Correction not over yet
By Colin Twiggs
March 21st, 2011 5:00 a.m. ET (9:00 p.m. AEDT)
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.
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.
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.
* Target calculation: 1220 + ( 1220 - 1020 ) = 1420
Bullish divergence on 13-week Twiggs Money Flow for Fedex hints at a recovery. Breakout above $96.00 would confirm.
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.
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.
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.
* Target calculation: 5800 - ( 6100 - 5800 ) = 5500
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.
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.
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.
* Target calculation: 17500 - ( 18500 - 17500 ) = 16500
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.
* STI Target: 2970 - ( 3120 - 2970 ) = 2820
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.
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.
* Target calculation: 1920 - ( 2000 - 1920 ) = 1840
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.
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.
* 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.
* Target calculation: 22500 - ( 24500 - 22500 ) = 20500
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.
* Target calculation: 64000 - ( 68000 - 64000 ) = 60000
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.
* Target calculation: 31500 - ( 33000 - 31500 ) = 30000
$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.
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.
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.
In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.
~ Friedrich Nietzsche