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Recovery Without China

By Colin Twiggs
March 15, 2010 01:00 a.m. ET (5:00 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.



North American, European and many Asian markets show signs of recovery, but the Shanghai Composite is headed for a test of primary support. A primary down-trend would seriously impact on demand and prices for basic commodities, of which China is the primary consumer — with a knock-on effect on resources stocks in other markets.

Commodities & Resources Stocks

At present the Baltic Dry Index is recovering, breaking through resistance at 3300 to signal the end of the latest correction. The surge in shipments of bulk commodities is good news for resources stocks, but the HARPEX container freight index remains extremely low, indicating that manufacturing exports lag way behind.

Baltic Dry Index

USA

Dow Jones Industrial Average

The Dow is headed for a test of the January high at 10750. Rising Twiggs Money Flow (21-day) confirms buying pressure. Breakout above 10750 would offer a target of 11500*. Reversal below 9900 is most unlikely, but would signal a primary down-trend.

Dow Jones Industrial Average

* Target calculation: 10700 + ( 10700 - 9900 ) = 11500

S&P 500

The S&P 500 is testing 1150 and breakout would offer a target of 1250*. Recovery above the descending trendline on Twiggs Money Flow (13-week) indicates buying pressure. Reversal below 1050 is most unlikely, but would signal a primary down-trend.

Standard & Poors 500 chart

* Target calculation: 1150 + ( 1150 - 1050 ) = 1250

Transport

The Dow Transport Index broke through resistance at 4300, offering a target of 4800*. Fedex and UPS breakout would confirm a similar advance.

Dow Jones Transportation Average

* Target calculation: 4300 + ( 4300 - 3800 ) = 4800

Technology

The Nasdaq 100 similarly broke resistance at 1900, signaling an advance to 2050*. Recovery above the descending trendline on Twiggs Money Flow (13-week) indicates buying pressure. Reversal below 1900 is unlikely, but would signal weakness.

Nasdaq 100

* Target calculation: 1900 + ( 1900 - 1750 ) = 2050

Canada: TSX

The TSX Composite closed above 12000, signaling an advance to 13000*. Twiggs Money Flow (13-week) above the descending trendline indicates buying pressure. Reversal below 11100 is most unlikely, but would signal a primary down-trend.

TSX Daily

* Target calculation: 12000 + ( 12000 - 11000 ) = 13000

United Kingdom: FTSE

The FTSE 100 closed above 5600, confirming the advance to 6000*. Twiggs Money Flow (13-week) above the declining trendline indicates buying pressure. Reversal below 5550 is unlikely, but would signal trend weakness.

FTSE 100 Daily

* Target calculation: 5500 + ( 5500 - 5000 ) = 6000

Germany: DAX

The DAX is headed for a test of 6050; breakout would signal an advance to 6600*. Twiggs Money Flow (13-week) recovered to above zero, but below the declining trendline indicates little buying pressure. Reversal below support at 5400 is unlikely, but would signal a primary down-trend.

German DAX

* Target calculation: 6000 +( 6000 - 5400 ) = 6600

India: Sensex

The Sensex is retracing Monday toward short-term support at 17000; respect would indicate a test of 17800. Twiggs Money Flow (13-week) above the declining trendline indicates buying pressure. In the long term, upward breakout would offer a target of 20000*. Reversal below support at 15500 is unlikely, but would signal a primary down-trend.

Sensex India

* Target calculation: 17800 + ( 17800 - 15700 ) = 19900

Japan: Nikkei

The Nikkei 225 is headed for a test of 11000; breakout would signal an advance to 12000*. Rising Twiggs Money Flow (13-week) indicates short-term buying pressure, but long-term bearish divergence continues to warn of weakness. Reversal below 9900 is unlikely, but would signal a primary down-trend.

nikkei 225 japan

* Target calculation: 11000 + ( 11000 - 10000 ) = 12000

South Korea

The Seoul Composite found short-term support at 1645 Monday; respect would signal a test of 1720. Rising Twiggs Money Flow (13-week) indicates short-term buying pressure, but long-term bearish divergence continues to warn of weakness. Reversal below primary support at 1550 is unlikely, but would signal a primary down-trend.

Seoul Composite Index

China

The Shanghai Composite Index broke through support at 2900 Monday to signal a test of 2650. Twiggs Money Flow (13-week) at zero warns of continued selling pressure. Failure of support at 2650 would indicate a primary down-trend.

Shanghai Composite Index China

The Hang Seng Index retraced to test support at 21000 Monday. Respect would indicate that the primary down-trend is weakening; failure would warn of another test of 19500. Twiggs Money Flow (13-week) recovery above the declining trendline would indicate buying support, but respect of the zero line (from below) would warn of selling pressure.

Hang Seng Index Hongkong

Australia: ASX

The All Ordinaries is retracing for a test of the new support level at 4740; respect would confirm the advance to 5000. Twiggs Money Flow (21-day) respect of the zero line would provide further confirmation.

ASX All Ordinaries

The ASX 200 chart reflects the long term picture, with broad consolidation between 4500 and 5000. Twiggs Money Flow (13-week) recovery above the declining trendline indicates buying pressure. Breakout above 5000 would signal an advance to 5500*, while failure of support at 4500 would signal a primary down-trend.

ASX 200

* Target calculations: 5000 + ( 5000 - 4500 ) = 5500 and 4500 - ( 5000 - 4500 ) = 4000



In essence, if we want to direct our lives, we must take control of our consistent actions. It's not what we do once in a while that shapes our lives, but what we do consistently.

~ Tony Robbins

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