The Dollar Index is headed for a test of resistance at 80. The brief dip below zero on 63-day Twiggs Momentum suggests a solid primary up-trend. Breakout above 80 would offer a target of 85*.
* Target calculation: 80 + ( 80 – 75 ) = 85
Europe warns of another decline
Dow Jones Europe Index is headed for a test of the band of support between 200 and 205. A 63-day Twiggs Momentum peak below zero would warn of a strong primary down-trend. Failure of primary support would offer a target of 150*.
* Target calculation: 205 – ( 260 – 205 ) = 150
Bovespa disappoints
Brazil’s Bovespa index disappointed after promising a breakout above 60000. The index failed to break through resistance, instead falling through support at 58000 to warn of another test of 48000. Rising 63-day Twiggs Momentum and Twiggs Money Flow, however, continue to indicate that the index is forming a bottom.
Singapore Straits Times Index & Indian Sensex
The Straits Times Index broke through 2700, warning of another primary down-swing. The decline of 63-day Twiggs Momentum below zero indicates a primary down-trend. Target for the initial down-swing is 2100*.
* Target calculation: 2500 – ( 2900 – 2500 ) = 2100
India’s BSE Sensex Index broke the band of primary support at 15800 to 16000, warning of a decline to 14000*. Repeated peaks below zero on 63-day Twiggs Momentum indicate a strong primary down-trend.
* Target calculation: 16 – ( 18 – 16 ) = 14
S&P 500 continues to mimic early 2008
Looking at the S&P 500 weekly chart, it continues to follow the same pattern as in early 2008. There is a similar false recovery above medium-term resistance at 1200 (compared to 1400 in 2008) followed by reversal below the new support level. Also, a similar 63-day Twiggs Momentum peak below the zero line warns of a strong primary down-trend.
* Target calculation: 1100 – ( 1300 – 1100 ) = 900
Japan & South Korea
DJ South Korea Index is testing medium-term support at 390 Monday. Failure would signal a test of the primary level at 350. 63-Day Twiggs Momentum holding below zero suggests continuation of the primary down-trend.
* Target calculation: 350 – ( 420 − 350 ) = 280
The weekly chart of Japan’s Nikkei 225 shows respect of resistance at 9000. Failure of primary support at 8400 would offer a target of 7800*. 13-Week Twiggs Money Flow below zero warns of rising selling pressure.
* Target calculation: 8400 – ( 9000 − 8400 ) = 7800
ASX 200 threatens support
The ASX 200 index is testing medium-term support at 4150. Bearish divergence on 21-day Twiggs Money Flow warns of selling pressure. Failure of support would test the primary level at 3850.
* Target calculation: 3900 – ( 4300 − 3900 ) = 3500
A weekly chart of the All Ords shows a primary down-trend. Failure of support at 4200 would test 3900. Completion of a peak below zero on 63-day Twiggs Momentum would suggest another decline.
* Target calculation: 4000 – ( 4500 − 4000 ) = 3500
India & Singapore
The BSE Sensex is headed for a test of primary support at 16000/15800. Reversal of 13-week Twiggs Money Flow below zero warns of further selling pressure. Failure of primary support would offer a target of 14000*.
* Target calculation: 16 – ( 18 − 16 ) = 14
Westpac’s monthly Fearful Symmetry chronicle on the Indian economy makes an interesting point:
“The reality is that while India is an internally focused and investment-led economy — thus producing a low-beta response to swings in global growth — the financing of investment, at the margin, must come from abroad, so it is highly vulnerable to downswings that incorporate or are driven by negative financial shocks. Put simply, in India a slowdown in the global economy is felt principally through the hardening of its external financing constraint. That is in contrast to the majority of its East Asian (surplus) neighbours, where global shocks are primarily transmitted via an export-led deceleration in aggregate demand, or its non-China BRIC peers, where swings in commodity prices are the key variable.”
Given that almost half of foreign bank funding is sourced from Europe, expect a significant tightening of external finance and hence domestic investment.
Singapore’s Straits Times Index is headed for medium-term support at 2700. Failure of 2700 would indicate a test of primary support at 2500. Reversal of 63-day Twiggs Momentum deep below zero warns of a strong primary down-trend.
* Target calculation: 2500 – ( 2900 − 2500 ) = 2100
TSX 60 warns of another decline
Canada’s TSX 60 index broke medium-term support — at 680 on the weekly chart below. Respect of the descending trendline suggests another decline. Failure of primary support at 650 would confirm. 63-Day Twiggs Momentum deep below zero also indicates a strong primary down-trend. A conservative target for the decline would be 580*.
* Target calculation: 650 − ( 720 − 650 ) = 580
Nasdaq, Dow warn of correction
The NASDAQ 100 index broke support at 2300 on the weekly chart, warning of a correction to test primary support at 2000. A large bearish divergence on 13-week Twiggs Money Flow now warns of a primary down-trend; reversal below zero would strengthen the signal. Failure of support at 2000 would confirm.
* Target calculation: 2000 – ( 2400 – 2000 ) = 1600
Dow Jones Industrial Average broke out below its recent pennant, warning of another test of primary support at 10600. Breach of support at 11600 would confirm the signal. Reversal of 63-day Twiggs Momentum below its recent lows (-4%) would complete an “iceberg” — with the indicator just peaking above the zero line — indicating a primary down-trend.
* Target calculation: 10600 – ( 12200 – 10600 ) = 9000