Dow Averages Signal Bull Market
By Colin Twiggs
July 23, 2009 10:00 p.m. ET (12:00 p.m. AET)
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.
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.
* Target calculation: 9000 + ( 9000 - 8000 ) = 10000
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
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).
The S&P 500 broke through resistance at 950 to signal a primary advance. Penetration of 1000 would offer a target of 1300*.
* Target calculation: 1000 + ( 1000 - 700 ) = 1300
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An FTSE 100 broke through 4500 to signal a primary advance with a target of 5000*.
* Target calculation: 4500 + ( 4500 - 4000 ) = 5000
The DAX broke out above 5150, signaling a primary advance with a target of 5800*.
* Target calculation: 5150 + ( 5150 - 4500 ) = 5800
Take time to deliberate, but when the time for action has arrived, stop thinking and go in.
~ Napoleon Bonaparte (1769 - 1821)