Tag: Dow Jones Industrial Average

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Dow & Nasdaq buying pressure

Dow Jones Industrial Average penetrated its descending trendline, suggesting that the correction is over. Recovery above 17000 would signal an advance to 18000* — confirmed if follow-through above resistance at 17300. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Respect of resistance at 17000 is unlikely, but would warn of another test of 16350.

Dow Jones Industrial Average

* Target calculation: 17000 + ( 17000 – 16000 ) = 18000

The Nasdaq 100 recovered above its descending trendline and resistance at 4000, signaling an advance to 4500*. Follow-through above 4100 would confirm. Recovery of 13-week Twiggs Money Flow above 35% would flag buying pressure. Reversal below 4000 is unlikely, but would warn of a test of another test of the rising trendline.

Nasdaq 100

* Target calculation: 4100 + ( 4100 – 3700 ) = 4500

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October sell-off: Drawing to a close?

  • DAX and FTSE find support, but remain in a down-trend
  • China is bullish, but Japan bearish
  • US stocks find support and continue to indicate a bull market
  • ASX respects primary support

The S&P 500 found support at 1820 and is testing resistance at 1900. Breach of resistance would suggest that the correction is over. 21-Day Twiggs Money Flow below zero, however, continues to warn of medium-term selling pressure. Respect of resistance is more likely, indicating another test of support at 1800*.

S&P 500 Index

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

CBOE Volatility Index (VIX) retreated to 22, indicating moderate risk, but nowhere near the 30+ levels typical of a bear market.

S&P 500 VIX

Dow Jones Industrial Average recovered above resistance (the former support level) at 16300, the long tail indicating short-term buying pressure. Follow-through above the descending trendline would signal that the correction is over. Recovery above the recent highs at 25% on 13-week Twiggs Money Flow would suggest that buyers have regained control.

Dow Jones Industrial Average

Germany’s DAX is retracing to test resistance at 9000. Respect would confirm a primary down-trend. 13-Week Twiggs Momentum below zero strengthens the bear signal. Target for the decline is 8000*. Recovery above 9000 remains unlikely, but would warn of a bear trap.

Dow Jones Euro Stoxx 50

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The Footsie displays a similar long tail, indicating buying pressure. Recovery above 6500 is unlikely, but would warn of a bear trap. Respect of resistance would offer a target of 6000*.

FTSE 100 Index

* Target calculation: 6400 – ( 6800 – 6400 ) = 6000

China’s Shanghai Composite Index is testing support at 2340/2350. Breach would warn of a correction. But the primary up-trend remains and rising 13-week Twiggs Money Flow signals medium-term buying pressure.

Shanghai Composite Index

Japan’s Nikkei 225 Index plunged through support at 14800, warning of a test of primary support at 13900/14000. Reversal of 13-week Twiggs Money Flow below zero indicates (long-term) selling pressure.

Nikkei 225 Index

The ASX 200 recovered above resistance at 5250 and the descending trendline, suggesting that the correction is over. Bullish divergence and a rising 21-day Twiggs Money Flow (above zero) indicates medium-term buying pressure. Recovery above 5350 would confirm that buyers are back in control, while reversal below 5250 would indicate another test of 5000/5050.

ASX 200

* Target calculation: 5350 – ( 5650 – 5350 ) = 5050

ASX 200 VIX remains below 20, indicating low risk typical of a bull market.

ASX 200 VIX

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October sell-off: Drawing to a close?

  • DAX and FTSE find support, but remain in a down-trend
  • China is bullish, but Japan bearish
  • US stocks find support and continue to indicate a bull market
  • ASX respects primary support

The S&P 500 found support at 1820 and is testing resistance at 1900. Breach of resistance would suggest that the correction is over. 21-Day Twiggs Money Flow below zero, however, continues to warn of medium-term selling pressure. Respect of resistance is more likely, indicating another test of support at 1800*.

S&P 500 Index

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

CBOE Volatility Index (VIX) retreated to 22, indicating moderate risk, but nowhere near the 30+ levels typical of a bear market.

S&P 500 VIX

Dow Jones Industrial Average recovered above resistance (the former support level) at 16300, the long tail indicating short-term buying pressure. Follow-through above the descending trendline would signal that the correction is over. Recovery above the recent highs at 25% on 13-week Twiggs Money Flow would suggest that buyers have regained control.

Dow Jones Industrial Average

Germany’s DAX is retracing to test resistance at 9000. Respect would confirm a primary down-trend. 13-Week Twiggs Momentum below zero strengthens the bear signal. Target for the decline is 8000*. Recovery above 9000 remains unlikely, but would warn of a bear trap.

Dow Jones Euro Stoxx 50

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The Footsie displays a similar long tail, indicating buying pressure. Recovery above 6500 is unlikely, but would warn of a bear trap. Respect of resistance would offer a target of 6000*.

FTSE 100 Index

* Target calculation: 6400 – ( 6800 – 6400 ) = 6000

China’s Shanghai Composite Index is testing support at 2340/2350. Breach would warn of a correction. But the primary up-trend remains and rising 13-week Twiggs Money Flow signals medium-term buying pressure.

Shanghai Composite Index

Japan’s Nikkei 225 Index plunged through support at 14800, warning of a test of primary support at 13900/14000. Reversal of 13-week Twiggs Money Flow below zero indicates (long-term) selling pressure.

Nikkei 225 Index

The ASX 200 recovered above resistance at 5250 and the descending trendline, suggesting that the correction is over. Bullish divergence and a rising 21-day Twiggs Money Flow (above zero) indicates medium-term buying pressure. Recovery above 5350 would confirm that buyers are back in control, while reversal below 5250 would indicate another test of 5000/5050.

ASX 200

* Target calculation: 5350 – ( 5650 – 5350 ) = 5050

ASX 200 VIX remains below 20, indicating low risk typical of a bull market.

ASX 200 VIX

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US stocks: Broad selling pressure

The S&P 500 broke through support at 1900, offering a target of 1800*. Decline of 21-day Twiggs Money Flow below zero warns of medium-term selling pressure. Recovery above 1910 is unlikely at present, but would suggest a bear trap.

S&P 500

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

CBOE Volatility Index (VIX) broke above 20%, but still indicates moderate risk. A break above 30% would suggest elevated risk.

VIX Index

Dow Jones Industrial Average is testing support at 16300. Breach would indicate a test of the (primary) rising trendline. Bearish divergence on 13-week Twiggs Money Flow continues to warn of selling pressure. Recovery above 16500 is less likely, but would suggest another rally.

Dow Jones Industrial Average

The Nasdaq 100 broke support at 3850. Follow-through below 3750 would confirm a target of primary support at 3400*. Divergence on 13-week Twiggs Money Flow indicates selling pressure. Respect of support at 3750 is unlikely, but recovery above 3850 would suggest another rally.

Nasdaq 100

* Target calculation: 3750 – ( 4100 – 3750 ) = 3400

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October clearance sales not yet over

Dow Jones Industrial Average ran into resistance at 17000 signaling that the October clearance sales may not yet be over. 21-Day Twiggs Money Flow oscillating around zero suggests hesitancy despite the good job numbers. The primary trend is bullish, but reversal below 16700 would warn of a secondary correction.

Dow Jones Industrial Average

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

The Nasdaq 100 found support at 3950/4000 on the weekly chart. Recovery above 4100 would indicate a further advance, while follow-through below 3950 would warn of a correction to the primary trendline at 3750/3850. Mild divergence on 13-week Twiggs Money Flow suggests further selling pressure.

Nasdaq 100

* Target calculation: 4000 + ( 4000 – 3750 ) = 4250

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Rising interest rates: Good or bad for stocks?

We are now at the September quarter-end, normally a volatile time for stocks. Expect selling pressure to increase over the next few weeks as investment managers sell off poor-performing stocks. Increased cash balances then enable them to take advantage of new opportunities as they present themselves. If the fundamental under-pinning of the market is sound, the market is likely to undergo a minor dip before resuming its advance. If not, and there are serious flaws, the sell-off could turn into a rout — as in 1987 and 2007.

At present the market appears sound, with none of our market indicators flagging elevated risk, and the bull market is likely to continue.

Bears cite the potential for an increase in US interest rates as a major threat to the US economy. The track record for the last 15 years suggests otherwise. The graph below compares percentage change in 10-year Treasury yields to the Wilshire 5000 Total Market Index (divided by 20 for purposes of comparison). The two tend to rise and fall in sync, with a 20% to 40% rise in the index accompanying a 1% increase in yields.

10-year Treasury yields v. Wilshire 5000 Total Market Index

The Fed tends to be conservative about raising interest rates (“doves” outnumber “hawks”) and is unlikely to raise rates until there is solid evidence of a recovery. So a rise in interest rates is more likely to be followed by a surge in stocks than a fall.

US stocks

The S&P 500 found significant support at 1965, the lower border of the broadening wedge. Monday’s long tail flags (short-term) buying pressure. Follow-through above 1990 would suggest a rally to test the upper border. Breach of 1965, however would indicate another correction. Decline of 21-day Twiggs Money Flow below zero would confirm, while recovery above its September high would suggest that buyers are back in control.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) is rising, but the low level continues to suggest a bull market.

VIX Index

Dow Jones Industrial Average found support at 16950 on the weekly chart. Long tails again flag buying pressure. Recovery above 17150 would suggest another advance, while follow-through above 17350 would confirm. Breach of support at 16950 is unlikely, but would warn of a correction. 13-Week Twiggs Money Flow reflects some hesitancy, but the long-term picture is bullish.

Dow Jones Industrial Average

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

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Quarter-end turbulence

We are now approaching the September quarter-end, normally a volatile time for stocks. Investment managers tend to re-balance their portfolios after month-end, selling off poor performers and increasing cash balances to later take advantage of new opportunities. The result is that stocks tend to dip in October. If the fundamental under-pinning of the market is strong, they soon recover and continue on its merry way. But if there are serious flaws, the sell-off can turn into a rout — as in 1987 and 2007.

At present the market outlook appears sound and the bull market is likely to continue. I often use transport stock Fedex as a bellwether for the US economy. If the economy is robust, you can expect Fedex to display a solid up-trend. If weak, Fedex tends to lead the market lower. In November 2007 for example, on the monthly chart below, Fedex signaled a bear market several months ahead of the major indices. The present situation is quite the opposite, with the Fedex in a strong bull-trend, having recently respected support at $145. A 13-week Twiggs Money Flow trough above zero also suggests buying pressure. Economic activity is clearly improving.

Fedex

* Target calculation: 145 + ( 145 – 130 ) = 160

The S&P 500 break above 2010 proved to be a false break, with the market headed for a re-test of support at 1980. Breach would indicate another correction. Declining 21-day Twiggs Money Flow now indicates medium-term selling pressure; a fall below zero would warn of a primary down-trend.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) remains low, however, suggesting continuation of the bull market.

VIX Index

Dow Jones Industrial Average also retreated, testing its new support level at 17150. Reversal below 16950 would indicate a correction, while respect would suggest another advance. Declining 21-day Twiggs Money Flow also suggests medium-term selling pressure.

Dow Jones Industrial Average

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

My conclusion is that the bull market is sound, but likely to encounter some turbulence over the quarter-end. There may be a secondary correction, but respect of recent support levels would indicate a fresh advance.

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Dow, S&P 500 make new highs

Dow Jones Industrial Average followed through above 17150, confirming a primary advance to 18000*. Rising 21-day Twiggs Money Flow suggests buying pressure. Reversal below support at 16950 is most unlikely, but would warn of a correction.

Dow Jones Industrial Average

* Target calculation: 17150 + ( 17150 – 16350 ) = 17950

The S&P 500 similarly followed through above 2010, confirming a primary advance with a target of 2070*. Reversal below support at 1980 is most unlikely, but would warn of a correction.

S&P 500

* Target calculation: 1990 + ( 1990 – 1910 ) = 2070

CBOE Volatility Index (VIX) is now back at 12, continuing to indicate low risk typical of a bull market.

VIX Index

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Dow finds support

Dow Jones Industrial Average found short-term support at 16950/17000. Follow-through above 17050 would indicate another attempt at 17150. And breakout above 17150 would offer a target of 17500*. Recovery of 21-day Twiggs Money Flow above 20% would indicate buying pressure. Reversal below support at 16950 is unlikely, but would test the rising trendline around 16700.

Dow Jones Industrial Average

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

The S&P 500 is testing support at 1980/1985. Monday’s long tail suggests short-term buying pressure; strengthened if 21-day Twiggs Money Flow starts to rise. Recovery above 2000 would indicate another rally. Follow-through above 2010 would signal an advance to 2100*. Failure of short-term support at 1980 is unlikely, but would warn of a correction to 1950.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) readings remain low, typical of a bull market.

VIX Index

The Nasdaq 100 is retracing to test its new support level at 4000. Respect of support is likely and would suggest an advance to 4250*. Failure of support at 4000, however, would warn of a correction to the primary trendline, around 3850. Completion of another 13-week Twiggs Money Flow trough above zero would strengthen the bull signal.

Nasdaq 100

* Target calculation: 4000 + ( 4000 – 3750 ) = 4250

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US stocks find support

Dow Jones Industrial Average is consolidating in a narrow band above 17000. Sideways drift on 21-day Twiggs Money Flow reflects hesitancy. Breakout above 17150 remains likely, however, and would offer a target of 17500*. Reversal below 16950, while unlikely, would test the rising trendline around 16700.

Dow Jones Industrial Average

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

I still expect the Nasdaq 100 to retrace to test its new support level at 4000. A 13-week Twiggs Money Flow trough above zero indicates buying pressure. Respect of support is likely and would offer a target of 4250. Reversal below 4000 is unlikely but would warn of a correction.

Nasdaq 100

* Target calculation: 4000 + ( 4000 – 3750 ) = 4250

Russell 2000 small caps is once again headed for a test of resistance at 12.00 on the monthly chart. Completion of a second 13-week Twiggs Momentum trough at the zero line would suggest a healthy up-trend. Breakout above 12.00 would signal an advance to 13.00*. Breach of support at 11.00 is unlikely, but would warn of a down-trend.

Russell 2000

* Target calculation: 12 + ( 12 – 11 ) = 13

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