Nikkei Slips Despite Buying Support

By Colin Twiggs
May 24, 2010 6:00 a.m. ET (8:00 p.m. AET)

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Most markets display signs of short-term buying support, indicating a bear rally. This is likely to be a temporary pause rather than an end to the correction. South Korea and Japan, affected by heightened tensions with North Korea, failed, however, to join in — the Nikkei 225 signaling a primary down-trend.

Commodities & Resources Stocks

The Baltic Dry Index is advancing toward 4650. Rising demand for dry bulk shipping — primarily iron ore and coal — is at odds with the down-turn in Chinese stock markets, but the lag can last several months. Breakout above 4650 would confirm the primary up-trend, while reversal below 2900 would warn of a primary down-trend — if confirmed by the Baltic Panamax Index.

Baltic Dry Index

USA

Dow Jones Industrial Average

A strong close on Friday indicates a Dow rally to test 10700. Twiggs Money Flow (21-day) recovery above the declining trendline would confirm.

Dow Jones Industrial Average

S&P 500

S&P 500 showed a similar blue candle on Friday and Twiggs Money Flow (21-day) breakout above the declining trendline would signal a bear rally.

Standard & Poors 500 chart

Transport

The Dow Transport index broke medium-term support, indicating a weak primary up-trend.

Dow Jones Transportation Average

Technology

The Nasdaq 100 displays a similar picture, with a strong close on Friday.

Nasdaq 100

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

Canada: TSX

The TSX Composite likewise signals a bear rally.

TSX Daily

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

United Kingdom: FTSE

The FTSE 100 goes further, with a bullish divergence on Twiggs Money Flow (21-day) accompanying Friday's long tail.

FTSE 100 Daily

Germany: DAX

The DAX likewise displays a bullish divergence on Twiggs Money Flow (21-day), signaling short/medium-term buying pressure.

German DAX

India: Sensex

The Sensex also displays bullish divergence on Twiggs Money Flow (21-day), signaling a rally to test 17000. In the long term, reversal below 15800 would signal a primary down-trend; recovery above 18000, however, would offer a target of 20000*.

Sensex India

* Target calculation: 18000 + ( 18000 - 16000 ) = 20000

Japan: Nikkei

The Nikkei 225 broke support at 9900 to signal a primary down-trend. Triple bearish divergence on Twiggs Money Flow (13-week) confirms strong selling pressure. The breakout offers a target of 9000*.

nikkei 225 japan

* Target calculation: 10000 - ( 11000 - 10000 ) = 9000

South Korea

The Seoul Composite is headed for a test of primary support at 1550. Twiggs Money Flow (21-day) reversal below zero would warn of a primary down-trend.

Seoul Composite Index

China

The Shanghai Composite Index rallied to 2670 Monday; breakout above 2750 would offer a target of 2950. Twiggs Money Flow (21-day) recovery above the declining trendline indicates short/medium-term buying pressure. The primary trend, however, remains downward.

Shanghai Composite Index China

* Target calculations: 2900 - ( 3150 - 2900 ) = 2650

The Hang Seng Index encountered support at 19500, but remains in a primary down-trend. Expect consolidation between 19500 and 20000 before another down-swing with a target of the July 2009 low at 17000*. Declining Twiggs Money Flow (13-week) indicates continued selling pressure.

Hang Seng Index Hongkong

* Target calculations: 19500 - ( 22000 - 19500 ) = 17000

Australia: ASX

The All Ordinaries is in a primary down-trend, having broken support at 4500. Twiggs Money Flow (21-day) recovery above the declining trendline indicates retracement to test the new resistance level. Breakout above 4700 would warn of a bear trap.

ASX All Ordinaries

The ASX 200 is undergoing a similar retracement. Twiggs Money Flow (13-week) below zero, however, confirms the primary down-trend.

ASX 200


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~ Pythagoras (580-520 BC)