Doubts Over China Unsettle The ASX
By Colin Twiggs
April 27, 2010 3:00 a.m. ET (5:00 p.m. AET)
Sharp falls on the Shanghai Composite Index warn of a primary down-trend. The Hang Seng index is already in a down-trend and only the Shenzhen Composite remains to complete the trifecta. Australian markets, unsettled by the fall, threaten a correction. Japan and South Korea, however, continue to follow the US recovery.
The Baltic Dry Index reflects a very weak up-trend and another test of primary support at 2560 is likely.
However, unusually high deliveries of Capesize vessels in 2009 and 2010 may distort the index (BIMCO April 2010 Report).
Shipping rates for the larger Capesize vessels, typically used for iron ore shipments, are now lower than Panamax rates, used for coal and wheat shipments. Capesize means the vessel is too large to traverse the Panama canal, which only handles Panamax and smaller classes.
It would be safer to only take signals that are confirmed by the Baltic Panamax Index — which currently shows a healthy up-trend.
The Dow lost some momentum, signaled by the fall below the rising trendline, and Monday's weak close warns of retracement to test short-term support at 11000. Failure would signal a correction to test support at 10700. Twiggs Money Flow (21-day) reversal below 10% would confirm. The long-term target for the breakout is 11500* and reversal below primary support at 9900 remains unlikely.
* Target calculation: 10700 + ( 10700 - 9900 ) = 11500
S&P 500 is advancing towards its target of 1250*. Rising Twiggs Money Flow (13-week) confirms buying pressure. Retracement to test support at 1150 is likely, but reversal below primary support at 1050 most unlikely.
* Target calculation: 1150 + ( 1150 - 1050 ) = 1250
Economic activity is recovering, with the Dow Transport Index, Fedex and UPS all in strong primary up-trends.
* Target calculation: 4300 + ( 4300 - 3800 ) = 4800
The Nasdaq 100 reached its target at 2050* and retracement to test support at 1900 is likely. Rising Twiggs Money Flow (21-day), however, signals strong buying pressure and failure of support at 1900 is most unlikely.
* Target calculation: 1900 + ( 1900 - 1750 ) = 2050
The TSX Composite is advancing towards its target of 13000*. Rising Twiggs Money Flow (13-week) confirms strong buying pressure. Reversal below 12000 is unlikely, but would warn of a correction.
* Target calculation: 12000 + ( 12000 - 11000 ) = 13000
The FTSE 100 is undergoing a correction back to support at 5550. Twiggs Money Flow (21-day) reversal below zero would confirm the correction.
* Target calculation: 5500 + ( 5500 - 5000 ) = 6000
The DAX closed above resistance at 6300, signaling an advance towards 6600*. Twiggs Money Flow (21-day) testing the zero line, however, warns of selling pressure — and a correction to test support at 6000.
* Target calculation: 6000 +( 6000 - 5400 ) = 6600
The Sensex is again testing resistance at 17750 on Tuesday. Respect would suggest another correction; confirmed if the rising trendline and short-term support at 17500 is broken. Twiggs Money Flow (21-day) below zero warns of selling pressure. Recovery above 18000 is less likely but would signal an advance to 19750*.
* Target calculation: 17750 + ( 17750 - 15750 ) = 19750
The Nikkei 225 found support between 10900 and 11000, indicating another advance with a target of 12000*. Bearish divergence on Twiggs Money Flow (13-week), however, warns of long-term selling pressure. Penetration of the rising trendline would signal another correction to test primary support at 9900.
* Target calculation: 11000 + ( 11000 - 10000 ) = 12000
The Seoul Composite respected support at 1700, signaling an advance to 1940*. Rising Twiggs Money Flow (21-day) indicates buying pressure. Reversal below 1700 is unlikely, but would warn of a correction.
* Target calculation: 1720 + ( 1720 - 1520 ) = 1940
The Shanghai Composite Index broke primary support (intra-day) at 2900 on Tuesday. A close below this level would signal a primary down-trend. Twiggs Money Flow (13-week) reversal below zero would confirm.
* Target calculations: 3100 + ( 3100 - 2900 ) = 3300
After a failed breakout above 1250, the Shenzhen Composite Index appears headed for a test of support at 1100; confirmed if the rising trendline is broken. Twiggs Money Flow (13-week) above the descending trendline, however, indicates weak selling pressure. Failure to confirm a Shanghai down-trend would raise doubt over the signal.
The Hang Seng Index is already in a primary down-trend and headed for support at 21000; failure would test primary support at 19500. In the longer term, failure of 19500 would offer a target of the July 2009 low at 17000*. Twiggs Money Flow (13-week) reversal below zero warns of a strong selling pressure.
* Target calculations: 19500 - ( 22000 - 19500 ) = 17000
The All Ordinaries is testing short-term support at 4900 — Tuesday's doji indicating uncertainty. Penetration of the rising trendline already warns of a correction and failure of support at 4900 would confirm. Falling Twiggs Money Flow (21-day) indicates sellng pressure; reversal below zero would strengthen the signal.
The ASX 200 reversed below 4900; penetration of the rising trendline would signal another test of primary support at 4500. Twiggs Money Flow (13-week) continues to display a large, weak, bearish divergence, but reversal below zero would strengthen the signal.
In less than ten years, using reasonable assumptions, there will essentially be no money left to run the US government — 93% of all tax revenues the US government collects will go to pay social security, Medicare, Medicaid and the interest costs on their national debt.
~ Eric Sprott & David Franklin, Sprott Asset Management