Why you shouldn’t panic when stocks are getting slammed from CNBC.
BOB JANJUAH: Time For Action, Warning Over – Business Insider
Sam Ro of Business Insider reports on Nomura strategist Bob Janjuah’s August 21 note:
“I now think the correct thing to do – as I also said in April and June – is to prepare for a serious risk-off phase between August and November,” [Janjuah] reiterated. “Over the August to November period I am looking for the S&P500 to trade off down from around 1400…by 20% to 25%…to trade at or below the lows of 2011.”
He argues that the key drivers of this sell-off will be disappointment at next week’s Federal Reserve Jackson Hole speech and realization that the ECB won’t be be able to deliver on their promises.
via BOB JANJUAH: Time For Action, Warning Over – Business Insider.
S&P 500 and Nasdaq remain bearish
The S&P 500 remains in a slow up-trend as indicated by narrow oscillation of 63-day Twiggs Momentum above zero. A fall below zero, or downward breakout from the trend channel would warn of another correction. In the long term, breakout above 1420 is unlikely, but would signal an advance to 1570*.
* Target calculation: 1420 + ( 1420 – 1270 ) = 1570
The Nasdaq 100 is in a similar trend channel on the weekly chart. Respect of resistance at 2660 would suggest another test of primary support at 2440. Reversal of 13-week Twiggs Money Flow below zero would warn of a primary down-trend.
Bellwether transport stock Fedex also displays an upward trend channel on the weekly chart but remains bearish after completion of an earlier double top formation. Reversal below the former neckline at 88.00 would strengthen the bear signal, while failure of primary support at 84.00 would confirm.
S&P 500 and Dow Industrials remain bearish
The S&P 500 continues to test resistance at 1370 but declining 63-day Twiggs Momentum warns of a primary down-trend. Breach of the rising trendline would indicate a primary down-swing; confirmed if support at 1270 is broken. Reversal of 63-day Twiggs Momentum below zero would strengthen the bear signal. Breakout above 1420 is unlikely, but would signal an advance to 1570*.
* Target calculation: 1420 + ( 1420 – 1270 ) = 1570
The Dow Industrial Average is in a similar position, with bearish divergence on 13-week Twiggs Money Flow warning of selling pressure. Reversal of TMF below zero would indicate a primary down-trend .
S&P 500: Weak rally suggests down-turn
The S&P 500 is advancing on the weekly chart toward another test of 1420, but falling momentum warns of a primary down-trend. Reversal of 63-day Twiggs Momentum below zero would indicate a primary decline. Failure of primary support at 1270 would confirm, offering a target of 1170*. In the shorter term, recovery above 1370 would indicate a test of 1420. Breakout above 1420 is unlikely at this stage — especially with money flowing into bonds.
* Target calculation: 1270 – ( 1370 – 1270 ) = 1170
Gold rallies
Spot gold rallied late Friday, breaking the first line of resistance at $1600/ounce. Penetration of the declining trendline suggests that the down-trend is weakening, but 63-day Twiggs Momentum remains firmly below zero. Retracement that respects new support at $1600 would strengthen the bull signal, however, as would recovery of Momentum above zero.
* Target calculation: 1500 – ( 1800 – 1500 ) = 1200
Spot gold tests $1530
The Dollar Index followed through after last week’s breakout above resistance at 81.50/82.00, confirming the fresh advance signaled by a 63-day Twiggs Momentum trough above zero. Target for the advance is 86.00*.
* Target calculation: 82 + ( 82 – 78 ) = 86
On the daily chart, spot gold tests medium-term support at $1530/ounce. Long tails indicate buying support but the rising dollar continues to apply downward pressure. Breach of support and follow-through below $1500 would signal a long-term decline to $1200/ounce*. Declining 63-day Twiggs Momentum (below zero) already indicates a primary down-trend. Recovery above $1600 is less likely but would indicate that the down-trend is weakening.
* Target calculation: 1500 – ( 1800 – 1500 ) = 1200
Nasdaq 100 and S&P 500 threaten a correction
The Nasdaq 100 is testing medium-term support at 2630. Reversal of 21-day Twiggs Money Flow below zero warns of a correction; follow-through below Friday’s low of 2620 would confirm, offering an initial target of 2400.
The S&P 500 continues to test support at 1350/1370 on the weekly chart after penetrating its rising trendline. Declining 13-week Twiggs Money Flow indicates medium-term selling pressure. Failure of support would signal a correction with an initial target of 1300*, but the primary up-trend is not under immediate threat.
* Target calculation: 1350 – ( 1400 – 1350 ) = 1300
US: S&P 500 and Nasdaq 100
The S&P 500 continues to test support at 1350/1370 after penetrating its rising trendline. Recovery above 1400 would indicate another advance, but declining 13-week Twiggs Money Flow warns that support is likely to fail, with a correction to 1300. In the longer term, respect of 1300 would indicate the primary up-trend is intact, while failure would signal trend weakness.
The Nasdaq 100 breached its (secondary) rising trendline, indicating a correction back to the primary trendline at 2500. Declining 13-week Twiggs Money Flow indicates selling pressure, but respect of the zero line would suggest that the primary up-trend is intact, presenting a possible buying opportunity for the more adventurous.
Selling pressure on S&P 500 and Nasdaq 100
The S&P 500 is testing support at 1350 after penetrating its rising trendline. Failure of support would indicate a correction with an initial target of 1300. Respect of 1300 — and of the zero line by 13-week Twiggs Money Flow — would signal that the primary up-trend is intact and may present a buying opportunity for the more adventurous.
On the daily chart, recovery of the S&P 500 above 1400 would suggest a new primary advance, while breach of support at 1350 would signal a correction. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure.
A similar (21-day Twiggs Money Flow) bearish divergence on the Nasdaq 100 warns of a correction. Breach of the rising trendline strengthens the signal. Follow-through below 2700 would confirm, offering an initial target of 2400.
