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Dow Rallies While Commodities Fall

By Colin Twiggs
September 7, 6:30 a.m. ET (8:30 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.


Commodities

The CRB Commodities Index is undergoing a secondary correction as a result of falling demand from China. Failure of short-term support at 253 confirms the signal. Narrow range for the last 3 days indicates hesitancy as the Shanghai market rallies, but continuation of the correction remains more likely. Breakout above the declining trendline, however, would warn that the down-trend is weakening.

CRB Commodities Index

USA

Dow Jones Industrial Average

The Dow is headed for a second test of resistance at 9600. Breakout would signal an advance to 10000*. Reversal below 9100 is unlikely, but would warn of a secondary correction. Twiggs Money Flow (21-day) fall below 0.1 would warn of further selling pressure, increasing the probability of a secondary correction.

Dow Jones Industrial Average

* Target calculation: 9600 + ( 9600 - 9250 ) = 9900

S&P 500

The S&P 500 is consolidating around the key 1000 level. Breakout above 1030 would signal continuation of the primary advance, to 1120*, while reversal below 980 would warn of a secondary correction. Rising Twiggs Money Flow (13-week) indicates long-term buying pressure.

Standard & Poors 500 chart

* Target calculation: 1000 + ( 1000 - 880 ) = 1120

Transport

The Dow Transport Average and Fedex continue in a primary up-trend, while UPS consolidates in a narrow [orange] band. Upward UPS breakout would signal a primary advance, completing the positive outlook for the economy, while reversal would suggest caution.

Dow Jones Transportation Average

Technology

The Nasdaq 100 displays a broadening top — a bullish continuation pattern. Respect of support at 1600 (a failed/partial swing) suggests an upward breakout and advance to 1800*. Twiggs Money Flow (21-day) breakout above the declining trendline would strengthen the signal.

Nasdaq 100

* Target calculation: 1600 + ( 1600 - 1400 ) = 1800

Canada: TSX

The TSX Composite is again testing resistance at 11000 after a bullish short retracement. Breakout would signal a primary advance with a target of 12000*. Rising Twiggs Money Flow (21-day) indicates buying pressure. Failure of support at 10500 is unlikely, but would warn of a secondary correction.

TSX Daily

* Target calculation: 10700 + ( 10700 - 9600 ) = 11800

United Kingdom: FTSE

The FTSE 100 respected short-term support at 4800 and is headed for a test of the key resistance level at 5000*. Twiggs Money Flow (21-day) holding well above the zero line signals buying pressure. Reversal below 4800 is unlikely, but would warn of a secondary correction — confirmed if support at 4600 is broken.

FTSE 100 Daily

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

Europe: DAX

The DAX is headed for another test of the band of resistance around 5500. Upward breakout would signal a primary advance with a target of 6000*. Twiggs Money Flow (21-day) mostly above the zero line indicates mild buying pressure. Reversal below 5150 is unlikely, but would warn of a secondary correction.

German DAX

* Target calculation: 5200 + ( 5200 - 4500 ) = 5900

India: Sensex

The Sensex is headed for another test of resistance at 16000. Breakout would signal a primary advance with a target of 17500*, while reversal below 15400 would warn of a secondary correction — confirmed if support at 14800 is broken. Twiggs Money Flow (21-Day) holding well above the zero line indicates buying pressure.

Sensex India

* Target calculation: 15500 + ( 15500 - 13500 ) = 17500

Japan: Nikkei

The Nikkei 225 is testing support at 10200. Breakout would warn of a secondary correction — confirmed if support at 10000 is broken. Twiggs Money Flow (21-day) reversal below zero would strengthen the signal. Recovery above 10600 is unlikely at present, but would signal a primary advance with a target of 11000*.

nikkei 225 japan

* Target calculation: 10000 + ( 10000 - 9000 ) = 11000

South Korea

The Seoul Composite Index is consolidating in a narrow band around the new support level at 1600 — a bullish sign. Rising Twiggs Money Flow (21-day) indicates buying pressure. Breakout above 1620 is likely and would signal a primary advance with a target of 1700*. Reversal below 1590, however, would warn of a secondary correction — confirmed if support at 1530 is broken.

Seoul Composite Index

* Target calculation: 1450 + ( 1450 - 1200 ) = 1700

China

The Shanghai Composite Index is headed for another test of the new resistance level at 3000. Upward breakout is unlikely, but would indicate another test of 3500. Twiggs Money Flow (21-day) breakout above the declining trendline indicates selling pressure is easing. Reversal below 2800, however, would warn of another down-swing with a target of 2300* — confirmed if support at 2650 is broken.

Shanghai Composite Index China

* Target calculations: 2800 - ( 3300 - 2800 ) = 2300

The Hang Seng broke out above its declining trend channel, indicating the secondary correction is weakening. Follow-through above 20400 would strengthen the signal. Twiggs Money Flow (21-day) penetration of the falling trendline also indicates selling pressure is easing. Reversal below 20000 would warn of another down-swing — confirmed if support at 19400 is broken. In the longer term, recovery above 21000 would signal a primary advance with a target of 22500*.

Hang Seng Index Hongkong

* Target calculation: 21000 + ( 21000 - 19500 ) = 22500

Australia: ASX

Resources stocks face selling pressure from falling commodity prices. The All Ordinaries is consolidating in a narrow band below resistance at 4500; normally a bullish sign, but declining Twiggs Money Flow (21-day) indicates selling pressure. Reversal below 4300 would signal a secondary correction, while breakout above 4500 would indicate an advance to the upper trend channel.

ASX All Ordinaries

The ASX 200 is also testing resistance at 4500. Reversal below 4300 would signal a correction, while breakout above 4500 would indicate another test of the upper trend channel. Twiggs Money Flow (13-week) small bearish divergence indicates short-term selling pressure, but long-term the picture remains strong.

ASX 200

Reminder: This is no blue sky rally. Enjoy it while it lasts. But bear in mind that it could end badly. And keep your stops tight.



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I hope our wisdom will grow with our power, and teach us, that the less we use our power the greater it will be.

~ Thomas Jefferson (1743 - 1826)

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