Tag: Twiggs Money Flow

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Europe approaches zero hour

As I mentioned in an earlier post, 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. 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. A down-grade would raise their cost of funding and place their own budgets under pressure. If they are down-graded then the kids are home alone — there will be no adults left in the room.

The FTSE 100 displays a decent bullish divergence on 13-week Twiggs Money Flow, warning of strong buying pressure. Breakout above 5600 would offer a target of 6000*, but expect retracement to test the new support level. Respect would confirm the advance.

FTSE 100 Index

* Target calculation: 5500 + ( 5500 – 5000 ) = 6000

Germany’s DAX is headed for 6500, but a weaker recovery on Twiggs Money Flow suggests this is a bear market rally. Respect of 6500 would indicate another test of 5000.

DAX Index

The French CAC-40 index displays secondary buying pressure. Respect of 3700 would signal another test of primary support at 2800.

CAC-40 Index

Madrid rallied to test resistance at 900. Again buying pressure on 13-week Twiggs Money Flow appears secondary. Respect of 900 would signal a decline to the 2009 low of 700. Breakout, however, would signal a rally to test the descending trendline.

Madrid General Index

Italy’s MIB index is testing the descending trendline near 16500. Respect would test the 2009 low at 12500. Breakout would offer a target of 19000*.

FTSE MIB Index

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

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2008 Deja Vu

Early May 2008, the S&P 500 index recovered above resistance at the former primary support level of 1400 on its second attempt. 13-Week Twiggs Money Flow broke back above zero, indicating secondary buying pressure. Breakout was followed by two pull-backs in May. The first made a false break below the new support level; the second followed through, commencing a 50% decline to 700.

S&P 500 Index Weekly Chart - 2008

We are now at a similar watershed. Expect retracement in the week ahead to test the new support level at 1250. Respect of support would strengthen the signal, but beware of any penetration. Follow-through above 1300 would signal that the (immediate) danger is over. Until then, consider this a bear market.

S&P 500 Index Weekly - 2011

* Target calculation: 1250 + ( 1250 – 1100 ) = 1400

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Dow not yet out of the woods

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*.

Dow Jones Industrial Average

* 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.

10-Year Treasury Yield

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.

S&P 500 Index

* 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*.

Nasdaq 100 Index

* Target calculation: 2400 + ( 2400 – 2200 ) = 2600

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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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Japan & South Korea buying pressure

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.

Nikkei 225 Index

* 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.

Seoul Composite Index

* Target calculation: 1900 + ( 1900 – 1650 ) = 2150

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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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India & Singapore

The BSE Sensex is testing resistance at 17000. Breakout would signal a bear market rally to test the descending trendline. Rising 13-week Twiggs Money Flow indicates medium-term buying support.

SENSEX

* Target calculation: 16 – ( 17.5 – 16 ) = 14.5

The Singapore Straits Times Index also reflects a bear market rally. Respect of resistance at 2900 would warn of another down-swing — as would a 63-day Twiggs Momentum peak below the zero line.

Straits Times Index

* Target calculation: 2500 – ( 2900 – 2500 ) = 2100

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TSX 60 rally

Canada’s TSX 60 index is headed for a test of the descending trendline and resistance at 730 — another bear market rally.  13-Week Twiggs Money Flow oscillating around the zero line indicates hesitancy. Respect of resistance would indicate another test of support at 650*.

TSX 60 Index

* Target calculation: 650 – ( 730 – 650 ) = 570

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Nasdaq hints at recovery

Dow Jones Industrial Average is testing resistance at 11700. Breakout would warn of a primary advance, but the market is prone to false signals because of excessive volatility and it would be prudent to wait for confirmation. Respect of 11700, or a false break above 11700, would re-visit support at 10600.

Dow Jones Industrial Average

* Target calculation: 11000 – ( 12000 – 11000 ) = 10000

The S&P 500 is similarly testing resistance at 1230 on the weekly chart. Breakout would signal an advance to 1350, while respect would indicate another test of 1100. Breakout above the declining trendline on 13-week Twiggs Money Flow suggests nothing more than a secondary reaction (bear market rally). See the monthly chart.

S&P 500 Index

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

The Nasdaq 100 index, however, broke through 2350 and is headed for its July high. Bullish divergence on 13-week Twiggs Money Flow indicates reversal to an up-trend. Breakout above 2440 would confirm, offering a target of 2800*.

Nasdaq 100 Index

* Target calculation: 2400 + ( 2400 – 2000 ) = 2800

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New Zealand

The NZX 50 Index broke through resistance at 3350 to signal an advance to 3450, with a long-term target of the 2011 high. 13-Week Twiggs Money Flow above zero indicates buying pressure.

NZX 50 Index

* Target calculation: 3350 + ( 3350 – 3100 ) = 3600

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