicates medium-term selling pressure. Breach of 3200 and the rising trendline would warn of a correction and weakness in the primary up-trend. Recovery above 3300 is less likely, but would suggest another advance.

Dow Jones Euro Stoxx 50

* Target calculation: 3200 + ( 3200 – 3000 ) = 3400

DAX again retreated below the psychological barrier of 10,000. A sharp fall on 21-day Twiggs Money Flow indicates strong medium-term selling pressure. Expect further consolidation between 10000 and 9700. Failure of support would warn of a correction to the primary trendline at 9500. Recovery above 10000 is unlikely at present, but would indicate an advance to 10500*.

DAX

* Target calculation: 9750 + ( 9750 – 9000 ) = 10500

The Footsie also shows selling pressure on 21-day Twiggs Money Flow. Expect another test of 6700. Recovery above 6870 is unlikely at present, but would signal an advance to 7200*.

FTSE 100

* Target calculation: 6800 + ( 6800 – 6400 ) = 7200

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What a difference a week makes

Summary:

  • S&P 500 advances toward 2000.
  • China respects primary support.
  • ASX 200 rallies.
  • Understanding momentum.

Market sentiment shifted significantly to the bull side after some solid employment numbers. There are still concerns about low interest rates across the US and other major economies, but these policies are likely to continue — with corporate earnings remaining buoyant — for the foreseeable future. And as Eddy Elfenbein observed: “…market corrections solely due to valuation are fairly rare. If the market’s dropping, earnings usually are too.”

The S&P 500 is advancing towards the psychological barrier of 2000. Weekly (13-week) Twiggs Money Flow recovered above its descending trendline and Daily (21-day) is trending higher, signaling medium-term buying pressure. Expect retracement at the 2000 level, but short duration or narrow consolidation would indicate continued buying pressure and another advance. Reversal below 1950 is unlikely, but would warn of a correction to the rising trendline.

S&P 500

* Target calculation: 1900 + ( 1900 – 1800 ) = 2000

Buoyed by Fed monetary policy, CBOE Volatility Index (VIX) is at extremely low levels, indicative of a bull market.

S&P 500 VIX

The Shanghai Composite Index respected primary support at 1990/2000 and rising Twiggs Money Flow indicates medium-term buying pressure. Follow-through above 2080 would indicate another test of 2150. Further ranging between 2000 and 2150 is expected — in line with a managed “soft landing”. Breach of primary support is unlikely at present, but would signal a decline to 1850*.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 is headed for another test of resistance at 5550 while an up-turn on 13-week Twiggs Money Flow suggests medium-term buying pressure. Twiggs Money Flow has been descending for some time, indicating long-term selling pressure, but failure to breach the zero line suggests buying support and completion of another trough above zero — with a rise above 20% — would confirm the resumption of long-term buying pressure. Breakout above 5550 would offer a long-term target of 5850*. Reversal below support at 5350 is unlikely, but would warn of a down-trend.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

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What a difference a week makes

Summary:

  • S&P 500 advances toward 2000.
  • China respects primary support.
  • ASX 200 rallies.

Market sentiment shifted significantly to the bull side after some solid employment numbers. There are still concerns about low interest rates across the US and other major economies, but these policies are likely to continue — with corporate earnings remaining buoyant — for the foreseeable future. And as Eddy Elfenbein observed: “…market corrections solely due to valuation are fairly rare. If the market’s dropping, earnings usually are too.”

The S&P 500 is advancing towards the psychological barrier of 2000. Weekly (13-week) Twiggs Money Flow recovered above its descending trendline and Daily (21-day) is trending higher, signaling medium-term buying pressure. Expect retracement at the 2000 level, but short duration or narrow consolidation would indicate continued buying pressure and another advance. Reversal below 1950 is unlikely, but would warn of a correction to the rising trendline.

S&P 500

* Target calculation: 1900 + ( 1900 – 1800 ) = 2000

Buoyed by Fed monetary policy, the CBOE Volatility Index (VIX) is at extremely low levels, indicative of a bull market.

S&P 500 VIX

The Shanghai Composite Index respected primary support at 1990/2000 and rising Twiggs Money Flow indicates medium-term buying pressure. Follow-through above 2080 would indicate another test of 2150. Further ranging between 2000 and 2150 is expected — in line with a managed “soft landing”. Breach of primary support is unlikely at present, but would signal a decline to 1850*.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 is headed for another test of resistance at 5550 while an up-turn on 13-week Twiggs Money Flow suggests medium-term buying pressure. Twiggs Money Flow has been descending for some time, indicating long-term selling pressure, but failure to breach the zero line suggests buying support and completion of another trough above zero — with a rise above 20% — would confirm the resumption of long-term buying pressure. Breakout above 5550 would offer a long-term target of 5850*. Reversal below support at 5350 is unlikely, but would warn of a down-trend.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

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Aussie retraces as ASX 200 strengthens

RBA concern over the rising Australian Dollar is increasing, but whether this will motivate governor Glenn Stevens to do more than attempt to talk the market lower remains to be seen. The Aussie retraced to test its new support level, but only a fall below $0.92 would suggest a trend change. Recovery above $0.94 would suggest not, while follow-through above $0.95 would confirm a target of $0.97.

AUDUSD

The ASX 200 broke clear of its descending trendline, suggesting that the correction is over. But 21-day Twiggs Money Flow remains weak and follow-through above 5540/5560 unlikely. Further ranging between 5400 and 5550 seems likely. Reversal below 5380 is now unlikely, but would warn of a test of 5300.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX again tracked lower, indicating a bull market.

ASX 200

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Full Employment and the Path to Shared Prosperity | Dissent

Great summary of the current political gridlock by Dean Baker and Jared Bernstein:

There are many policies that can reduce inequality, but there is none as straightforward conceptually and as difficult politically as full employment. The basic point is simple: at low rates of unemployment, the demand for labor allows workers at the middle and bottom of the wage distribution to achieve gains in hourly wages, annual hours of work, and thus income.

Levels of unemployment are not the gift or curse of the gods; they are the result of conscious economic policy. The decision to tolerate high rates of unemployment is a choice. It is one that has enormous implications not just for the millions of people who are needlessly unemployed or underemployed but also for tens of millions of workers in the bottom half of the wage distribution whose bargaining power is undermined by high unemployment.

It is pretty obvious that low unemployment would enhance wage growth amongst middle- and low-income workers. But the policies to create low unemployment are not as clear:

  • Raising inflation to lift real interest rates would not get strong support in many quarters. It would seem that you are manipulating market signals to dupe business investors to act in a fashion that may not be in their long-term best interest.
  • Infrastructure spending is the key to a sound recovery, but beware of raising public debt to fund anything other than productive assets that can generate a market-related return (to service the debt).
  • The trade deficit is a big part of any solution. We need to penalize currency manipulators like China (Japan before them) for buying US Treasurys to suppress their exchange rate.
  • Job sharing is not a long-term solution, but it does enable unemployed workers to retain skills that would otherwise be lost.

    • Overall, an excellent summary of what needs to be done. But it omits one vital piece of the puzzle. How do we get politicians and interest groups to act in the best interest of the country rather than their own?

    Read more at Full Employment and the Path to Shared Prosperity | Dissent Magazine.

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Shanghai rally

Dow Jones Shanghai Index rallied Monday, headed for another test of resistance at 270/272. Momentum is rising, but only recovery above 282/284 (with TMO above zero) would signal a trend change. Further consolidation is more likely, ranging between 258 and 284. Downward breakout, unlikely at present, would warn of a decline to 240*.

Dow Jones Shanghai Index

* Target calculation: 260 – ( 280 – 260 ) = 240

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