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Dow Averages Signal Bull Market

By Colin Twiggs
July 23, 2009 10:00 p.m. ET (12:00 p.m. AET)

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



Five major indexes have all commenced a primary up-trend, signaling the start of a bull market. A word of caution: the recovery is exceedingly fragile. I will only feel comfortable with the bull signal when the Fed and other central banks start raising interest rates. And that is unlikely to occur for some time — without risking a second contraction. Keep your guard up — and your stops tight.

Dow Jones Industrial Average

The Dow broke through 9000, exceeding its January high to confirm a primary advance with a target of 10000*. The spike in Twiggs Money Flow (21-Day) indicates abnormal buying pressure.

Dow Jones Industrial Average

* Target calculation: 9000 + ( 9000 - 8000 ) = 10000

Transport

The Dow Transport Average broke through resistance at 3400 after a lengthy consolidation between 3000 and 3400 (referred to as a line in Dow Theory). Expect a primary advance with a target of 3800*.

* Target calculation: 3400 + ( 3400 - 3000 ) = 3800

Dow Jones Transportation Average

Bellwether transport stock Fedex displays a similar signal, but UPS lags behind after disappointing earnings. Declining UPS package volumes and flat Fedex shipments raise the risk of a "false spring" (Bloomberg).

S&P 500

The S&P 500 broke through resistance at 950 to signal a primary advance. Penetration of 1000 would offer a target of 1300*.

Standard & Poors 500

* Target calculation: 1000 + ( 1000 - 700 ) = 1300

UK: FTSE 100

An FTSE 100 broke through 4500 to signal a primary advance with a target of 5000*.

FTSE 100

* Target calculation: 4500 + ( 4500 - 4000 ) = 5000

Germany: DAX

The DAX broke out above 5150, signaling a primary advance with a target of 5800*.

DAX

* Target calculation: 5150 + ( 5150 - 4500 ) = 5800



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Take time to deliberate, but when the time for action has arrived, stop thinking and go in.

~ Napoleon Bonaparte (1769 - 1821)



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