Beware Of The Bear
By Colin Twiggs
July 18, 2010 6:00 p.m. ET (8:00 a.m. AET)
The recent uncertainty, typified by broadening wedges across a number of market indices, is now beginning to resolve to the downside. Failed up-swings (an up-swing that fails to reach the upper border of the broadening wedge) are prevalent and warn of a downward breakout. The long-term picture is clear: four of the big five are in a primary down-trend, warning of a global bear market. The signal would be strengthened further if the DAX joins the other four (Dow/SPX, FTSE, N225, SSEC) in a primary down-trend.
The Dow retreated sharply on Friday, the latest up-swing failing to test the upper boarder of the broadening wedge formation — a bear signal. Reversal below 9900 would confirm the primary down-trend. The signal would be strengthened even further if there is a breach of the lower wedge border. Twiggs Momentum respect of the zero line from below would also warn of a down-trend. Breakout above the uupper border of the wedge is most unlikely, but would indicate a bear trap.
* Target calculation: 10000 - ( 11000 - 10000 ) = 9000
S&P 500 reversal below 1050 would confirm a bear market.
Bellwether transport stock Fedex reversed below its key support level of $76.50, confirming a primary down-trend. UPS reversal below its February low would confirm the slow-down in economic activity.
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The Nasdaq 100 also portrays a broadening wedge and failed up-swing. Reversal below 1730 would signal a primary down-trend and confirm the bear market. Declining Twiggs Money Flow (13-week) strengthens the bear signal.
The TSX Composite displays a failed up-swing within a broadening wedge formation. Reversal below 11400 would signal a primary down-trend. Breakout below 11000 (the lower border of the wedge) would confirm. Twiggs Momentum respecting the zero line from below also warns of a down-trend.
* Target calculation: 11400 - ( 12000 - 11400 ) = 10800
The FTSE 100 is retracing to test support at 5000; failure would confirm the primary down-trend. Twiggs Money Flow (13-week) breakout below the triangular pattern would strengthen the signal. Reversal above 5300 is unlikely, but would warn of a bear trap.
* Target calculation: 5000 - ( 5800 - 5000 ) = 4200
The DAX is condolidating in a broad band between 5700 and 6300, currently retracing to test the support level. Failure of support would signal a primary down-trend. Declining Twiggs Money Flow (13-week) warns of a bear market.
* Target calculation: 5700 - ( 6300 - 5700 ) = 5100
The Sensex remains bullish, consolidating in a narrow range below resistance at 18000. Upward breakout would offer a target of 20000*. A completed higher trough on Twiggs Money Flow (13-week) would confirm strong buying pressure. Bearish influence from global markets, however, is likely to dampen enthusiasm.
* Target calculation: 18000 + ( 18000 - 16000 ) = 20000
The Nikkei 225 is in a primary down-trend. Reversal below 9400 would signal another down-swing with a target of 8200*. Upward breakout from the broadening wedge is most unlikely, but would indicate an advance to 11400.
* Target calculation: 9200 - ( 10200 - 9200 ) = 8200
The Seoul Composite remains bullish, with Twiggs Money Flow (13-week) holding high above zero. Breakout above 1750 would signal an advance with a target of 1950*. Bearish influence from global markets is likely to dampen buying pressure, however, and reversal below short-term support at 1670 would test primary support at 1550.
* Target calculation: 1750 + ( 1750 - 1550 ) = 1950
The Shanghai Composite Index respected short-term resistance at 2500 and is retracing to test support at 2350; failure would signal continuation of the down-swing towards its target of 2100*. Twiggs Money Flow (13-week) reversal below zero would indicate selling pressure.
* Target calculations: 2700 - ( 3300 - 2700 ) = 2100
The Hang Seng Index is retracing to test short-term support at 19700; failure would test primary support at 19000. Twiggs Money Flow (13-week) reversal below zero would warn of selling pressure.
* Target calculations: 19000 - ( 21000 - 19000 ) = 17000
The All Ordinaries encountered primary resistance at 4500; reversal below 4250 would confirm the primary down-trend. Twiggs Money Flow (21-day) respect of the zero line from below would strengthen the bear signal.
A Twiggs Money Flow (13-week) reversal below zero on the ASX 200 would warn of selling pressure. Breakout below 4200 would signal another primary down-swing with a target of 3800*.
* Target calculation: 4200 - ( 4600 - 4200 ) = 3800
Time makes more converts than reason.
~ Thomas Paine: Common Sense (1776)