Canada’s TSX 60 continues towards its target of the 2008 high at 900. Rising troughs on 13-week Twiggs Money Flow signal strong buying pressure. Reversal below support at 845 remains unlikely.
Europe: Mild selling pressure
DAX again retraced to test support at 9750/9800. A small decline on 13-week Twiggs Money Flow indicates mild (medium-term) selling pressure. Failure of support would warn of a correction to the primary trendline. Respect is less likely, but would suggest a fresh advance; confirmed by breakout above 10000.
* Target calculation: 9750 + ( 9750 – 9000 ) = 10500
The Footsie shows similar selling pressure to the DAX, with a mild decline on 13-week Twiggs Money Flow. The long tail on last week’s candle suggests support at 6700 and the rising trendline. Recovery above 6900 would signal an advance to 7200*. But reversal below 6700 is as likely and would warn of a correction to primary support at 6400/6500.
* Target calculation: 6800 + ( 6800 – 6400 ) = 7200
S&P 500 unfazed
Summary:
- S&P 500 continues a primary advance.
- China respects primary support.
- ASX 200 continues to signal weakness.
- Momentum investors need to hold positions.
The S&P 500 retraced to test its latest support level at 1950 after a downward GDP revision for the first quarter. Respect indicates medium-term buying pressure — also evidenced by rising 21-day Twiggs Money Flow. Follow-through above 1970 would confirm a test of 2000*. Reversal below 1950 is unlikely, but penetration of the secondary trendline would warn of a correction.
* Target calculation: 1900 + ( 1900 – 1800 ) = 2000
The CBOE Volatility Index (VIX) remains low, indicative of a bull market.
The Shanghai Composite Index respected primary support at 1990/2000. 21-Day Twiggs Money Flow oscillating above zero indicates buying support, but this may be due to the managed “soft landing”. What we do know is that a fall below zero would definitely signal selling pressure. Breach of support would signal a decline to 1850*. The primary trend is expected to continue its downward path, but further ranging between 2000 and 2150 is likely. An abrupt fall is a fairly remote possibility.
* Target calculation: 2000 – ( 2150 – 2000 ) = 1850
The ASX 200 made a false break above 5470, but 21-day Twiggs Money Flow below zero warns of medium-term selling pressure. Breach of support remains likely and would indicate a correction to 5300. The long-term trend, however, remains upward. Support at 5300/5400 would offer a great entry point for long-term investors. Recovery above 5470 is unlikely at present, but would signal a test of resistance at 5550.
* Target calculation: 5400 + ( 5400 – 5000 ) = 5800
I repeat my warning from last week: Momentum investors should not attempt to time secondary corrections and need to endure the present volatility in order to reach their intended investment goals.
S&P 500 unfazed
Summary:
- S&P 500 continues a primary advance.
- China respects primary support.
- ASX 200 continues to signal weakness.
- Momentum investors need to hold positions.
The S&P 500 retraced to test its latest support level at 1950 after a downward GDP revision for the first quarter. Respect indicates medium-term buying pressure — also evidenced by rising 21-day Twiggs Money Flow. Follow-through above 1970 would confirm a test of 2000*. Reversal below 1950 is unlikely, but penetration of the secondary trendline would warn of a correction.
* Target calculation: 1900 + ( 1900 – 1800 ) = 2000
The CBOE Volatility Index (VIX) remains low, indicative of a bull market.
The Shanghai Composite Index respected primary support at 1990/2000. 21-Day Twiggs Money Flow oscillating above zero indicates buying support, but this may be due to the managed “soft landing”. What we do know is that a fall below zero would definitely signal selling pressure. Breach of support would signal a decline to 1850*. The primary trend is expected to continue its downward path, but further ranging between 2000 and 2150 is likely. An abrupt fall is a fairly remote possibility.
* Target calculation: 2000 – ( 2150 – 2000 ) = 1850
The ASX 200 made a false break above 5470, but 21-day Twiggs Money Flow below zero warns of medium-term selling pressure. Breach of support remains likely and would indicate a correction to 5300. The long-term trend, however, remains upward. Support at 5300/5400 would offer a great entry point for long-term investors. Recovery above 5470 is unlikely at present, but would signal a test of resistance at 5550.
* Target calculation: 5400 + ( 5400 – 5000 ) = 5800
I repeat my warning from last week: Momentum investors should not attempt to time secondary corrections and need to endure the present volatility in order to reach their intended investment goals.
Russell shake-up likely to drive heavy volume at Friday’s close | Reuters
From Reuters:
Investors can expect a surge in volume at the close of trading on Friday, when Russell Investments announces the annual rebalance of its series of indexes that will affect more than $5 trillion in assets…..Credit Suisse anticipates about $42 billion will trade on Friday as a result of the reconstitution, which will make it one of the biggest trading days of the year in terms of dollar volume.
Read more at Russell shake-up likely to drive heavy volume at Friday's close | Reuters.
Middle class is drowning in debt, hobbling the economy | Rex Nutting
From Rex Nutting at MarketWatch:
For decades, economic growth in America was driven by a powerful and sustainable force: increased consumption paid for by the rising incomes for middle-class and working-class Americans.
But somewhere around 1980, that model broke down. Wages flattened out, but consumption didn’t. Americans cut back on their savings, and took on more debt — mostly mortgage debt — to satisfy their needs and desires.
It’s not a sustainable model, but it did persist for nearly 30 years until the credit bubble burst in 2007. Millions of Americans lost their jobs, and millions lost their homes when the credit spigot was shut off, forcing average families to cut back on their consumption and live within their means once again.
And now, with the economy only partially healed, it seems we’re going back to the lend-and-spend economy that failed us before.For the past six or seven years, most of what the Federal Reserve has done to fix the problem has been focused on getting the credit spigot turned back on: cutting interest rates and hectoring banks to start lending again, even though demand for loans was weak….
Read more at Middle class is drowning in debt, hobbling the economy – Rex Nutting – MarketWatch.
ASX 200 still plagued by indecision
The ASX 200 found support at 5380/5400. Recovery above 5470 would break the descending trendline, suggesting that the correction is over — and a test of resistance at 5540/5560 likely. But 21-day Twiggs Money Flow whipsawing around zero indicates indecision. Respect of (or a false break above) 5470 would suggest correction to 5300.
* Target calculation: 5550 + ( 5550 – 5400 ) = 5700
ASX 200 VIX making new lows, however, indicates a bull market.
Quant Funds Are Hot Again | Morningstar
By Greg Carlson
Funds that use quantitative stock-picking models are on a roll. A list of 52 U.S.-sold quant funds compiled by Morningstar beat more than 80% of their respective peers over the trailing three years through June 13, and the group outperformed its respective peers in 2011, 2012, 2013, and thus far in 2014.
Read more at Quant Funds Are Hot Again.
ASX 200 rallies
The ASX 200 rallied on Monday, but 21-day Twiggs Money Flow at zero indicates (medium-term) buying pressure is weak. Follow-through above 5470 would signal a test of resistance at 5540/5560, but China continues to weigh on the index and reversal below 5380 would warn of a test of 5300.
* Target calculation: 5550 + ( 5550 – 5400 ) = 5700
ASX 200 VIX making new lows is indicative of a bull market.
Japan India bullish
Completion of a 13-week Twiggs Money Flow trough above zero indicates long-term buying pressure for Japan’s Nikkei 225 index. Breakout above medium-term resistance at 15200 suggests a rally to 16000. Reversal below 14800 is unlikely, but would warn of another test of primary support at 14000.
* Target calculation: 16000 + ( 16000 – 14000 ) = 18000
India’s Sensex is testing its new support level at 25000. The primary trend is up, but bearish divergence on 13-week Twiggs Money Flow warns of medium-term selling pressure. Breach of support would warn of a correction to 24000, but respect would confirm an advance to 26000*.
* Target calculation: 21000 + ( 21000 – 16000 ) = 26000