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March 18, 2012

Europe on the rise

Dow Jones Europe Index broke through 260 to signal a primary up-trend. Respect of the zero line by 13-week Twiggs Money Flow confirms strong buying pressure. Target for the advance is 310*.

Dow Jones Europe Index

* Target calculation: 260 + ( 260 – 210 ) = 310

Italy’s MIB Index reflects a similar pattern, signaling an advance to 21000*.

FTSE MIB Index

* Target calculation: 17000 + ( 17000 – 13000 ) = 21000

The FTSE 100 is already in a primary up-trend. A trough high above zero on 13-week Twiggs Money Flow indicates strong buying pressure and a likely breakout above resistance at 6100.

FTSE 100 Index

* Target calculation: 5700 + ( 5700 – 5000 ) = 6400

The DAX shows similar strong buying pressure and breakout above the 2011 high of 7500 is likely.

DAX Index

* Target calculation: 6400 + ( 6400 – 5400 ) = 7400

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.

Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.

Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.

January 16, 2012

European markets

The FTSE 100 is testing resistance at 5750 but bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Respect of resistance would suggest another test of primary support at 5050. Upward breakout is less likely, but would indicate an advance to 6300*.

FTSE 100 Index

* Target calculation: 5700 + ( 5700 – 5100 ) = 6300

The DAX is testing resistance at 6400. Breakout would indicate an advance to 7400*, but reversal of below the rising trendline — or 13-week Twiggs Money Flow below zero — would warn of another test of primary support at 5000.

DAX Index

* Target calculation: 6400 + ( 6400 – 5400 ) = 7400

Italy’s MIB Index is more hesitant than the DAX. Breakout above 17000 would signal a primary advance, but failure of support at 13000 would indicate a decline to 9000*. Reversal of 13-week Twiggs Money Flow below zero would warn of increased selling pressure.

FTSE MIB Index

* Target calculation: 13 – ( 17 – 13 ) = 9

November 28, 2011

Europe weakens

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*.

Dow Jones Europe Index

* 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*.

Italian MIB Index

* 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*.

FTSE 100 Index

* Target calculation: 4800 – ( 5600 – 4800 ) = 4000

November 20, 2011

Europe: breach of medium-term support would signal decline

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.

FTSE MIB Index

* 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*.

CAC-40 Index

* 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*.

DAX Index

* 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.

FTSE 100 Index

* Target calculation: 4800 – ( 5600 − 4800 ) = 4000

November 14, 2011

Europe consolidates

The FTSE Italian MIB index found support at 15000. Expect an upsurge in response to news that Mario Monti has been asked to form a new government. Breakout above 17000 would signal a rally to 19000. Rising 13-week Twiggs Money Flow indicates consistent buying pressure over the past few weeks.

FTSE MIB Index

* Target calculation: 17 + ( 17 – 15 ) = 19

France’s CAC-40 index similarly found support at 3000. Recovery above 3400 would offer a target of 3800, but 63-day Twiggs Momentum, a long way below zero, indicates a primary down-trend.

CAC-40 Index

* Target calculation: 2800 – ( 3400 – 2800 ) = 2200 AND 3400 + ( 3400 – 3000 ) = 3800

The German DAX found support at 5700. Recovery above 6400 would offer a target of 7100, while failure of support would warn of another test of primary support at 5000.

DAX Index

* Target calculation: 6400 + ( 6400 – 5700 ) = 7100

The FTSE 100 is also consolidating above medium-term support — this time at 5350. 13-Week Twiggs Money Flow continues to signal strong buying pressure. Breakout above 5700 would re-test the 2011 highs at 6100. Failure of support is unlikely, but would warn of another test of primary support at 4800.

FTSE 100 Index

* Target calculation: 5700 + ( 5700 – 5300 ) = 6100

We need to remember, however, that this is still a bear market. We have seen one or two favorable news headlines but very little substance. And the European economy faces strong headwinds over the next few years.

November 7, 2011

Europe stumbles onwards

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.

DAX Index

* 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.

CAC-40 Index

* 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.

FTSE Italian MIB Index

* 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.

FTSE 100 Index

* Target calculation: 5400 + ( 5400 – 4800 ) = 6000

October 31, 2011

Europe rebounds

The FTSE 100 index is headed for a test of its 2011 high at 6000/6100. Rising 13-week Twiggs Money Flow signals strong buying pressure. Expect retracement to test support at 5400. Respect would confirm a primary up-trend; failure would re-test support at 4800.

FTSE 100 Index

* Target calculation: 5400 + ( 5400 – 4800 ) = 6000

Germany’s DAX is testing resistance at 6500. Retracement would test support at 5600. A 63-day Twiggs Momentum peak that respects the zero line would warn that the bear market will continue.

DAX Index

* Target calculation: 5700 + ( 5700 – 5000 ) = 6400

Italy is the latest canary in the coal mine. The FTSE MIB index rallied to test its secondary descending trendline at 17000. Respect would warn of another test of primary support at 13000, while breakout would offer a target of 19000*. The primary trend remains downward despite 13-week Twiggs Money Flow having crossed above zero.

FTSE Italian MIB Index

* Target calculation: 17 + ( 17 – 15 ) = 19