By Colin Twiggs
October 29, 2009 3:00 a.m. ET (6:00 p.m. AET)
The Dow and FTSE 100 yesterday both threatened a secondary correction — on the 80th anniversary of the great crash of 1929. Today the Shanghai Composite fell below 3000 and the Nikkei 225 below 10000, both warning of another down-swing. The Australian All Ordinaries index closed below 4600, signaling a correction, but final confirmation will come from the Dow.
The Dow followed through after breaking below 9900, warning of a test of medium-term support at 9500. Bearish divergence on Twiggs Money Flow (21-day) warns of a secondary correction. Failure of support at 9500 would confirm.
The FTSE 100 broke out below its trend channel, warning of a secondary correction. Twiggs Money Flow (21-day) reversal below zero strengthens the signal. Failure of support at 5000 would confirm.
The All Ords closed below support at 4600, signaling a secondary correction. A sharp fall on Twiggs Money Flow (21-day) strengthens the signal. Final confirmation would come from a similar signal on the Dow. The Fibonacci 50% retracement target would be 4300*, while a strong correction would test 4000.
* Target calculation: 4900 - ( 4900 - 3700 ) / 2 = 4300
We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand.
The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time.
~ John Maynard Keynes: The Great Slump of 1930