Tag: DAX

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Nasdaq bearish divergence

The S&P 500 found resistance at 2100, indicating a continued lack of enthusiasm. Declining 13-week Twiggs Money Flow flags medium-term selling pressure. Reversal below 2000 would warn of another test of primary support at 1870. Upward breakout now appears less likely, but would signal a fresh advance to 2400*.

S&P 500 Index

* Target calculation: 2130 + ( 2130 – 1870 ) = 2390

Declining CBOE Volatility Index (VIX) below 20 indicates market risk is returning to normal. Some macro indicators remain elevated, however, which is why we maintain reduced exposure.

S&P 500 VIX

The Nasdaq 100 is testing the previous (2000) high of 4800. Breakout would be a bullish sign for the broader market but bearish divergence on 13-week Twiggs Money Flow continues to warn of stubborn resistance.

Nasdaq 100

Canada’s TSX 60 is struggling to break resistance at 800. 13-Week Twiggs Momentum peaks below zero continue to warn of a strong primary down-trend. Recovery above 825 is unlikely, while failure of support at 765 would confirm another decline.

TSX 60 Index

* Target calculation: 775 – ( 825 – 775 ) = 725

Europe

Germany’s DAX is retracing to test its new support level at 11000. Respect is likely and would confirm another test of 12400. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 11000 is unlikely, but would warn of another test of 10000.

DAX

The Footsie is strengthening, with rising 13-week Twiggs Momentum. Breakout above 6500 would indicate another test of 7000/7100. Reversal below 6000 is unlikely but would signal a primary down-trend.

FTSE 100

Asia

Dow Jones Shanghai Index

The Shanghai Composite Index recovered above support at 3500. I remain wary of China because of the high Debt to GDP ratio, the need to wean itself off investment stimulus, and impending rate rises in the US which could encourage further capital outflows.

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Japan’s Nikkei 225 is testing short-term resistance at 20000. This is unlikely to impede an advance to 21000. Rising 13-week Twiggs Money Flow indicates buying pressure.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex is retracing to test the former band of primary support at 26000/26500. Respect would confirm a primary down-trend. Reversal of 13-week Twiggs Money Flow below zero would strengthen the signal. Follow-through below 25000 would offer a target of 22500*. Recovery above the upper trend channel at 27000 is unlikely, but would suggest a rally to 30000.

SENSEX

* Target calculation: 25000 – ( 27500 – 25000 ) = 22500

Australia

The ASX 200 encountered short-term resistance at 5300. Declining 13-week Twiggs Money Flow indicates (medium-term) selling pressure; reversal below zero would strengthen the signal. Breach of 5150 would warn of another test of primary support at 5000. Failure of support would signal a primary down-trend.

ASX 200

* Target calculation: 5000 – ( 6000 – 5000 ) = 4000

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Markets lack enthusiasm

The S&P 500 hesitated at 2100, short candle ranges indicating a lack of interest ahead of the Thanksgiving holiday. Lower 21-day Twiggs Money Flow likewise indicates a lack of enthusiasm. Reversal below 2000 is unlikely but would warn of another test of primary support at 1870. Expect strong resistance at 2130 but an upward breakout remains more likely — and would signal a fresh advance to 2400*.

S&P 500 Index

* Target calculation: 2130 + ( 2130 – 1870 ) = 2390

Declining CBOE Volatility Index (VIX) below 20 indicates market risk is returning to normal.

S&P 500 VIX

Canada’s TSX 60 hesitated at 800, but the (bear) rally to 825 seems on track. The 13-week Twiggs Momentum peaks below zero continue to warn of a strong primary down-trend. Recovery above 825 is unlikely, while failure of support at 765 would confirm another decline.

TSX 60 Index

* Target calculation: 775 – ( 825 – 775 ) = 725

Europe

Germany’s DAX broke resistance at 11000, signaling another test of 12400. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below medium-term support at 10600 is unlikely, but would warn of a decline to primary support at 9400/9500.

DAX

The Footsie is strengthening, with a 13-week Twiggs Money Flow trough above zero indicating medium-term buying pressure. Breakout above 6500 and the descending trendline would signal another test of 7000/7100. Reversal below 6100 is unlikely but would threaten primary support at 6000.

FTSE 100

Asia

The Shanghai Composite Index respected its new support level at 3500, indicating a test of resistance at 4000. 13-Week Twiggs Money Flow suggests modest buying pressure. Government intervention has created artificial support and I would adopt a cautious approach.

Dow Jones Shanghai Index

Japan’s Nikkei 225 found short-term resistance at 20000 but this is unlikely to impede the advance to 21000 for long. Rising 13-week Twiggs Money Flow indicates buying pressure.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex remains weak, having retreated below the former band of primary support at 26000/26500. Reversal of 13-week Twiggs Money Flow below zero would warn of another down-swing, with a target of 23500*. Recovery above the upper trend channel at 27000 is unlikely, but would suggest a rally to 30000.

SENSEX

* Target calculation: 25000 – ( 26500 – 25000 ) = 23500

Australia

The ASX 200 is testing short-term support at 5200. Sharp decline on 21-day Twiggs Money Flow warns of selling pressure. Breach of 5200 would warn of another test of primary support at 5000. Respect of support is as likely, however, and would indicate a test of 5400. I suspect the index will range between 5000 and 5400 until the new year, possibly longer.

ASX 200

* Target calculation: 5000 – ( 6000 – 5000 ) = 4000

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Cement and electricity – not there yet

Buying looks a lot more robust than last week and more US-led gains are likely.

Electricity & Cement Production

An examination of electricity and cement production shows the US recovery has plenty of scope for further improvement. Cement production recovered from its dramatic fall in 2008 but remains at the bottom end of the normal range of 120 to 160.

Cement Production

Construction activity is recovering but is a long way below the over-heated levels of 2006. Figures on the graph below are adjusted for CPI.

Construction Spending

Electricity production remains stalled at 2008 levels. Severity of the Great Recession should ensure that low growth endures for longer than the last period of stagnation in the early 1980s.

Electricity Production Index

GDP may have resumed its long-term up-trend but it would be reassuring to see this supported by growing electricity output. Only when growth is restored can we say the economy is fully mended.

Electricity Production compared to Real GDP

North America

The S&P 500 posted two strong blue candles suggesting that the correction is now over. Expect resistance at the previous high of 2130. A 21-day Twiggs Money Flow trough above zero would indicate healthy buying pressure. Breakout above 2130 would signal a fresh advance, with a target of 2400*. Reversal below 2000 is unlikely, but would warn of another test of primary support at 1870.

S&P 500 Index

* Target calculation: 2130 + ( 2130 – 1870 ) = 2390

A CBOE Volatility Index (VIX) peak at 20 indicates market risk is returning to normal.

S&P 500 VIX

NYSE short sales remain subdued.

The Nasdaq 100 is testing its March 2000 high at 4800. Bearish divergence on 13-week Twiggs Money Flow continues to indicate selling pressure but the pattern appears secondary in nature and recovery above the declining trendline would suggest a breakout, offering a target of 5800*.

Nasdaq 100

* Target calculation: 4800 + ( 4800 – 3800 ) = 5800

Canada’s TSX 60 respected support at 765, suggesting another attempt at 825. The 13-week Twiggs Momentum peak below zero (-5%) remains a strong bear signal. Failure of support at 765 would confirm the primary down-trend.

TSX 60 Index

* Target calculation: 775 – ( 825 – 775 ) = 725

Europe

Germany’s DAX continues to test resistance at 11000. Troughs on 21-day Twiggs Money Flow above zero indicate medium-term buying pressure. Breakout above 11000 and the descending trendline would suggest another test of the previous high at 12400. Respect is unlikely, but would warn of another test of primary support at 9400/9500.

DAX

The Footsie is a lot weaker, only finding support at 6100. 21-Day Twiggs Money Flow oscillating below zero indicates persistent selling pressure. Reversal below 6250 would warn of another test of primary support at 6000. Breakout above 6500 is unlikely, but would suggest another test of 7000.

FTSE 100

Asia

The Shanghai Composite Index is testing its new support level at 3500. Declining 13-week Twiggs Money Flow indicates moderate selling pressure. Breach of 3500 would signal another test of 3000.

Dow Jones Shanghai Index

Japan’s Nikkei 225 respected support at 19000, confirming another test of resistance at 21000. Rising 13-week Twiggs Money Flow indicates buying pressure.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex broke the band of primary support at 26000/26500 but is edging lower in a trend channel, rather than a dramatic fall. Reversal of 13-week Twiggs Money Flow below zero would warn of rising selling pressure; a trough at zero would suggest buying pressure. Recovery above the upper channel at 27500 is unlikely at present, but would warn of a bear trap.

SENSEX

* Target calculation: 25000 – ( 27500 – 25000 ) = 22500

Australia

The ASX 200 respected primary support at 5000, suggesting another test of 5400. A 21-day Twiggs Money Flow trough above zero indicates medium-term buying pressure. Breach of 5000 is unlikely at present, but would warn of a (long-term) decline to 4000*.

ASX 200

* Target calculation: 5000 – ( 6000 – 5000 ) = 4000

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Watch out for the caboose

Markets remain tentative and we continue to limit our exposure to roughly 50% of portfolio value. The danger is that you avoid the steam engine but get hit by the caboose when you step back on the tracks. It is safer to wait until the anxiety subsides.

North America

The S&P 500 encountered moderate resistance at the previous high of 2130. Retracement is mild and looks promising for the next attempt at 2130. Decline of 21-day Twiggs Money Flow is gradual, indicating light selling pressure. Breakout above 2130 would signal a fresh primary advance. Reversal below 2050 is unlikely, but would warn of another test of primary support at 1870.

S&P 500 Index

* Target calculation: 2130 + ( 2130 – 1870 ) = 2390

CBOE Volatility Index (VIX) indicates market risk is easing.

S&P 500 VIX

NYSE short sales remain subdued.

NYSE Short Sales

A long-term chart shows the Nasdaq 100 testing its March 2000 high of 4800. Bearish divergence on 13-week Twiggs Money Flow continues to indicate selling pressure but the pattern appears secondary in nature and recovery above the declining trendline would suggest a breakout.

Nasdaq 100

Canada’s TSX 60 reversed below 800, warning of another decline. Failure of 775 would strengthen the signal. A 13-week Twiggs Momentum peak at -5% is a strong bear signal.

TSX 60 Index

* Target calculation: 775 – ( 825 – 775 ) = 725

Europe

Germany’s DAX continues to test resistance at 11000. Recovery of 13-week Twiggs Money Flow above zero indicates medium-term buying pressure. Breakout above 11000 and the descending trendline would suggest another test of the previous high at 12400. Respect is less likely, but would warn of another test of primary support.

DAX

The Footsie is weakening, having respected resistance at 6500. A sharp fall on 13-week Twiggs Money Flow indicates medium-term selling pressure. Breach of 6250 would warn of another test of primary support at 6000. Breakout above 6500 is less likely, but would suggest another test of 7000.

FTSE 100

Asia

The Shanghai Composite Index broke resistance at 3500 and rising 13-week Twiggs Money Flow indicates buying pressure. It would be prudent to wait for a higher trough before interpreting this as a reversal.

Dow Jones Shanghai Index

Japan’s Nikkei 225 broke resistance at 19000. Expect retracement to test the new support level; respect would confirm another test of 21000. Rising 13-week Twiggs Money Flow indicates buying pressure.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex fell through the former band of primary support at 26000/26500. 13-Week Twiggs Money Flow troughs above zero continue to indicate long-term buying pressure, but failure to recover above 26500 in the short-term would be a strong bear signal. Follow-through below 25000 would confirm a primary down-trend.

SENSEX

* Target calculation: 25000 – ( 27500 – 25000 ) = 22500

Australia

The ASX 200 broke medium-term support at 5150, warning of another test of primary support at 5000. Another 13-week Twiggs Money Flow trough above zero would indicate strong support at 5000. Breach of 5000 is unlikely at this stage, but would warn of a (long-term) decline to 4000*.

ASX 200

* Target calculation: 5000 – ( 6000 – 5000 ) = 4000

Posted on

No fireworks yet

The S&P 500 is testing resistance at the previous high of 2130. Down-turn on 21-day Twiggs Money Flow warns of short-term selling pressure; a fall below zero would indicate strong resistance. Reversal below 2050 is unlikely, but would indicate another test of primary support at 1870.

S&P 500 Index

* Target calculation: 2000 + ( 2000 – 1870 ) = 2130

A declining CBOE Volatility Index (VIX) indicates market risk is easing.

S&P 500 VIX

NYSE short sales remain subdued.

NYSE Short Sales

Nasdaq 100 broke resistance at 4700 and is approaching its previous (March 2000) high of 4816. 13-Week Twiggs Money Flow is rising steeply but expect resistance at 4800. Breakout would be a positive sign for the large cap S&P 500 and Dow Industrial indices.

Nasdaq 100

Canada’s TSX 60 is far more hesitant, testing stubborn resistance at 825. Breakout would signal a fresh advance, but follow-through below 800 would be bearish and failure of 775 would warn of another decline. Recovery of 13-week Twiggs Momentum above -5% would offer some hope, but the index remains tentative.

TSX 60 Index

* Target calculation: 775 – ( 825 – 775 ) = 725

Europe

Germany’s DAX is consolidating below resistance at 11000; a bullish sign. Recovery of 13-week Twiggs Money Flow above zero indicates medium-term buying pressure. Breakout above 11000 and the descending trendline would suggest another test of the previous high at 12400.

DAX

The Footsie is similarly testing resistance at 6500. Breakout would suggest another test of the previous high at 7100. 13-Week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Reversal below 6250 is unlikely, but would warn of another test of primary support at 6000.

FTSE 100

Asia

The Shanghai Composite Index is testing resistance at 3500. Rising 13-week Twiggs Money Flow indicates buying pressure. Breakout would signal an advance to 4000, but I remain wary because of government intervention.

Dow Jones Shanghai Index

Japan’s Nikkei 225 is testing resistance at 19000. Breakout would signal another test of 21000. Respect is less likely, but reversal below 18500 would warn of another test of primary support at 17000.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex is testing the former primary support level at 26500 after encountering resistance at 27500. Rising 13-week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Respect of 26500 is likely and would indicate continuation of the rally (to 28500). Failure of support would warn of a primary decline.

SENSEX

* Target calculation: 25000 – ( 27500 – 25000 ) = 22500

Australia

The ASX 200 is testing medium-term support at 5150. Reversal of 21-day Twiggs Money Flow below zero indicates medium-term selling pressure. Breach of 5150 is likely and would warn of another test of primary support at 5000. Recovery above 5400 is unlikely at this stage, but would suggest an advance to 6000.

ASX 200

* Target calculation: 5000 – ( 5400 – 5000 ) = 4600


More….

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Marc Faber: Don’t believe China’s growth figures

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We aren’t born with the ability to make good decisions; we learn it.

~ Ray Dalio, Bridgewater Associates

Posted on

Iron ore headed for the smelter

Bloomberg News quotes Zhu Jimin, deputy head of the China Iron & Steel Association, representing major steel producers, at their quarterly briefing on Wednesday:

“Production cuts are slower than the contraction in demand, therefore oversupply is worsening.”

“China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed,” Zhu said. “As demand quickly contracted, steel mills are lowering prices in competition to get contracts.”

Little wonder that bulk commodity prices are falling sharply.

RBA: Bulk Commodity Prices

Australian producers have been ramping up production to compensate for lower prices.

RBA: Bulk Commodity Exports

But with further production due to come on line, the market looks ready for a meltdown. This from David Llewellyn-Smith at Macrobusiness:

Yes, China is still shutting in supply and is on track for 270 million tonnes this year but it’s not going to drop enough in the future (at the very best down to 200mt) as Roy Hill, Sino, Anglo, Vale and India (and possibly Tonkolili as well) continue the great ramp up, adding another 200mt plus in the next two years even as Chinese steel production keeps falling at 2-3% per year, taking 40mt per annum out of demand….. the total seaborne iron ore market is about to peak and then shrink….

The ASX 300 Metals & Mining Index is testing its 2008 low. Breach appears likely and would offer a target of 1700*.

ASX 300 Metals & Mining Index

* Target calculation: 2200 – ( 2700 – 2200 ) = 1700

North America

The S&P 500 respected support at 2050 and is headed for a test of the previous high at 2130 on the back of strong earnings performance. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure but expect strong resistance at 2130. Reversal below 2050 is unlikely, but would warn of another test of primary support at 1870.

S&P 500 Index

* Target calculation: 2000 + ( 2000 – 1870 ) = 2130

A declining CBOE Volatility Index (VIX) indicates market risk is easing.

S&P 500 VIX

NYSE short sales remain subdued.

NYSE Short Sales

Dow Jones Industrial Average is similarly headed for a test of 18300, with 13-week Twiggs Money Flow rising steeply.

Dow Jones Industrial Average

Canada’s TSX 60 continues to test stubborn resistance at 825. Weak 13-week Twiggs Momentum, below zero, indicates the market remains bearish. Breakout would signal an advance to 900, but reversal below the former primary support level at 800 is as likely and would warn of another decline.

TSX 60 Index

* Target calculation: 775 – ( 825 – 775 ) = 725

Europe

Germany’s DAX is testing resistance at 11000. Recovery of 13-week Twiggs Money Flow above zero indicates medium-term buying pressure. Breakout above the descending trendline would suggest another test of the previous high at 12400. Expect stubborn resistance, however, and reversal below 10000 would warn of another decline.

DAX

The Footsie is similarly testing resistance at 6500. Breakout above the descending trendline would suggest another test of the previous high at 7100. 13-Week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Reversal below 6250 is unlikely, but would warn of another test of primary support at 6000.

FTSE 100

Asia

The Shanghai Composite Index continues to test resistance at 3500. Respect is likely and would indicate a re-test of government-backed support at 3000.

Dow Jones Shanghai Index

Hong Kong’s Hang Seng Index is retracing to test support at 22500. Respect would indicate a rally to 24000, but failure remains as likely and would test primary support at 21000. A 13-week Twiggs Money Flow trough above zero would indicate (long-term) buying pressure.

Hang Seng Index

Japan’s Nikkei 225 is testing resistance at 19000. Breakout would signal another test of 21000. Respect is less likely, but would warn of another test of primary support at 17000.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex encountered resistance at 27500. Rising 13-week Twiggs Money Flow troughs above zero indicate long-term buyiong pressure. Expect another test of 26500 but respect is likely and would indicate continuation of the rally. Reversal below 26500 would warn of another (primary) decline.

SENSEX

* Target calculation: 25000 – ( 27500 – 25000 ) = 22500

Australia

The ASX 200 is retracing to test medium-term support between 5200 and 5300. Reversal of 21-day Twiggs Money Flow below its rising trendline indicates (medium-term) selling pressure; decline below zero would strengthen the signal. Breach of 5200 would warn of another test of primary support at 5000. Recovery above the descending trendline is unlikely at this stage, but would suggest another test of 6000.

ASX 200

* Target calculation: 5000 – ( 5400 – 5000 ) = 4600


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Jack Johnson: No Other Way

Failure is by and large due to not accepting and successfully dealing with the realities of life…. Achieving success is simply a matter of accepting and successfully dealing with all my realities.

~ Ray Dalio, Bridgewater Associates

Posted on

Iron ore headed for the smelter

Bloomberg News quotes Zhu Jimin, deputy head of the China Iron & Steel Association, representing major steel producers, at their quarterly briefing on Wednesday:

“Production cuts are slower than the contraction in demand, therefore oversupply is worsening.”

“China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed,” Zhu said. “As demand quickly contracted, steel mills are lowering prices in competition to get contracts.”

Little wonder that bulk commodity prices are falling sharply.

RBA: Bulk Commodity Prices

Australian producers have been ramping up production to compensate for lower prices.

RBA: Bulk Commodity Exports

But with further production due to come on line, the market looks ready for a meltdown. This from David Llewellyn-Smith at Macrobusiness:

Yes, China is still shutting in supply and is on track for 270 million tonnes this year but it’s not going to drop enough in the future (at the very best down to 200mt) as Roy Hill, Sino, Anglo, Vale and India (and possibly Tonkolili as well) continue the great ramp up, adding another 200mt plus in the next two years even as Chinese steel production keeps falling at 2-3% per year, taking 40mt per annum out of demand….. the total seaborne iron ore market is about to peak and then shrink….

The ASX 300 Metals & Mining Index is testing its 2008 low. Breach appears likely and would offer a target of 1700*.

ASX 300 Metals & Mining Index

* Target calculation: 2200 – ( 2700 – 2200 ) = 1700

North America

The S&P 500 respected support at 2050 and is headed for a test of the previous high at 2130 on the back of strong earnings performance. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure but expect strong resistance at 2130. Reversal below 2050 is unlikely, but would warn of another test of primary support at 1870.

S&P 500 Index

* Target calculation: 2000 + ( 2000 – 1870 ) = 2130

A declining CBOE Volatility Index (VIX) indicates market risk is easing.

S&P 500 VIX

NYSE short sales remain subdued.

NYSE Short Sales

Dow Jones Industrial Average is similarly headed for a test of 18300, with 13-week Twiggs Money Flow rising steeply.

Dow Jones Industrial Average

Canada’s TSX 60 continues to test stubborn resistance at 825. Weak 13-week Twiggs Momentum, below zero, indicates the market remains bearish. Breakout would signal an advance to 900, but reversal below the former primary support level at 800 is as likely and would warn of another decline.

TSX 60 Index

* Target calculation: 775 – ( 825 – 775 ) = 725

Europe

Germany’s DAX is testing resistance at 11000. Recovery of 13-week Twiggs Money Flow above zero indicates medium-term buying pressure. Breakout above the descending trendline would suggest another test of the previous high at 12400. Expect stubborn resistance, however, and reversal below 10000 would warn of another decline.

DAX

The Footsie is similarly testing resistance at 6500. Breakout above the descending trendline would suggest another test of the previous high at 7100. 13-Week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Reversal below 6250 is unlikely, but would warn of another test of primary support at 6000.

FTSE 100

Asia

The Shanghai Composite Index continues to test resistance at 3500. Respect is likely and would indicate a re-test of government-backed support at 3000.

Dow Jones Shanghai Index

Hong Kong’s Hang Seng Index is retracing to test support at 22500. Respect would indicate a rally to 24000, but failure remains as likely and would test primary support at 21000. A 13-week Twiggs Money Flow trough above zero would indicate (long-term) buying pressure.

Hang Seng Index

Japan’s Nikkei 225 is testing resistance at 19000. Breakout would signal another test of 21000. Respect is less likely, but would warn of another test of primary support at 17000.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex encountered resistance at 27500. Rising 13-week Twiggs Money Flow troughs above zero indicate long-term buyiong pressure. Expect another test of 26500 but respect is likely and would indicate continuation of the rally. Reversal below 26500 would warn of another (primary) decline.

SENSEX

* Target calculation: 25000 – ( 27500 – 25000 ) = 22500

Australia

The ASX 200 is retracing to test medium-term support between 5200 and 5300. Reversal of 21-day Twiggs Money Flow below its rising trendline indicates (medium-term) selling pressure; decline below zero would strengthen the signal. Breach of 5200 would warn of another test of primary support at 5000. Recovery above the descending trendline is unlikely at this stage, but would suggest another test of 6000.

ASX 200

* Target calculation: 5000 – ( 5400 – 5000 ) = 4600

Posted on

Bear market – brief respite

North America

The S&P 500 is retracing to test short-term support at 2000. Failure would warn of another test of support at 1870, while respect would indicate continuation of the bear rally to test resistance at the high of 2130. Bullish divergence on 21-day Twiggs Money Flow indicates (medium-term) buying pressure. The market remains bearish, however, having broken primary support at 2000, and respect of 2130 would warn of another test of support at 1870.

S&P 500 Index

* Target calculation: 2000 + ( 2000 – 1870 ) = 2130

The CBOE Volatility Index (VIX) below 20 indicates market risk is easing. We need to remain vigilant for the next few weeks. At least until we see a peak below 20.

S&P 500 VIX

NYSE short sales remain subdued.

NYSE Short Sales

Dow Jones Industrial Average similarly retraced to test support at 17000 on the weekly chart. 13-Week Twiggs Money Flow holding above zero indicates buying pressure. Respect of support would again indicate a rally to test the previous high (18300), failure would warn of another test of primary support at 16000.

Dow Jones Industrial Average

Canada’s TSX 60 respected resistance at 825. Reversal below 800 would warn of another decline; breach of 775 would confirm. Weak 13-week Twiggs Momentum, below zero, signals the market is still bearish.

TSX 60 Index

* Target calculation: 775 – ( 825 – 775 ) = 725

Europe

Germany’s DAX remains weak, with the index retracing to test support at 10000 and 13-week Twiggs Money Flow below zero. Reversal below 10000 is likely and would warn of another decline; follow-through below 9500 would confirm. Recovery above 10500 is unlikely but would indicate continuation of the bear rally.

DAX

The Footsie is more resilient, with 13-week Twiggs Money Flow holding above zero. The index respected resistance at 6500 and is retracing to test short-term support at 6250. Respect is more likely and would suggest another test of 6500. Reversal below 6000 is unlikely, but would confirm the primary down-trend.

FTSE 100

Asia

The Shanghai Composite Index rallied off government-enforced support at 3000. But the rally is likely to be short-lived and recovery above 3500 unlikely.

Dow Jones Shanghai Index

Hong Kong’s Hang Seng Index is retracing to test support at 22500 after a similar bear rally. Respect of 22500 would indicate another test of 24000, but breach of support is more likely and would warn of another test of primary support at 21000.

Hang Seng Index

Japan’s Nikkei 225 encountered resistance at 18500. Gradual decline on 13-week Twiggs Money Flow suggests a secondary correction, with long-term buying pressure continuing. Recovery above 19000 would indicate another test of 21000.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex is retracing to test support at 26500. The 13-week Twiggs Money Flow trough above zero, however, indicates strong buying pressure and respect of support at 26500 would indicate continuation of the rally. Reversal below 26000 is unlikely, but would confirm a primary down-trend.

SENSEX

Australia

The ASX 200 retreated from resistance at 5250/5300. Rising 13-week Twiggs Money Flow, however, indicates medium-term buying pressure. A higher trough above 5000 would strengthen the signal. Breakout above 5300 would signal continuation of the bear rally to test the descending trendline. The bear market continues despite recent support and breach of 5000 would confirm a primary down-trend.

ASX 200

* Target calculation: 5000 – ( 5400 – 5000 ) = 4600

 

Being powerful is like being a lady. If you have to tell people you are, you aren’t.

~ Margaret Thatcher

Posted on

Bear Rally

North America

Construction activity continues to advance. The graph below shows Total US Construction Spending adjusted for inflation (Core CPI). Spending is substantially below the 2004 to 2007 property bubble but equates to the earlier Dotcom era. The steep rise suggests that rate increases will be necessary to prevent another bubble.

US Construction Spending adjusted by Core CPI

The S&P 500 is testing resistance at 2000. Bullish divergence on 21-day Twiggs Money Flow indicates (medium-term) buying pressure. Recovery above 2000 would signal a relieving rally, with a target (from the double-bottom pattern) of 2130*. The market remains bearish and respect of 2130 would warn of another test of primary support at 1870.

S&P 500 Index

* Target calculation: 2000 + ( 2000 – 1870 ) = 2130

The CBOE Volatility Index (VIX) below 20 indicates market risk is easing. We need to remain vigilant for the next few weeks as VIX can be prone to false breaks.

S&P 500 VIX

NYSE short sales are subdued.

Dow Jones Industrial Average is similarly testing resistance at 17000 on the weekly chart. Breakout would offer a similar target of 18300. Recovery of 13-week Twiggs Money Flow above zero indicates buying pressure. Reversal below 16000 is unlikely, but would confirm a primary down-trend.

Dow Jones Industrial Average

Canada’s TSX 60 recovered above the former primary support level at 800. Follow-through above 820 would signal a relieving rally. Weak 13-week Twiggs Momentum, below zero, warns the market is still bearish.

TSX 60 Index

* Target calculation: 820 + ( 820 – 750 ) = 890

Europe

Germany’s DAX remains weak, with 13-week Twiggs Money Flow below zero. Recovery above 10500 would indicate a bear rally. Only follow-through above 11000 would signal that the down-trend is over.

DAX

The Footsie proved more resilient, respecting support at 6000 with 13-week Twiggs Money Flow holding above zero. Breakout above 6300 indicates a relieving rally, while follow-through above the descending trendline would suggest that the correction is over. Reversal below 6000 is unlikely, but would confirm the primary down-trend.

FTSE 100

Asia

The Shanghai Composite Index continues to test government-enforced support at 3000. Recovery above 3500 is most unlikely.

Dow Jones Shanghai Index

Hong Kong’s Hang Seng Index rallied to test resistance at 22500, while 13-week Twiggs Money Flow recovered above zero. Follow-through above 22500 would indicate another test of 24000. But this remains a bear market and reversal below 22500 would warn of another decline.

Hang Seng Index

Japan’s Nikkei 225 respected primary support at 17000. Gradual decline on 13-week Twiggs Money Flow suggests a secondary correction. Recovery above 19000 would indicate another test of 21000.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex followed through above resistance at 26500, indicating a bear rally. Strong buying pressure, signaled by a 13-week Twiggs Money Flow trough above zero, suggests a reversal. Breakout above 28500 would confirm. Reversal below 25000 is unlikely, but would confirm a primary down-trend.

SENSEX

Australia

A monthly chart of the ASX 200 shows the significance of the 5000 support level.

ASX 200 monthly

Rising 21-Day Twiggs Money Flow on the daily chart indicates medium-term buying pressure. Breakout above 5300 would offer a target of 5700. But expect stiff resistance between 5200 and 5300 — already flagged by a tall shadow on today’s candlestick. Breach of 5000 is unlikely at present, but would confirm a primary down-trend.

ASX 200

* Target calculation: 5000 – ( 5400 – 5000 ) = 4600


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Deleveragings go on for about 15 years. The process of raising debt relative to incomes goes on for 30 or 40 years, typically. There’s a last big surge, which we had in the two years from 2005 to 2007 and from 1927 to 1929, and in Japan from 1988 to 1990, when the pace becomes manic. That’s the classic bubble. And then it takes about 15 years to adjust.

~ Ray Dalio, Bridgewater Associates

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