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Correction not over yet

By Colin Twiggs
March 21st, 2011 5:00 a.m. ET (9:00 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.


Global

Economic losses from the devastating earthquake and tsunami in Japan are likely to exceed $100-billion according to EQECAT, but insured losses are expected to be lower — in the region of $25- to $35-billion.

The Dow Global index ($DJWO) found support at 246, rallying to test the upper trend channel. There is no indication as yet that the correction is over. Twiggs Money Flow (21-day) reversal below zero would warn of further selling pressure. The primary trend remains up, but breach of support at 246 (and the rising [lime] trendline) would test primary support at 236.

Dow Jones Global Index

USA

Dow Jones Industrial Average

The Dow also rallied and is likely to test resistance (and the upper trend channel) at 12000. Failure of short-term support at 11600 would signal another downward leg on the correction. Penetration of the rising trendline warns that momentum is slowing, but we are still way above primary support at 11000.

Dow Jones Industrial Average

S&P 500

The S&P 500 is similarly headed for a test of resistance at 1300. Bearish divergence on 13-week Twiggs Money Flow continues to warn of selling pressure. Failure of short-term support at 1260 would indicate another downward leg, but the correction remains way above primary support at 1180.

Standard & Poors 500 chart

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

Transport

Bullish divergence on 13-week Twiggs Money Flow for Fedex hints at a recovery. Breakout above $96.00 would confirm.

Dow Transport Index

Technology

The Nasdaq 100 bearish divergence on 13-week Twiggs Money Flow is stronger than the Dow or S&P 500 and suggests that the correction will test the long-term trendline at 2050.

Nasdaq 100

Canada: TSX

The TSX Composite broke support at 13700, indicating a correction. Twiggs Momentum reversal below zero would strengthen the signal — as would failure of short-term support at 13500.

TSX Composite

United Kingdom

The FTSE 100 found short-term support at 5600, and is rallying to test resistance at 5850. Bearish divergence on Twiggs Money Flow (13-week) continues to warn of selling pressure. Failure of primary support at 5500 would warn of a reversal.

FTSE 100 Daily

* Target calculation: 5800 - ( 6100 - 5800 ) = 5500

Germany

The DAX found short-term support at 6550, the base of the broadening wedge; reversal below this level would warn of a further down-swing.

German DAX

France

The CAC-40 found short-term support at 3700; reversal below this level would indicate another down-swing. Failure of primary support at 3600 would warn of a reversal. Twiggs Money Flow (13-week) reversal below 5% would signal further selling pressure.

France CAC-40

India

The Sensex is in a primary down-trend and headed for a test of support at 17500; failure would signal a decline to 16500*. Declining 13-week Twiggs Money Flow continues to indicate long-term selling pressure.

Sensex India

* Target calculation: 17500 - ( 18500 - 17500 ) = 16500

Singapore

The Straits Times Index is also in a primary down-trend. Breach of support at 2970 offers a target of 2820*. Completion of a Twiggs Momentum peak below zero confirms a strong down-trend.

Singapore

* STI Target: 2970 - ( 3120 - 2970 ) = 2820

Japan

The Nikkei 225 rallied off primary support, between 8600 and 8800. Bearish divergence on 13-week Twiggs Money Flow continues to warn of strong selling pressure.

Japan

South Korea

The Seoul Composite Index encountered strong support at 1920. Failure would test 1850*, but bullish divergence on 21-day Twiggs Money Flow warns of medium-term buying pressure. Breakout above 2020 would signal that the correction is over.

South Korea

* Target calculation: 1920 - ( 2000 - 1920 ) = 1840

Taiwan

The Dow Jones Taiwan Index is also undergoing a correction. Twiggs Money Flow (13-week) indicates mild selling pressure. Breakout above the upper channel would indicate that the correction has ended.

Taiwan Index

China

The Shanghai Composite Index continues to test medium-term support at 2900; failure would test the rising trendline. Long-term, breakout above 3150 would confirm a primary up-trend, while failure of support at 2650 would signal a down-trend.

Shanghai Composite Index

* Target calculations: 3100 + ( 3100 - 2700 ) = 3500

The Hang Seng Index broke support at 22500, signaling a primary down-trend; a bearish sign for the Shanghai and Shenzhen indices. Twiggs Money Flow (13-week) reversal below zero confirms the signal.

Hang Seng Index Hongkong

* Target calculation: 22500 - ( 24500 - 22500 ) = 20500

Brazil: Bovespa

The Bovespa Index is in a primary down-trend, but continues to consolidate below resistance at 68000. Upward breakout would signal another test of 72000, while reversal below 64000 would offer a target of 60000*. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure, favoring an upward breakout.

Brazil Bovespa

* Target calculation: 64000 - ( 68000 - 64000 ) = 60000

South Africa: JSE

The JSE Overall index rallied off primary support at 30000*. Expect a test of the upper trend channel around 31400, but failure of support would warn of a primary down-trend. Declining 13-week Twiggs Money Flow continues to indicate selling pressure.

JSE Overall Index

* Target calculation: 31500 - ( 33000 - 31500 ) = 30000

New Zealand: NZX

$NZDOW breakout below its trend channel warns of a correction. Like the NZX50, strong bearish divergence on 13-week Twiggs Money Flow and reversal below zero suggest a primary down-trend.

NZX 50 Index

Australia: ASX

The All Ordinaries rallied off primary support at 4650, the sharp rise in Twiggs Money Flow (21-day) indicating short-term buying pressure. The correction is not yet over and we can expect a re-test of the band of support between 4550 and 4650.

ASX All Ordinaries

The ASX 200 similarly rallied off primary support at 4580. Bullish divergence on 13-week Twiggs Money Flow indicates longer term buying pressure — and suggests another attempt at 5000.

ASX 200


In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.

~ Friedrich Nietzsche

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