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Nikkei Slips Despite Buying Support

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



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


Choose always the way that seems the best, however rough it may be; custom will soon render it easy and agreeable.

~ Pythagoras (580-520 BC)

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