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Market watershed approaches

By Colin Twiggs
November 29, 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 tested support while US investors enjoyed a long weekend after Thanksgiving — evident from the low trading volumes. We are approaching a watershed moment: if support fails, expect strong selling; but if it holds, look forward to another primary advance.

The Dow Global index ($DJWO) is testing the band of support around 240. Recovery above 244 would signal an advance to 280 (follow-through above 250 would confirm), while downward breakout would warn of a correction to the lower trend channel at 228. Twiggs Momentum reversal below zero would be bearish, but recovery above the falling trendline would indicate a primary up-trend.

Dow Jones Global Index

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

USA

Dow Jones Industrial Average

Low volume Friday on the Dow highlights buyers and sellers taking an extended weekend. Recovery above resistance at 11200 would indicate an advance to 12000*(confirmed if 11450 is penetrated), while reversal below 11000 would signal a correction to the rising trendline near 10500. Twiggs Money Flow (21-day) continues to reflect buying pressure, suggesting the primary up-trend will continue.

Dow Jones Industrial Average

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

S&P 500

The S&P 500 is in a similar situation. Recovery above 1200 would suggest a primary advance, confirmed by a break of 1220; while failure of support at 1180 would warn of a correction to 1100. Twiggs Money Flow (21-day) continues to indicate buying pressure. The long-term target for a primary advance is 1420*.

Standard & Poors 500 chart

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

Transport

Fedex is consolidating between 86 and 90, while UPS displays a similar pattern. Upward breakout would confirm the primary up-trend — a bullish sign for the economy.

Fedex, Dow Transport Index

Technology

The Nasdaq 100 found support at 2100; breakout above the 2007 high of 2250 would signal a fresh primary advance. Twiggs Money Flow (13-week) high above zero continues to indicate strong buying pressure.

Nasdaq 100

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

Canada: TSX

The TSX Composite is testing resistance at 13000, breakout would confirm an advance to 13400*. Reversal below 12600 is unlikely, but would signal a correction. A Twiggs Momentum trough above zero is more likely and would signal a strong primary up-trend.

TSX Daily

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

United Kingdom

The FTSE 100 broke support at 5650 to warn of a correction. Bearish divergence on Twiggs Money Flow (21-day) indicates buying pressure. Reversal 5600 would confirm. Recovery above 5900 is less likely, but would signal an advance to the 2007 high at 6750*.

FTSE 100 Daily

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

Germany

The DAX is advancing towards its target of 7000*. Rising 21-day Twiggs Money Flow signals buying pressure.

German DAX

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

France

The CAC-40 index broke support at 3750, warning of a correction. Bearish divergence on Twiggs Money Flow (21-day) indicates selling pressure. Breakout below 3650 would confirm.

France CAC-40

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

India

The Sensex is undergoing a correction after breaking support at 19800/20000. The immediate target is 18000. A Twiggs Money Flow (13-week) fall below zero would warn of strong selling pressure.

Sensex India

Singapore

The DJ Singapore Index penetrated its rising trendline, warning that momentum is slowing. Reversal below 250 would signal a correction. The primary trend remains up, but watch if Twiggs Money Flow (13-week) reverses below zero.

Singapore

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

Japan

The Nikkei 225 is headed for a test of 10200, but divergence on Twiggs Money Flow (21-day) warns of selling pressure. Reversal below 9800 would suggest another correction — as would a TMF retreat below zero.

Japan

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

South Korea

The DJ South Korea index penetrated its rising trendline, warning that the up-trend is losing momentum. Reversal below support at 395 would signal a correction — with an immediate target of 375. Bearish divergence on Twiggs Money Flow (21-day) indicates selling pressure. The primary trend is up and likely to remain so unless we witness further provocation from the North.

South Korea

China

The Shanghai Composite index is consolidating below resistance at 2900, indicating continuation of the correction. Expect a decline to 2700, confirmed if 2800 is penetrated. Bearish divergence on Twiggs Money Flow (13-week) signals selling pressure. Recovery above 3000 is unlikely, but would warn of a bear trap.

Shanghai Composite Index

The Shenzhen Composite index is more bullish, having respected support at 1250. Follow-through above 1300 indicates a strong primary up-trend; breakout above 1400 would confirm. Twiggs Money Flow (13-week) holding above the zero line indicates long-term buying pressure.

Shenzhen Index

The Hang Seng index broke support at 23000, signaling a correction to the rising (green) trendline. Bearish divergence on Twiggs Money Flow (13-week) warns of selling pressure. The primary trend, however, remains upward.

Hang Seng Index Hongkong

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

Brazil

The Bovespa index is undergoing a correction after breaking support at 69000. Penetration of the rising trendline would warn that momentum is slowing, and failure of support at 68000 would offer a target of primary support at 64000. Falling Twiggs Money Flow (21-day) indicates selling pressure.

Brazil Bovespa

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

Australia: ASX

Monday's long tail on the All Ordinaries indicates good support at 4650. Twiggs Money Flow (21-day) recovery above zero would confirm. Recovery above 4750 (4800 for the more conservative) would indicate another attempt at 5000. Failure of support at 4650, however, would warn of another test of primary support at 4350. Twiggs Momentum is testing the zero line: respect would confirm a strong up-trend, while penetration would warn of a further down-swing.

ASX All Ordinaries

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

The ASX 200 recovered after dipping below 4600. Twiggs Money Flow (13-week) below zero signals strong selling pressure. A rise above 4700 would suggest another advance; reversal below 4600 would warn of another test of primary support at 4300.

ASX 200


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~ Winston Churchill

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