The Aussie Dollar is headed for a test of support at $1.01/$1.00. Recovery above $1.08 would complete an inverted head and shoulders, but there is still some way to go. Breach of support would warn of another primary decline. In the long-term, failure of support at $0.94 would offer a target of $0.80, while breakout above $1.08 would indicate a target of $1.22.
* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80
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.
* 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.
* 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.
* Target calculation: 17 + ( 17 – 15 ) = 19
Dow Jones Industrial Average broke through resistance at 12000. On the monthly chart we can see the index is headed for a test of its 2011 high at 13000. Breakout would signal an advance to 15000*. Bearish divergence on 63-Day Twiggs Momentum, however, continues to warn of a primary down-trend; and respect of 13000 would indicate another test of primary support at 11000.
* Target calculation: 13 + ( 13 – 11 ) = 15
Looking at the weekly chart, retracement to test the new support level at 12000 is likely. Respect would confirm the primary advance, while failure would signal another test of primary support at 10500/11000. A 13-week Twiggs Money Flow trough above the zero line would indicate strong buying pressure.
* Target calculation: 12 + ( 12 – 11 ) = 13
The Dollar Index retraced to test the new support level at 76.00. Respect would confirm the primary up-trend, while failure would signal trend weakness. A trough above zero on 63-day Twiggs Momentum would strengthen the bull signal.
* Target calculation: 80 + ( 80 – 76 ) = 84
Gold broke through $1700/ounce in response to dollar weakness. Expect retracement to test the new support level. Respect would signal a primary advance to 1800*. The long-term (primary) trend remains upward.
* Target calculation: 1700 + ( 1700 – 1600 ) = 1800
The Amex Gold Bugs Index is testing medium-term resistance at 560. Breakout would test the upper border of broadening wedge pattern — around 650 — and support a similar advance for the spot metal.
Brent crude is also stronger, testing its upper trend channel at $110/barrel. Respect would indicate another test of the lower channel — and the ascending long-term trendline — while breakout would signal an advance to $120*.
* Target calculation: 110 + ( 110 – 100 ) = 120
The broader CRB Commodities Index is also headed for its upper trend channel. The ascending primary trendline remains intact but 63-day Twiggs Momentum respect of the zero line (from below) warns of a strong down-trend.
The TSX 60 index also shows a small bullish divergence on 13-week Twiggs Money Flow, suggesting secondary buying pressure. Expect a rally to the descending trendline at 720. Respect would signal another test of primary support at 640. Breakout remains unlikely, but would offer a target of 800*.
* Target calculation: 720 + ( 720 – 640 ) = 800
Dow Jones Industrial Average followed through on its breakout above the 10600-11700 trading range but expect some resistance at 12000. The index looks set for a decent rally after narrow consolidation below resistance at 11700. Target for the breakout is 12600*.
* Target calculation: 11600 + ( 11600 – 10600 ) = 12600
Yields on 10-year Treasury notes also rallied as funds flowed back into stocks, but we are not yet out of the woods.
There is bound to be a relief rally when EU leaders announce details of their rescue package — followed by a pull-back when traders figure out the costs involved. The danger is that Germany and France do an “Ireland” and rescue the banks but put themselves at risk. Both have public debt to GDP ratios close to 80 percent and it would not take much to push them into the danger zone. If they are down-graded then the kids are home alone — there will be no adults left in the room. A down-grade would raise their cost of funding and place their own budgets under pressure.
The S&P 500 is also testing resistance at 1260; breakout would confirm a Dow signal. 13-Week Twiggs Money Flow is rising but no bullish divergence means this could be secondary (medium-term) buying pressure.
* Target calculation: 1120 + ( 1220 – 1120 ) = 1320
Nasdaq 100 index displays an ascending broadening wedge as it approaches resistance at 2400. The ascending wedge is a bearish pattern: Bulkowski maintains that it breaks out downward 73% of the time. Target would be the base of the pattern at 2000. Bullish divergence on 13-Week Twiggs Money Flow, however, indicates strong buying pressure. Breakout above 2450 would signal a primary advance to 2600*.
* Target calculation: 2400 + ( 2400 – 2200 ) = 2600
Brent crude is edging lower in a wide trend channel. Respect of the long-term ascending trendline (on the weekly chart) would suggest upward breakout from the channel — and a target of $150/barrel*. Recovery of 63-day Twiggs Momentum above zero would strengthen the signal.
* Target calculation: 125 + ( 125 – 100 ) = 150
The CRB Commodities index is similarly testing its long-term rising trendline at 300. Penetration of the secondary descending trendline would indicate another primary advance on the monthly chart. The 63-day Twiggs Momentum peak below zero [R], however, warns of a primary down-trend. Failure of support at 290 would strengthen the signal.
* Target calculation: 370 +( 370 – 290 ) = 450
Dow Jones Shanghai Index fell sharply on Tuesday, signaling a test of the lower trend channel. Declining 63-Day Twiggs Momentum below zero indicates a strong primary down-trend.
The Hang Seng Index retreated to 18000 Tuesday. Respect of both resistance at 19000 and the descending trendline warn of another test of primary support at 16000. Declining 13-week Twiggs Money Flow indicates long-term selling pressure. Failure of primary support would offer a target of 13000*.
* Target calculation: 16 – ( 19 – 16 ) = 13
The ASX 200 index encountered both the declining trendline (from April 2011) and resistance at 4300. Low volume indicates a lack of enthusiasm from buyers. The strong red candle warns of another test of 3850; follow-through below Tuesday’s low would confirm.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
Japan’s Nikkei 225 Index retreated Tuesday, but has completed a small double bottom, indicating a test of 9000. Bullish divergence on 13-week Twiggs Money Flow flags strong buying pressure. Breakout above 9000 would indicate an advance to 10000.
* Target calculation: 9000 + ( 9000 – 8400 ) = 9600
The Seoul Composite Index shows a weaker divergence on 13-week Twiggs Money Flow. Breakout above 1900 would offer a target of 2150, while respect would re-test primary support at 1650.
* Target calculation: 1900 + ( 1900 – 1650 ) = 2150
