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Market tests support

By Colin Twiggs
November 15, 2010 3:00 a.m. ET (7:00 p.m. AEDT)

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.


Markets got the jitters after the Chinese central bank raised reserve requirements in an attempt to cool inflation — and the G-20 summit failed to produce concrete results. The Dow Global index ($DJWO) is retracing to test the new support level at 240. Failure would indicate a decline to the rising trendline near 225, while respect of support would signal a primary advance to 280*. Bearish divergence on Twiggs Money Flow (21-day) indicates mild (medium-term) selling pressure; reversal below zero would signal a correction.

Dow Jones Global Index

* Target calculations: 242 + ( 242 - 204 ) = 280

USA

Dow Jones Industrial Average

The Dow is testing its new support level at 11200. Reversal below 11000 would signal a correction to the rising trendline near 10600; respect would signal an advance to 12000*. Twiggs Money Flow (21-day) displays little selling pressure; another trough above zero would signal continuation of the primary up-trend.

Dow Jones Industrial Average

* Target calculation: 11000 + ( 11000 - 10000 ) = 12000

S&P 500

The S&P 500 retreated below its April high of 1220, indicating a false breakout. Reversal below 1180 would warn of a correction. Twiggs Momentum (13-week) high above zero continues to indicate a strong up-trend. Recovery above 1220 would offer a long-term target of 1420*.

Standard & Poors 500 chart

* Target calculation: 1220 + ( 1220 - 1020 ) = 1420

Transport

Bellwether stock Fedex is again testing support at 86; failure would signal a correction. The Dow Transport index is also testing support at its April high.

Fedex, Dow Transport Index

Technology

The Nasdaq 100 is retracing to test support at 2050; respect would signal an advance to the 2007 high of 2250. Twiggs Money Flow (13-week) high above zero indicates a strong up-trend.

Nasdaq 100

* Target calculation: 2050 + ( 2050 - 1750 ) = 2350

Canada: TSX

The TSX Composite reversed below its rising (olive) trendline. Failure of support at 12550 would confirm a correction; respect would indicate an advance to 13400*. The double top on 21-day Twiggs Momentum warns of a correction, but respect of the zero line would signal continuation of the primary up-trend.

TSX Daily

* Target calculation: 12300 + ( 12300 - 11200 ) = 13400

United Kingdom

The FTSE 100 retreated below its April high, warning of a correction. Failure of support at 5600 would confirm. Recovery above 5900 would signal an advance to the 2007 high at 6750*. Bearish divergence on Twiggs Money Flow (21-day) indicates medium-term selling pressure; reversal below zero would signal a correction.

FTSE 100 Daily

* Target calculation: 5800 + ( 5800 - 4800 ) = 6800

Germany

The DAX reversal below its rising trendline indicates momentum is slowing. Bearish divergence followed by respect of the zero line on Twiggs Money Flow (21-day) indicates weak selling pressure. Expect a test of the rising (green) trendline.

German DAX

* Target calculation: 6350 + ( 6350 - 5700 ) = 7000

France

The CAC-40 index is testing support at 3800. Bearish divergence on Twiggs Money Flow (21-day) indicates selling pressure; reversal below zero would signal a correction.

France CAC-40

* Target calculation: 3750 + ( 3750 - 3450 ) = 4050

India

The Sensex is testing the band of support at 19800/20000. Failure would signal a correction to 18000. Sharp divergence on Twiggs Money Flow (21-day) warns of strong medium-term selling pressure.

Sensex India

Singapore

The Straits Times Index displays a weak divergence on Twiggs Momentum (21-day); completion of a double top would signal a correction. Reversal below 3120 would confirm. As long as Momentum holds above the zero line, the primary trend remains up.

Singapore

* Target calculation: 3000 + ( 3000 - 2650 ) = 3350

Japan

The Nikkei 225 recovered above 9800 Monday. Failure to hold this level would indicate another test of primary support at 8800/9000. Twiggs Money Flow (21-day) reversal below the zero line warns of selling pressure.

Japan

* Target calculation: 8800 - ( 9800 - 8800 ) = 7800

South Korea

The Seoul Composite index is testing support at 1900. Divergence on Twiggs Money Flow (21-day) suggests mild selling pressure. Respect of support would signal an advance to the 2007 high at 2050. Reversal below 1850 and the rising trendline would warn of a correction.

South Korea

* Target calculation: 1750 + ( 1750 - 1550 ) = 1950

China

The Shanghai Composite index recovered above 3000 Monday, after falling sharply last week. Divergence on Twiggs Money Flow (21-day) indicates (medium-term) selling pressure. Expect another test of 3150. Respect would indicate a correction to the rising trendline; breakout would signal an advance to the 2009 high of 3500. The primary trend remains up.

DJ China index

The Shenzhen Composite index is retracing to test the new support level at 1250. Respect would signal continuation of the strong primary up-trend.

Shenzhen Index

The Hang Seng index warns of a correction, with bearish divergence on Twiggs Money Flow (13-week). Breach of the rising (olive) trendline would strengthen the signal. The primary trend remains upward.

Hang Seng Index Hongkong

* Target calculation: 23000 + ( 23000 - 19000 ) = 27000

Brazil

The Bovespa index retreated below 72000, warning of a correction. Failure of support at 69500 would confirm. Divergence on Twiggs Money Flow (21-day) indicates medium-term selling pressure.

Brazil Bovespa

* Target calculation: 70000 + ( 70000 - 60000 ) = 80000

Australia: ASX

The All Ordinaries held up surprisingly well considering the fall in China and is testing support at 4780. Reversal below the medium-term (olive) rising trendline and Twiggs Momentum (21-day) below the 3% "support" level warn of a correction, but China did not follow through on Monday and short-term support is forming above 4750.

ASX All Ordinaries

* Target calculation: 4650 + ( 4650 - 4250 ) = 5050

Bearish divergence of Twiggs Money Flow (21-day) on the ASX 200 continues to warn of a correction; failure to recover above zero this week would strengthen the signal. Reversal below 4600 on the price chart would confirm the correction.

ASX 200


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~ Dennis Wholey

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