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Markets warn of a correction

By Colin Twiggs
May 16th, 2011 4:00 a.m. ET (6:00 p.m. AET)

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.


The Dow Jones Global Index retreated below its support level at 268. Downward breakout from the consolidation warns of a correction. The sharp decline on 21-day Twiggs Money Flow indicates selling pressure. Failure of support at 260 (and breach of the long-term trendline) would warn that the primary up-trend is losing momentum.

Dow Jones Global Index

USA

Dow Jones Industrial Average

The Dow continues to test medium-term support between 12400 and 12500; failure would signal a correction. Bearish divergence on 21-day Twiggs Money Flow indicates selling pressure. Recovery above 12900 is most unlikely but would indicate an advance to 13200*.

Dow Jones Industrial Average

* Target calculation: 12400 + ( 12400 - 11600 ) = 13200

S&P 500

The S&P 500 reversed below 1350 and is testing medium-term support at 1330; failure would confirm a correction. Breach of the rising trendline would also warn that the up-trend is weakening. Bearish divergence on 13-week Twiggs Money Flow indicates selling pressure. Recovery above 1350 is most unlikely, but would indicate an advance to 1450*.

Standard & Poors 500 chart

* Target calculation: 1350 + ( 1350 - 1250 ) = 1450

Transport

Bellwether stock Fedex continues to test resistance at 96/98. Breakout would signal another primary advance, while reversal below 85 would signal a primary reversal. UPS breakout above its February high would confirm an advance — a positive sign for the economy — while reversal below its March low would also warn of a down-trend.

Dow Transport Index

Technology

The Nasdaq 100 retreated below support at 2400; breach of 2350 would warn of a correction. Bearish divergence on 13-week Twiggs Money Flow indicates strong selling pressure. Breach of primary support at 2200 would signal a reversal, while recovery above 2400 would suggest an advance to 2600*.

Nasdaq 100

* Target calculation: 2400 + ( 2400 - 2200 ) = 2600

Canada: TSX

TSX Composite Index reversed below primary support at 13500, confirming a primary down-trend. A Twiggs Momentum peak below the zero line would strengthen the signal.

TSX Composite

The $CADOW displays a similar pattern. Bearish divergence on 21-day Twiggs Money Flow indicates long-term selling pressure.

DJ Canada

United Kingdom

The FTSE 100 continues to consolidate below 6100. Failure of support at 5860 would warn of a correction to 5600. Bearish divergence and Twiggs Money Flow (21-day) below zero indicate selling pressure.

FTSE 100 Daily

* Target calculation: 6100 + ( 6100 - 5600 ) = 6600

Germany

The DAX reversed below support at 7450; failure of short-term support at 7350 would warn of a correction. Bearish divergence on 21-day Twiggs Money Flow indicates selling pressure.

German DAX

* Target calculation: 7500 + ( 7500 - 6500 ) = 8500

France

The CAC-40 continues to signal buying pressure on 13-week Twiggs Money Flow. Breakout above 4150 would signal a primary advance to 4750. Breach of the long-term trendline, however, would warn that the primary trend is losing momentum.

France CAC-40

India

The Sensex found short-term support at 18200, but 21-day Twiggs Money Flow below zero warns of continued selling pressure. Expect a brief rally followed by a decline to test primary support at 17500.

Sensex India

Singapore

The Straits Times Index is headed for another test of support at 3100. Failure would warn of another test of primary support at 2920.

Singapore

Japan

The Nikkei 225 also retreated Monday, headed for a test of medium-term support at 9400. Failure would warn of another test of primary support at 8600. The primary trend remains down and intervention by the BOJ is unlikely to change this.

Japan

South Korea

The Seoul Composite Index is testing support around 2100; failure would indicate a correction to the primary trendline. Bearish divergence on 21-day and 13-week Twiggs Money Flow warn of a reversal.

South Korea

* Target calculation: 2100 + ( 2100 - 1950 ) = 2250

Taiwan

The Dow Jones Taiwan Index retraced to test its new support level at 212. Bearish divergence on 21-day Twiggs Money Flow warns of medium-term selling pressure. Breach of the rising trendline would warn of another test of primary support at 196.

Taiwan Index

* Target calculation: 220 + ( 220 - 195 ) = 245

China

The Shanghai Composite Index is testing support at 2850; failure would signal a correction to primary support at 2650. Bearish divergence on 21-day Twiggs Money Flow warns of selling pressure.

Shanghai Composite Index

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

The Hang Seng Index is testing support at 23000 Monday; failure would test primary support at 22200. Reversal of 21-day Twiggs Money Flow below zero indicates selling pressure.

Hang Seng Index Hongkong

Brazil: Bovespa

The Bovespa Index reversed below primary support at 64000, confirming another decline with a target of 58000*. Twiggs Money Flow below zero indicates selling pressure.

Brazil Bovespa

* Target calculation: 64000 - ( 70000 - 64000 ) = 58000

South Africa: JSE

The JSE Overall Index is testing support at 31400; failure would indicate a correction to primary support at 30000. Bearish divergence on 21-day Twiggs Money Flow indicates selling pressure. Recovery above 33000 is unlikely but would signal an advance to 36000*.

JSE Overall Index

* Target calculation: 33000 + ( 33000 - 30000 ) = 36000

New Zealand: NZX

The NZ50 reached its target of 3550. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breach of the rising trendline, however, would warn of a correction; failure of support at 3425 would confirm.

NZX 50 Index

* Target calculation: 3425 + ( 3425 - 3300 ) = 3550

Australia: ASX

The All Ordinaries is headed for a test of primary support at 4560. Declining 21-day Twiggs Money Flow indicates medium-term selling pressure.

ASX All Ordinaries

* Target calculation: 5000 + ( 5000 - 4600 ) = 5400

In the longer term, ASX 200 breach of support at 4500 would signal a primary trend reversal; confirmed if 13-week Twiggs Money Flow crosses below zero.

ASX 200


If a soldier is rigid, he won't win; If a tree is rigid, it will come to its end. Rigidity and power occupy the inferior position; Suppleness, softness, weakness and delicateness occupy the superior position.

~ Lao Tzu: Tao-Te Ching

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