By Colin Twiggs
September 20, 2010 3:00 a.m. ET (5:00 p.m. AET)
Markets continue to recover from the recent slump, led by India, Singapore and South Korea. The Dow Global index ($DJWO) broke through resistance at 228, signaling the start of a primary up-trend. Rising 63-day Twiggs Momentum strengthens the signal.
But we are approaching the end of the third quarter and fund managers may be supporting prices to window-dress their balance sheets. We can only be sure of the current resurgence when the quarter-end has passed. Expect a mid-October retracement to test the new support level.
The Dow is headed for a test of resistance at 10700. Twiggs Money Flow (21-day) recovered above 15%, signaling rising buying pressure. The index is unlikely to reverse direction before the month-end and may well break resistance, indicating an advance to 11500*, but it would be prudent to wait for retracement in October to test the new support level. Reversal below the former primary support level at 9900 is unlikely at present, but would indicate a primary down-swing, with a target of 8700*.
* Target calculations: 10700 + ( 10700 - 9900 ) = 11500 and 9700 - ( 10700 - 9700 ) = 8700
The S&P 500 is testing resistance at 1130; breakout would indicate a primary advance to 1220*. Twiggs Money Flow holding above the zero line indicates buying pressure. Again, it would be prudent to wait until mid-October to check if support continues after the quarter-end. Reversal below 1030 is unlikely at present, but would confirm the primary down-trend.
* Target calculation: 1130 + ( 1130 - 1050 ) = 1210
UPS and the Dow Transport Index encountered resistance at their August high. Fedex is headed for another test of primary support at its recent low; failure would be a bear signal for the broader economy.
The Nasdaq 100 broke resistance at 1920 and is advancing to 2060*. Twiggs Money Flow (13-week) respect of the zero line indicates buying pressure. Expect retracement, however, to test the new support level in October.
* Target calculation: 1920 + ( 1920 - 1770 ) = 2070
TSX Composite is headed for a test of primary resistance at 12300. Breakout would offer a target of 13400*. Rising 63-day Twiggs Momentum suggests an up-trend.
* Target calculation: 12300 + ( 12300 - 11200 ) = 13400
The FTSE 100 is retracing to test the new support level at 5400. Respect would confirm the advance to 5800*. Bearish divergence on Twiggs Money Flow (13-week), however, warns of a reversal.
* Target calculation: 5400 + ( 5400 - 5100 ) = 5700
The DAX is retracing to test the rising trendline and support at 5900. Failure would confirm the bearish divergences on Twiggs Money Flow (13-week) and 63-day Twiggs Momentum. Breakout above resistance at 6350 is unlikely at present, but would signal a primary advance to 6900*.
* Target calculation: 6300 + ( 6300 - 5700 ) = 6900
The CAC-40 respected resistance at 3800. Twiggs Money Flow (13-week) holding below the zero line warns of selling pressure. Reversal below the rising trendline would test primary support at 3300.
The Sensex broke resistance at 18500 and is advancing to 20000*. Rising Twiggs Money Flow (13-week) signals strong buying pressure.
* Target calculation: 18000 + ( 18000 - 16000 ) = 20000
The Straits Times Index broke resistance, signaling a primary advance to 3350*. Rising Twiggs Momentum (63-day) indicates an up-trend.
* Target calculation: 3000 + ( 3000 - 2650 ) = 3350
The Nikkei 225 rallied in response to stimulus measures taken by the Japanese government. Expect a test of resistance at 10000, but the primary trend is likely to remain downward.
The Seoul Composite Index broke resistance at 1790, signaling an advance to 1960*. Rising Twiggs Money Flow (13-week) indicates continued buying pressure.
* Target calculation: 1760 + ( 1760 - 1560 ) = 1960
The Shanghai Composite Index encountered stout resistance at 2700. Reversal below 2600 would warn of another test of primary support at 2300. Bearish divergence on Twiggs Money Flow (13-week) signals selling pressure.
* Target calculations: 2700 + ( 2700 - 2400 ) = 3000
The HangSeng Index broke resistance at 21800, offering a medium-term target of 23000*. Rising Twiggs Money Flow (13-week) indicates buying pressure.
* Target calculations: 21800 + ( 21800 - 20600 ) = 23000
The All Ordinaries is retracing to test the new support level at 4620*. Respect would confirm the advance to 5000*. Twiggs Money Flow (21-day) holding above zero indicates buying pressure.
* Target calculation: 4650 + ( 4650 - 4250 ) = 5050
The ASX 200 is on a similar path, with rising Twiggs Money Flow (13-week) indicating buying pressure. The ASX 200 is unlikely to reverse below 4600 at present, but the long-term picture will only clear when a retracement tests the new support level after month-end.
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