ASX 200 hits ceiling
By Colin Twiggs
October 18th, 2011 4:00 a.m. ET (7:00 p.m. AET)
Australia's ASX 200 index encountered both the declining trendline (from April 2011) and resistance at 4300. Low volume indicates a lack of enthusiasm from buyers. The strong red candle warns of another test of 3850; follow-through below Tuesday's low would confirm.
* Target calculation: 4000 - ( 4500 - 4000 ) = 3500
A monthly chart of the S&P 500 index gives a clearer picture. Although the Nasdaq is advancing strongly, the S&P 500 is stuck below its long-term trendline. Note the similarity to March-May 2008 rally. Breakout above 1250 would be a bullish sign, similar to the May 2008 breakout above 1400, but retreat below the former resistance level (1250) would give a strong bear warning. Likewise, a 63-day Twiggs Momentum peak below the zero line would signal a strong primary down-trend.
* Target calculation: 1100 - ( 1250 - 1100 ) = 950
Japan's Nikkei 225 Index retreated Tuesday, but has completed a small double bottom, indicating a test of 9000. Bullish divergence on 13-week Twiggs Money Flow flags strong buying pressure. Breakout above 9000 would indicate an advance to 10000.
* Target calculation: 9000 + ( 9000 - 8400 ) = 9600
The Seoul Composite Index shows a weaker divergence on 13-week Twiggs Money Flow. Breakout above 1900 would offer a target of 2150, while respect would re-test primary support at 1650.
* Target calculation: 1900 + ( 1900 - 1650 ) = 2150
It is simple arithmetic to prove that it is a wise thing to have the big bet down only when you win, and when you lose to lose only a small exploratory bet, as it were.
~ Jesse Livermore in Reminiscences of a Stock Operator by Edwin Lefevre.