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Breakout Threatened By Trade Tariffs

By Colin Twiggs
March 22, 2010 06:00 a.m. ET (9:00 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.



India, China and Japan show short-term strength, while western markets retrace to test support after recent breakouts. The Hang Seng, however, gapped below support — possibly reflecting escalating tensions between the US and China over exchange rates. Imposition of US trade tariffs on Chinese imports would plunge China into recession and seriously threaten resources stocks, but in the longer term would impact on the entire global economy — including the US.

Commodities & Resources Stocks

The Baltic Dry Index is retracing to test short-term support at 3300; respect would signal an advance to 4600. A surge in shipments of bulk commodities would be 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 testing resistance at the January high of 10750. Rising Twiggs Money Flow (21-day) confirms buying pressure. Breakout would offer a target of 11500*. Reversal below 9900 is 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 broke through 1150 before retracing to test the new support level. Respect of support would indicate a primary advance with a target of 1250*. Recovery above the descending trendline on Twiggs Money Flow (13-week) indicates buying pressure. Reversal below 1150 is unlikely, but would indicate weakness.

Standard & Poors 500 chart

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

Transport

The Dow Transport Index, Fedex and UPS all signal a fresh primary advance — a sign that economic activity is recovering.

Dow Jones Transportation Average

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

Technology

The Nasdaq 100 broke through resistance at 1900 before retracing to test the new support level. Respect would signal an advance to 2050*. A large Twiggs Money Flow (21-day) trough above zero would signal strong buying pressure. Reversal below 1900 is unlikely, but would indicate weakness.

Nasdaq 100

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

Canada: TSX

The TSX Composite reversed below 12000, indicating weakness. A Twiggs Money Flow (13-week) trough above the zero line, however, would signal buying pressure. Recovery above 12000 would indicate an advance to 13000*. Reversal below 11000 is most unlikely, but would warn of a primary down-trend.

TSX Daily

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

United Kingdom: FTSE

The FTSE 100 encountered selling pressure, with Fridays tall shadow warning of retracement. Bearish divergence on Twiggs Money Flow (21-day) warns of selling pressure. Expect support at 5550; failure would warn of a correction to test primary support at 5000, while respect would confirm the advance to 6000*.

FTSE 100 Daily

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

Germany: DAX

The DAX is retreating from resistance at 6050. Bearish divergence on Twiggs Money Flow (21-day) warns of selling pressure. Failure of short-term support at 5900 would indicate a correction to test primary support at 5430. Breakout above 6050, however, would signal an advance to 6600*.

German DAX

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

India: Sensex

The Sensex is is headed for a test of resistance at 17750; breakout would offer a target of 19750*. Rising Twiggs Money Flow (21-day) indicates buying pressure. Reversal below support at 15750 is most unlikely, but would signal a primary down-trend.

Sensex India

* Target calculation: 17750 + ( 17750 - 15750 ) = 19750

Japan: Nikkei

The Nikkei 225 is headed for a test of 11000; breakout would signal an advance to 12000*. Rising Momentum (63-day) and Twiggs Money Flow indicate buying pressure. 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 retraced Monday, headed for a test of short-term support at 1650. Respect would signal a test of 1720; failure is less likely, but would test primary support at 1550. Rising Twiggs Money Flow (13-week) indicates medium-term buying pressure, but bearish divergence continues to warn of long-term weakness.

Seoul Composite Index

China

The Shanghai Composite Index is headed for a test of resistance at 3100; breakout would signal the end of the correction — and a test of 3500. Rising Twiggs Money Flow (21-day) indicates buying pressure. Reversal below support at 2900 is unlikely, but would warn of a test of primary support at 2650.

Shanghai Composite Index China

The Hang Seng Index gapped sharply below support at 21000 on Monday, warning of another test of primary support at 19500. Twiggs Money Flow (13-week) reversal below the zero line would confirm the primary down-trend. In the long term, failure of support at 19500 would offer a target of 18000*.

Hang Seng Index Hongkong

* Target calculations: 19500 - ( 21000 - 19500 ) = 18000

Australia: ASX

The All Ordinaries is retracing for a test of short-term support level at 4800. Weak divergence on Twiggs Money Flow (21-day) indicates selling pressure. Recovery above 4900 would signal advance to 5000, while penetration of the rising trendline would warn of another test of primary support at 4500.

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 its January high suggests another primary advance. Breakout above 5000 would confirm, offering a target of 5500*. Failure of support at 4500 is less likely, but would signal a primary down-trend.

ASX 200

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



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~ Tony Robbins

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