The two overriding features on the USD/Yen chart are the strong primary down-trend — as indicated by the descending trendline — and a strong bullish divergence on 63-day Twiggs Momentum warning of a reversal. Recovery above resistance at ¥80 would confirm the reversal.
This is a 20-year (monthly) chart of the US dollar against the Japanese yen. The dollar has declined in a primary down-trend since early 2008. Long-term support at 80 failed to halt the fall and the greenback is now ranging between ¥75 and ¥80. The down-trend is in its fourth year and large bullish divergence on 63-day Twiggs Momentum warns of a reaction. Penetration of the declining trendline would strengthen the signal and breakout above 80 would confirm, offering a long-term target of 100.
The Nasdaq 100 is consolidating in a narrow band below resistance at 2400 on the weekly chart, suggesting an upward breakout. Follow-through above 2450 would confirm the target of 2800*. 13-Week Twiggs Money Flow continues to signal buying pressure after an earlier bullish divergence.
* Target calculation: 2400 + ( 2400 – 2000 ) = 2800
The Dow Industrial Average is consolidating below 12300. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Breakout above 12300 would offer a target of 12800*. Failure of support at 11600 is less likely, but would mean another test of primary support at 10600.
* Target calculation: 12200 + ( 12200 – 11600 ) = 12800
The S&P 500 is similarly consolidating between 1220 and 1300. Expect strong resistance at 1350.
Comparing to early 2008, the S&P500 displays a similar pattern, with the index testing resistance at 1400. We are close to a watershed: reversal below medium-term support (1220) would be a strong bear signal, while follow-through above recent highs would dispel fears of another bear market.
The ASX 200 index is testing its descending trendline. Recovery above 4350 would indicate a primary advance, while reversal below 4100 would test primary support at 3850. Bearish divergence on 21-day Twiggs Money Flow warns of medium-term selling pressure.
The longer term chart displays a bullish divergence on 13-week Twiggs Money Flow, indicating long-term buying pressure. Breakout above 4350 would offer a weak advance but a correction that respects primary support would strengthen the signal.
* Target calculation: 3900 – ( 4400 – 3900 ) = 3400
The weekly chart of India’s Sensex shows the index testing resistance at 18000 — which coincides with the descending trendline. Upward breakout would indicate that the primary down-trend is weakening, while respect would test primary support at 16000. 13-Week Twiggs Money Flow remains weak, despite earlier bullish divergence, and reversal below zero would warn of renewed selling pressure.
* Target calculation: 16 – ( 18 – 16 ) = 14
Singapore’s Straits Times Index is testing resistance at 2900. Respect would signal another test of primary support at 2500. Declining 63-day Twiggs Momentum continues to signal a primary down-trend.
* Target calculation: 2500 – ( 2900 – 2500 ) = 2100
The Dow is testing medium-term support at 11600. Failure would mean another test of primary support at 10600, while respect of support (with breakout above 12300) would confirm the primary advance to 12800*. Rising 21-day Twiggs Money Flow continues to indicate buying pressure, favoring an advance.
* Target calculation: 11600 + ( 11600 – 10400 ) = 12800
The S&P 500 is also testing medium-term support, this time at 1220. Respect would signal an advance to the 2011 high, while failure would re-test 1100. In the long-term, breach of 1100 would offer a target of 900* and breakout above 1350 would signal an advance to 1600.
* Target calculation: 1100 – ( 1300 – 1100 ) = 900
Bullish divergence on the Nasdaq 100 indicates strong buying pressure and a likely reversal. Breakout above 2440 would signal an advance to 2800*. Reversal below 2300 is less likely, but would warn of another test of primary support at 2000.
* Target calculation: 2400 + ( 2400 – 2000 ) = 2800
Several weeks ago, when asked what it would take to reverse the bear market, I replied that it would take 3 strong blue candles on the weekly chart followed by a correction — of at least two red candles — that respects the earlier low. We have had three strong blue candles. Now for the correction.
On the S&P 500 expect retracement to test support at 1200 or 1250. Respect of 1250 would signal a strong up-trend, while failure of support at 1200 would warn of another test of primary support at 1100. A trough on 13-week Twiggs Money Flow that respects the zero line would also indicate strong buying pressure.
* Target calculation: 1225 + ( 1225 – 1100 ) = 1350
Dow Jones Industrial Average weekly chart displays a similar picture. Expect retracement to test support at 11500. A peak on 63-day Twiggs Momentum that respects the zero line would be bearish — warning of continuation of the primary down-trend.
* Target calculation: 11500 + ( 11500 – 10500 ) = 12500
The Nasdaq 100 is testing resistance at 2400 — close to the 2011 high. Breakout would signal a primary advance to 2800*, while respect would warn of another test of primary support at 2000. Bullish divergence on 13-week Twiggs Money Flow has warned of a reversal for several weeks.
* Target calculation: 2400 + ( 2400 – 2000 ) = 2800
Just a reminder that the ASX is still in a bear market. Bullish divergence on 13-week Twiggs Money Flow indicates buying pressure on the All Ords and the index is testing the descending trendline. Breakout above 4400 would signal that a bottom has formed, while reversal below 4200 would warn of another test of primary support at 3900.
The ASX 200 weekly chart shows a similar picture, but 63-day Twiggs Momentum deep below zero warns that it may be some time before this bear (market) goes back into hibernation.
* Target calculation: 5600 – ( 6600 – 5600 ) = 5100
Dow Jones Industrial Average followed through on its breakout above the 10600-11700 trading range but expect some resistance at 12000. The index looks set for a decent rally after narrow consolidation below resistance at 11700. Target for the breakout is 12600*.
* Target calculation: 11600 + ( 11600 – 10600 ) = 12600
Yields on 10-year Treasury notes also rallied as funds flowed back into stocks, but we are not yet out of the woods.
There is bound to be a relief rally when EU leaders announce details of their rescue package — followed by a pull-back when traders figure out the costs involved. The danger is that Germany and France do an “Ireland” and rescue the banks but put themselves at risk. Both have public debt to GDP ratios close to 80 percent and it would not take much to push them into the danger zone. If they are down-graded then the kids are home alone — there will be no adults left in the room. A down-grade would raise their cost of funding and place their own budgets under pressure.
The S&P 500 is also testing resistance at 1260; breakout would confirm a Dow signal. 13-Week Twiggs Money Flow is rising but no bullish divergence means this could be secondary (medium-term) buying pressure.
* Target calculation: 1120 + ( 1220 – 1120 ) = 1320
Nasdaq 100 index displays an ascending broadening wedge as it approaches resistance at 2400. The ascending wedge is a bearish pattern: Bulkowski maintains that it breaks out downward 73% of the time. Target would be the base of the pattern at 2000. Bullish divergence on 13-Week Twiggs Money Flow, however, indicates strong buying pressure. Breakout above 2450 would signal a primary advance to 2600*.
* Target calculation: 2400 + ( 2400 – 2200 ) = 2600
The Shanghai Composite Index is testing support at the 2010 low of 2350. 13-Week Twiggs Money Flow below zero warns of selling pressure. Failure of support is likely and would offer a long-term target of 1800*.
* Target calculation: 2400 – ( 3000 – 2400 ) = 1800
Hang Seng Index rallied off support at 16000 and 13-week Twiggs Money Flow above zero indicates short/medium-term buying pressure. Expect a rally to test 19000, but the primary trend remains down and respect of resistance would indicate another test of 16000*.
* Target calculation: 19 – ( 22 – 19 ) = 16
South Korea’s Seoul Composite Index is headed for a test of its upper trend channel. Bullish divergence on 13-week Twiggs Money Flow suggests a bear market rally. Expect another test of 1900. But the primary trend remains down and failure of support at 1650 would warn of a decline to 1500*.
* Target calculation: 1700 – ( 1900 – 1700 ) = 1500
