China Builds Up Steam

By Colin Twiggs
July 7, 2007 2:30 a.m. EST (4:30 p.m. AEST)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment advice. Full terms and conditions can be found at Terms of Use.

USA: Dow, Nasdaq and S&P500

Most markets took a breather this week and the Dow Jones Industrial Average was no exception, consolidating at the upper border of its 3-year trend channel. Twiggs Money Flow recovered sharply, signaling short-term accumulation.

dow jones industrial average medium-term chart

Long Term: The primary trend is up, with support at 12000 and 12800.

Short Term: Breakout below 13250 would warn of a secondary correction, while a rise above 13700 would signal another primary advance - and possible acceleration into a blow-off. Low volumes are attributable to the Independence Day holiday.

dow jones industrial average short term chart

The Dow Jones Transportation Average respected support at 5000 and is now rallying to test 5300. Breakout above this level would be a bull signal. Twiggs Money Flow recovered sharply to signal short-term accumulation. Reversal below 5000 is not expected and would signal trend weakness.

Fedex and UPS both appear bullish, echoing the index.

dow jones transport average

The Nasdaq Composite displays a failed down-swing in the ascending broadening wedge pattern: signaling that an upward breakout is likely. Twiggs Money Flow is edging lower, but watch for a break of the downward trendline.

Long Term: The primary trend remains upwards, with support at 2340 and 2500 (from 2525).

nasdaq composite

The S&P 500 continues with similar consolidation to the Dow. A rise above 1540 would signal another primary advance, while breakout below 1490 would warn of a secondary correction. Twiggs Money Flow has recovered above zero, signaling short-term accumulation.

Long Term: The primary trend remains up, with support levels at 1460 and 1375.

standard and poors 500

LSE: United Kingdom

The FTSE 100 is rallying towards the upper border of an ascending broadening wedge. A swing that fails to reach the upper border would be bearish, while an upward breakout would signal another primary advance - towards the all-time high of 6900/7000. Twiggs Money Flow threatens to break above the downward trendline, which would be a bullish sign.

Long Term: The primary up-trend continues, with support at 6000 and 6450.

ftse 100

Japan: Nikkei

The Nikkei 225 shows short-term distribution on Twiggs Money Flow, but narrow consolidation below resistance at 18215 would be a bullish sign. The target for an upward breakout is 19800 (18200+[18200-16600]). A fall below the trend channel is not expected, but would signal another test of primary support at 16600.

Long Term: The primary trend remains up.

nikkei 225

China: Hang Seng

China is going gangbusters, with the Hang Seng index powering through resistance at 22000 and now headed for a test of 23000. Twiggs Money Flow is close to completing a bullish trough above zero, signaling strong accumulation. Reversal below 21600 is not expected and would signal a test of the new support level at 21000.

hang seng index

ASX: Australia

The All Ordinaries consolidates at the upper border of the trend channel. Downward breakout would warn of a secondary correction, while upward breakout would signal another advance - and an accelerating up-trend, possibly leading to a blow-off. Twiggs Money Flow (21-day) continues to display a long-term bearish divergence, though a break of the downward trendline would end this.

Long Term: The primary trend remains up, with support at 5650 and 6000.

all ords medium-term

Short Term: The broadening top formation lost its shape and now resembles a regular rectangle, with support at 6200 and resistance at 6420. Look for a failed swing or breakout to indicate future direction. Higher volumes on Monday and Tuesday signal selling into the rally, but this has faded.

all ords short-term

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.

~ Sun Tzu

To understand my approach, please read Technical Analysis & Predictions in About The Trading Diary.

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