Tag: trendline

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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

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Dollar declines, gold and commodities rise

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.

Dollar Index

* 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.

Spot Gold

* 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.

Amex Gold Bugs Index

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*.

IPE Brent Afternoon Markers

* 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.

CRB Commodities Index

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Aussie Dollar down-trend

Another monthly chart — this time of the Aussie dollar against the greenback. The decline of the last 3 months found support at $0.94 before rallying to a high of $1.04. Breach of the rising trendline indicates that the primary up-trend has ended; confirmed by bearish divergence on 63-day Twiggs Momentum and reversal below zero. Failure of support at $0.94 would signal a decline to $0.84.

AUDUSD

* Target calculation: 0.94 – ( 1.04 – 0.94 ) = 0.84

The daily chart shows consolidation between $1.01 and $1.04 over the last week. Failure of support at $1.01 is likely and would warn of a decline to $0.94. Breakout above $1.04 and the descending trendline is unlikely, but would indicate a rally to the July high of $1.10.

AUDUSD

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Dollar Index: The big picture

When markets are volatile it often pays to take a step back and look at the big picture. A monthly chart shows the Dollar Index ranging between 70 and 90 since 2003, with the 80 level alternating as mid-range support/resistance. The index recently pulled back from resistance at 80 and will now either re-group for another attempt or medium-term support will give way, signaling a test of long-term support.

US Dollar Index Monthly

Zooming in to the daily chart shows narrow consolidation above medium-term support at 76.50. Breakout above 77.60 and the descending trendline would signal another test of 80, while failure of support at 76 would mean a decline to 73.50*.

US Dollar Index

* Target calculation: 76.5 – ( 79.5 – 76.5 ) = 73.5

In the long term, breach of 73.50 would test 70, while breakout above 80 would signal an advance to 90. If support at 70 fails, gold will rocket through $2000/ounce, but that is only likely to occur if the Fed rolls out QE3.

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China & HongKong retreat

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.

Dow Jones Shanghai Index

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*.

Hang Seng Index

* Target calculation: 16 – ( 19 – 16 ) = 13

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ASX 200 hits ceiling

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.

ASX 200 Index

* Target calculation: 4000 – ( 4500 – 4000 ) = 3500

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South Africa & Brazil

The JSE Overall Index is testing both resistance and the descending trendline at 31500. Breakout would test the 2008/2011 high of 33000, but respect would warn of a test of 30000. Reversal below 30000 would signal a primary decline to 26000. 13-Week Twiggs Money Flow indicates medium-term buying support but long-term selling pressure.

JSE Overall Index

* Target calculation: 28500 – ( 31500 – 28500 ) = 25500

Brazil’s Bovespa index also shows medium-term buying support but long-term selling pressure. Respect of resistance at 58000 would indicate another test of primary support at 50000. Breakout above 58000 is unlikely, given global market conditions and falling iron ore prices, but would signal reversal to a primary up-trend.

Bovespa Index

* Target calculation: 50 – ( 58 – 50 ) = 42

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S&P 500 monthly chart

A monthly chart of the S&P 500 index gives a clearer picture. Although the Nasdaq is advancing strongly, the S&P 500 is stuck below its long-term trendline. Note the similarity to March-May 2008 rally. Breakout above 1250 would be a bullish sign, similar to the May 2008 breakout above 1400, but retreat below the former resistance level (1250) would give a strong bear warning. Likewise, a 63-day Twiggs Momentum peak below the zero line would signal a strong primary down-trend.

S&P 500 Index Monthly

* Target calculation: 1100 – ( 1250 – 1100 ) = 950

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South African Rand: weakness continues

The greenback found support at its secondary rising trendline, with a long tail at R7.70/dollar indicating buying pressure. Respect of the secondary trendline would indicate an advance to $9.00*, while failure would test the primary trendline at R7.35.

USDZAR

* Target calculation: 8.40 + ( 8.40 – 7.80 ) = 9.00

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