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China Uncertain While Markets Strengthen

By Colin Twiggs
March 29, 2010 04:30 a.m. ET (7:30 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.



Western markets and Asia, with the possible exception of China, appear set for a recovery. The Baltic Dry Index, however, indicates trend weakness, and together with the Harpex container shipping index, reinforce the question-mark over China.

Commodities & Resources Stocks

The Baltic Dry Index retreated below short-term support at 3300, indicating trend weakness. Recovery above 3300 would signal an advance to 4600, while failure of support at 2560 would test primary support at 2160. The surge in shipments of bulk commodities is fading, suggesting hard times for resources stocks.

Baltic Dry Index

Manufactured Exports

The Harpex container shipping index remains close to its 25-year low of 317 and well below 1000, the calculated break-even point for ship operators. Manufactured exports are a long way from a robust recovery.

Harpex Index

USA

Dow Jones Industrial Average

The Dow encountered resistance at 10900 and is retracing to test the new support level at 10750. Declining Twiggs Money Flow (21-day) indicates short-term selling pressure. Respect of support would offer a target of 11500*, but reversal below 10700 would warn of a bull trap.

Dow Jones Industrial Average

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

S&P 500

The S&P 500 is also retracing to test the new support level at 1150. Respect would indicate a primary advance to the upper trend channel at 1250*. A higher (large) trough on Twiggs Money Flow (21-day) would confirm the advance. Reversal below 1150 is unlikely, but would warn of trend weakness.

Standard & Poors 500 chart

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

Transport

The Dow Transport Index, Fedex and UPS continue to signal an increase in economic activity.

Dow Jones Transportation Average

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

Technology

The Nasdaq 100 also reflects short-term selling pressure. Respect of the new support level at 1900 would signal an advance to 2050*. A large Twiggs Money Flow (21-day) trough above zero would confirm strong buying pressure. Reversal below 1900 is unlikely, but would warn of trend weakness.

Nasdaq 100

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

Canada: TSX

The TSX Composite again reversed below 12000, indicating weakness. Declining Twiggs Money Flow (21-day) warns of selling pressure. Failure of short-term support at 11850 would signal a bear trap — and test of primary support at 11000. Recovery above 12000 is less likely, but would suggest an advance to 13000*.

TSX Daily

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

United Kingdom: FTSE

The FTSE 100 is also retracing to test support at 5600/5550, with small bearish divergence on Twiggs Money Flow (21-day) warning of selling pressure. But the larger picture remains positive — and respect of support would signal an advance to the upper border of the broadening wedge formation (right-angled) at 6000*. Failure of support is less likely, but would warn of trend weakness.

FTSE 100 Daily

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

Germany: DAX

The DAX broke through resistance at 6050, with rising Twiggs Money Flow (21-day) signaling buying pressure. Expect an advance to 6600*. Reversal below short-term support at 5900 is unlikely, but would indicate a test of primary support at 5430.

German DAX

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

India: Sensex

The Sensex is Monday testing 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 now most unlikely, but would signal a primary down-trend.

Sensex India

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

Japan: Nikkei

The Nikkei 225 is testing resistance at 11000; breakout would signal an advance to 12000*. Rising Twiggs Money Flow (21-day) indicates buying pressure. Reversal below 9900 is most unlikely, but would signal a primary down-trend.

nikkei 225 japan

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

South Korea

The Seoul Composite is headed for a test of 1720, with rising Twiggs Money Flow (21-day) indicating buying pressure. Breakout would offer a target of 1940*.

Seoul Composite Index

* Target calculation: 1720 + ( 1720 - 1520 ) = 1940

China

The Shanghai Composite Index recovered above resistance at 3100 on Monday, indicating the end of the correction — and a test of 3500*. Declining Twiggs Money Flow (21-day), however, warns of selling pressure. We need to remain vigilant for a bear trap, signaled by reversal below 3000 — which would warn of a test of primary support at 2650.

Shanghai Composite Index China

* Target calculations: 3250 + ( 3250 - 3000 ) = 3500

The Hang Seng Index recovered above 21000 on Monday, headed for a test of short-term resistance at 21500. Breakout would signal an advance to 22500. Twiggs Money Flow (21-day), however, remains weak and respect of the zero line (from below) would warn of another test of primary support at 19500.

Hang Seng Index Hongkong

Australia: ASX

The All Ordinaries is encountering selling pressure at 4900, but remains on track for a test of resistance at 5000. Rising Twiggs Money Flow (21-day) continues to signal buying pressure. Failure of support at 4800 is less likely, but 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) rising strongly 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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