Correction threat grows
By Colin Twiggs
March 13th, 2011 10:00 p.m. ET (2:00 p.m. AEDT)
Global re-insurers were hit by a sell-off following the devastating earthquake and tsunami in Japan. Losses are so far estimated at $10 to $15 billion; a fraction of the $100 billion cost of the 1995 Kobe earthquake (Guardian). Apart from the initial downward pressure on re-insurers, we can expect a subsequent sell-off of investments when they are called to cover the actual losses.
The Dow Global index ($DJWO) is testing medium-term support at 258; failure would signal a correction. Twiggs Money Flow (21-day) reversal below zero would warn of selling pressure. The primary trend remains up, but penetration of the rising (olive) trendline warns that momentum is slowing.
* Target calculations: 250 + ( 250 - 236 ) = 264
The Dow continues to test support at 12000. There is little indication of strong selling pressure from Twiggs Money Flow (21-day), but reversal below 12000 would signal a correction. Penetration of the rising trendline warns that momentum of the primary up-trend is slowing.
* Target calculation: 11200 + ( 11200 - 9800 ) = 12600
The S&P 500 continues to test support at 1300. Bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Reversal below 1300 would confirm a correction.
* Target calculation: 1220 + ( 1220 - 1020 ) = 1420
The downward trend on Fedex appears hesitant, with the bellwether stock recovering above 90. The broader Dow Transport index has formed a broadening wedge, signaling uncertainty.
The Nasdaq 100 is testing medium-term support at 2300, while displaying a bearish divergence on 13-week Twiggs Money Flow. Reversal below the 2007 high at 2250 would warn of a strong correction, possibly to the long-term trendline.
The TSX Composite retreated sharply, breaking support at 13700 to warn of a correction. Twiggs Momentum reversal below zero would strengthen the signal. Twiggs Money Flow (21-day) reversal below zero on the $CADOW would also warn of a correction.
The FTSE 100 broke support at 5850, signaling a correction. Bearish divergence on Twiggs Money Flow (13-week) warns of selling pressure. Expect a test of primary support at 5500.
* Target calculation: 5800 - ( 6100 - 5800 ) = 5500
The DAX broke the lower border of its ascending broadening wedge, offering a target at the base of 6550. Breach of support at 7000 strengthens the signal.
The CAC-40 broke support at 4000, signaling a correction. The initial test will the long-term, rising trendline at 3800. Twiggs Money Flow (13-week) reversal below 5% would confirm selling pressure.
The Sensex respected resistance at 18500 and is retreating towards primary support at 17500. Failure would signal a decline to 16500*. Declining 13-week Twiggs Money Flow indicates long-term selling pressure.
* Target calculation: 17500 - ( 18500 - 17500 ) = 16500
The Straits Times Index respected resistance at 3120, confirming the primary down-trend. Failure of support at 2970 would offer a target of 2820*. Completion of the Twiggs Momentum peak below zero would warn of a strong down-trend.
* STI Target: 2970 - ( 3120 - 2970 ) = 2820
The Nikkei 225 and $JPDOW fell 5% or more at the Monday open, signaling a correction to test primary support (at 53 on the $JPDOW and 8800 on the Nikkei). Bearish divergence on Twiggs Money Flow warns of strong selling pressure.
The Seoul Composite Index is already undergoing a correction. Failure of support at 1920 would test 1850*. Falling 13-week Twiggs Money Flow warns of continued selling pressure.
* Target calculation: 1920 - ( 2000 - 1920 ) = 1840
The Dow Jones Taiwan Index closed below support at 205, signaling a correction. Bearish divergence on Twiggs Money Flow (13-week) indicates selling pressure.
The Shanghai Composite Index found resistance at 3000 and is retracing to test the rising trendline. Twiggs Momentum reversal below zero would warn of weakness and a possible down-trend; confirmed if support at 2650 fails.
* Target calculations: 3100 + ( 3100 - 2700 ) = 3500
The Hang Seng Index is losing momentum (indicated by penetration of the rising trendline). Declining Twiggs Money Flow (13-week) warns of selling pressure. Breach of support at 22500 would signal a primary down-trend.
* Target calculation: 22500 - ( 24500 - 22500 ) = 20500
The Bovespa Index is in a primary down-trend, but consolidating below resistance at 68000. Upward breakout would signal another test of 72000, while reversal below 64000 would offer a target of 60000*. Bullish divergence on 21-day Twiggs Money Flow indicates buying pressure, but a fall below zero would reverse the signal.
* Target calculation: 64000 - ( 68000 - 64000 ) = 60000
The JSE Overall index broke support at 31400, signaling a correction to 30000*. Bearish divergence on 13-week Twiggs Money Flow warns of selling pressure.
* Target calculation: 31500 - ( 33000 - 31500 ) = 30000
The NZX 50 Index is retracing to test its new support level at 3340; failure would warn of a correction. Strong bearish divergence on 13-week Twiggs Money Flow and subsequent reversal below zero warn of a primary down-trend.
The All Ordinaries is testing primary support at 4650. Monday's long tail indicates the presence of buyers, but failure of support would warn of a primary down-trend. Twiggs Money Flow (21-day) below zero indicates medium-term selling pressure.
The ASX 200 is similarly testing primary support at 4580. The sharp fall and a Twiggs Momentum peak below zero would warn of a primary down-trend.
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