April 8, 2006
The S&P 500 is consolidating between 1295 and 1310, with resistance evident from strong volumes at  and . A fall below support would signal a test of 1270, while a close above 1310 would signal resumption of the primary up-trend.
The first quarter has ended and we need to remain alert for a secondary correction -- at least for the next week.
Long Term: The index is in a slow up-trend, with primary support at 1180.
Medium Term: A close below 10950 would warn of a secondary correction, testing support at 10000. Twiggs Money Flow (21-day) is bearish, having completed a peak below zero at [a].
Long Term: If the index respects support at 10950, the primary up-trend is confirmed.
The 10-Year treasury yield is rallying strongly on the back of low unemployment figures which have increased expectations of future rates hikes.
Medium Term: The Fed is expected to continue hiking the short-term funds rate, in turn causing long-term yields to rise. The buoyant property market should not be significantly harmed by the historically low long-term yields, while banks will benefit from wider margins caused by the steeper yield curve.
Long Term: The yield differential (10-year T-notes minus 13-week T-bills) is trending upwards, easing the credit squeeze and, if this continues, allowing the Fed more leeway to increase interest rates.
Spot gold closed at $587.80 after testing resistance at $600 earlier in the week.
Medium Term: A narrow consolidation below $600 would be a bullish sign, while a fall below $575 would signal a secondary correction.
The Big Picture: Gold has resumed its primary up-trend.
Light Crude closed at $67.39 a barrel and appears headed for a test of resistance at $70. A rise above $70 would be a strong bull signal for oil (and gold) prices, while a drop below $55 would signal a primary trend reversal.
The dollar is consolidating in a narrowing range against major trading partners.
EUR/USD: The euro is in an intermediate up-trend and threatens a primary trend reversal after the recent bullish breakout from a large triangle. A rise above the high of [D] would signal that the euro has started a primary up-trend against the dollar, while a fall below [E] would mean continuation of the down-trend.
The FTSE 100 is encountering stubborn resistance at 6050, with increased volume at  and long shadows at  and .
Medium Term: Twiggs Money Flow (21-day) is declining, showing short-term distribution. A close below support at 5930 (also the lower border of the linear regression channel) would warn of a secondary correction, while a close above 6050 would signal continuation of the up-trend.
The Big Picture: The FTSE 100 is in a strong primary up-trend.
The Nikkei 225 is rallying strongly, up almost 1000 points from the breakout.
Medium Term: Twiggs Money Flow (21-day) is rising steadily, signaling accumulation. The target for the breakout, 17900 (16700 - (16700 - 15500)), is likely to be reached sooner rather than later.
The Big Picture: The index has resumed a strong primary up-trend after establishing a base above 15000.
Manage Your Market Risk
Colin Twiggs' weekly review of the global economy will help you identify market risk and improve your timing.
Join our free Trading Diary mailing list with over 140,000 subscribers.
The market is entering a state of euphoria with the All Ordinaries making new highs. Retracements are exceedingly short with resistance at  and  quickly overcome by buying pressure.
whereupon it is ripe for a bust.
~ George Soros