The FTSE 100 encountered resistance at 5600, respecting the descending trendline. David Cameron’s veto of the EU treaty proposal is likely to inject further uncertainty — and another test of medium-term support at 5050. 13-Week Twiggs Money Flow is reasonably strong but, again, we need to allow a few weeks for markets to absorb the latest news.
The FTSE 100 index is headed for resistance at 5700. Breakout would signal an advance to the 2011 highs at 6100. Rising 13-week Twiggs Money Flow indicates buying pressure.
* Target calculation: 5700 + ( 5700 – 5200 ) = 6200
The Dow Jones Euro Stoxx 50 also shows signs of recovery, heading for a test of the descending trendline and resistance at 2500. Breakout would signal a primary advance to 2900* and the end of the bear market. Momentum is rising but remains a long way below the zero line. Respect of 2500 would be a bear signal not only for the euro-zone, but for the global economy.
* Target calculation: 2500 + ( 2500 – 2100 ) = 2900
A monthly chart of Dow Jones Europe shows the index testing primary support at 210. A peak below zero on 63-day Twiggs Momentum indicates a strong primary down-trend. Failure of support would offer a medium-term target of 160*.
* Target calculation: 210 – ( 260 – 210 ) = 160
Italy’s MIB Index is headed for another test of primary support at 13000 on the weekly chart. Respect of the descending trendline suggests another primary decline. Reversal of 13-week Twiggs Money Flow below zero would also warn of rising selling pressure. And breach of primary support would signal a decline to 9000*.
* Target calculation: 13 – ( 17 – 13 ) = 9
The UK’s FTSE 100 index is also headed for a test of primary support at 4800. 63-Day Twiggs Momentum peaking below zero indicates a strong primary down-trend. Failure of primary support would offer a target of 4000*.
* Target calculation: 4800 – ( 5600 – 4800 ) = 4000
Italy’s MIB index is testing medium-term support at 15000 on the weekly chart. Failure — and respect of the descending trendline — would warn of another decline, with a target of 9000*. Breach of primary support at 13000 would confirm.
* Target calculation: 13 − ( 17 − 13 ) = 9
France’s CAC-40 index is similarly testing support at 3000. Breach of support would warn of another decline — as would reversal of 13-week Twiggs Money Flow below zero. Failure of primary support at 2700 would offer a target of 2000*.
* Target calculation: 2700 – ( 3400 − 2700 ) = 2000
The DAX is also testing medium-term support. Reversal below 5600 would warn of another test of primary support at 5000. Failure of 5000 would offer a target of 3600*.
* Target calculation: 5000 – ( 6400 − 5000 ) = 3600
Even the FTSE 100 index is testing medium-term support. 13-Week Twiggs Money Flow looks stronger than its European neighbors, but reversal below zero would warn of a further decline. Breach of medium-term support at 5350 would warn of a test of primary support at 4800.
* Target calculation: 4800 – ( 5600 − 4800 ) = 4000
Markets have been fed a steady diet of press releases out of Europe for the past few weeks but very little substance. This is a dangerous strategy as hopes are raised and reaction to any form of disappointment will be strong. No matter how it is dressed up, we are likely to witness a substantial default of Southern European borrowers, requiring recapitalization of French and Northern European banks. With public debt close to danger levels in many of these countries, there are no ready funds available for a bailout. Quantitative easing by the ECB has been touted as a possible solution, but aversion to this is so strong — particularly in Germany — that it would be political suicide for Angela Merkel to support this. So Europe stumbles onwards, searching for a disguised form of QE solution that is palatable to German voters.
Germany’s DAX is testing support at 5600. Breach would test 5000, while respect would signal a primary advance to 7200*. 13-week Twiggs Money Flow is relatively weak and reversal below zero would warn of renewed selling pressure.
* Target calculation: 6400 + ( 6400 – 5600 ) = 7200 OR 5700 + ( 5700 – 5000 ) = 6400
France’s CAC-40 index is testing medium-term support at 3000. Failure would test 2700, while respect (signaled by breakout above 3350) would signal a further advance. 13-week Twiggs Money Flow remains weak and reversal below zero would also warn of renewed selling pressure.
* Target calculation: 2700 – ( 3300 – 2700 ) = 2100
Italy’s FTSE MIB index is similarly testing support at 15000. Again, 13-week Twiggs Money Flow is weak and reversal below zero would warn of renewed selling pressure.
* Target calculation: 13 – ( 17 – 13 ) = 9
The FTSE 100 index is testing support at 5350. Failure would test primary support at 4800, while respect (signaled by breakout above 5700) would confirm a primary advance to 6100*. Rising 13-week Twiggs Money Flow favors an advance.
* Target calculation: 5400 + ( 5400 – 4800 ) = 6000
