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Dow strengthens

By Colin Twiggs
December 6, 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.


Apart from a false break that shook out a few stops, buyers held firm at the key support level, sending markets rallying their November high. Dow Global index ($DJWO) breakout above 250 would signal an advance to 280. Reversal below 235, however, would warn of a correction to the rising trendline around 228. Twiggs Money Flow (21-day) respect of the zero line would indicate buying pressure; failure would warn of a correction.

Dow Jones Global Index

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

USA

Dow Jones Industrial Average

The Dow is headed for a test of 11450, breakout would indicate an advance to 12000*. Reversal below 11000 is now unlikely, but would signal a correction to 10500. Rising Twiggs Money Flow (21-day) reflects strong 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 even more positive, breaking through 1220 to signal a primary advance. Reversal below 1180 is most unlikely, but would warn of a correction to 1100. Twiggs Money Flow (13-week) trough high above zero indicates strong buying pressure. The target for a primary advance is 1420*.

Standard & Poors 500 chart

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

Transport

Dow Jones Transport Index and major components, Fedex and UPS, all indicate a fresh primary advance — a bullish sign for the economy.

Fedex, Dow Transport Index

Technology

The Nasdaq 100 is headed for a test of its 2007 high at 2250. Breakout would signal a fresh primary advance. A Twiggs Money Flow (13-week) trough high above zero again indicates strong buying pressure.

Nasdaq 100

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

Canada: TSX

The TSX Composite broke resistance at 13000, signaling an advance to 13400*. Reversal below 12600 is most unlikely, but would warn of a correction. The Twiggs Momentum trough above zero signals a strong up-trend.

TSX Daily

* Target calculation: 13000 + ( 13000 - 12600 ) = 13400

United Kingdom

The FTSE 100 found support at 5500 and is headed for a test of short-term resistance at 5900. Rising Twiggs Money Flow (13-week) indicates buying pressure. Breakout above 5900 would signal an advance to the 2007 high at 6750*. Reversal below 5500 is less likely, but would test primary support at 5100.

FTSE 100 Daily

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

Germany

The DAX is consolidating in an ascending broadening wedge below its target of 7000. Downward breakout is more likely and would offer a target of 6550, while upward breakout would target 7450*. Rising 13-week Twiggs Money Flow continues to signal long-term buying pressure.

German DAX

* Target calculation: 7000 + ( 7000 - 6550 ) = 7450

France

The CAC-40 index penetrated its rising trendline, warning of a correction, but quickly recovered. Rising 13-week Twiggs Money Flow indicates buying pressure. Reversal below 3650 would confirm the correction, while respect of the support level would suggest another attempt at 4050.

France CAC-40

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

India

The Sensex recovered above resistance at 20000 Monday, signaling another attempt at the 2007 high of 21000. Declining Twiggs Money Flow (13-week), however, continues to indicate selling pressure and reversal below 19800 would warn of another test of 19000.

Sensex India

Singapore

The Straits Times Index is consolidating at 3200. Reversal below 3120 would complete a small head and shoulders formation, indicating a correction to 3000. The primary trend remains up, but bearish divergence on Twiggs Momentum (21-day) warns of a correction, confirmed if the indicator reverses below zero.

Singapore

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

Japan

The Nikkei 225 is consolidating below 10200, a bullish sign. Twiggs Money Flow (13-week) edging upwards indicates mild buying pressure. Breakout above 10200 would signal an advance, while reversal below 9800 would warn of another correction.

Japan

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

South Korea

The Seoul Composite Index respected support at 1900, signaling a rally to the 2007 high of 2050. Breakout would indicate another primary advance. Twiggs Money Flow (13-week) holding high above zero reflects strong buying 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. Breakout below 2800 would offer a target of 2600*. Bearish divergence on Twiggs Money Flow (21-day) signals medium-term selling pressure. Recovery above 2900 is unlikely, but would warn of another test of 3150.

Shanghai Composite Index

* Target calculations: 2800 - ( 3100 - 2900 ) = 2600

The Shenzhen Composite index is headed for another test of support at 1250. Failure would signal a correction to 1100. Bearish divergence on 21-day Twiggs Money Flow warns of medium-term selling pressure.

Shenzhen Index

The Hang Seng Index rallied above support at 23000, but declining Twiggs Money Flow (13-week) continues to warn of selling pressure. Failure of support would offer a target of 21000*.

Hang Seng Index Hongkong

* Target calculation: 23000 - ( 25000 - 23000 ) = 21000

Brazil

The Bovespa Index found support at 68000 before rallying to resistance at 70000. Breakout would signal another test of 73000, while reversal below 68000 would test primary support at 64000. Rising 13-week Twiggs Money Flow indicates buying pressure, favoring another advance.

Brazil Bovespa

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

Australia: ASX

The All Ordinaries is testing medium-term resistance at 4800. Breakout would signal another attempt at 5000. Twiggs Money Flow (21-day) holding below zero, however, warns of selling pressure — also highlighted by weak closes over the last two days. Failure of support at 4640 would indicate another test of primary support at 4350.

ASX All Ordinaries

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

The ASX 200 is also consolidating. Declining Twiggs Money Flow (13-week) warns of selling pressure and reversal below 4575 would suggest another test of primary support at 4300.

ASX 200


I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we prudently save means that their life will be so much the more abundant. Economy is idealism in its most practical form.

~ Calvin Coolidge

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