Bullish outlook despite retracement
By Colin Twiggs
December 3rd, 2013 2:00 am ET (6:00 pm AEDT)
Dow Jones Industrial Average retraced to test short-term support at 16000. Breach would suggest a correction to test the rising trendline at 15500. Mild bearish divergence on 13-week Twiggs Money Flow warns of medium-term selling pressure. Target for the advance is 16600* and respect of support at 15500 would suggest another advance.
* Target calculation: 15700 + ( 15700 - 14800 ) = 16600
The S&P 500 is also testing short-term support, but at 1800*. Bearish divergence on 13-week Twiggs Money Flow warns of medium-term selling pressure. Breach of support would signal a correction to the rising trendline around 1730. Respect of the trendline would indicate a healthy up-trend.
* Target calculation: 1725 + ( 1725 - 1650 ) = 1800
CBOE Volatility Index (VIX) below 15 continues to indicate low market risk.
Bellwether transport stock Fedex displays a huge surge on the monthly chart, with rising Twiggs Money Flow indicating strong buying pressure. A bullish sign for the US economy.
* Target calculation: 100 + ( 100 - 70 ) = 130
The Nasdaq 100 continues its accelerating up-trend. Rising Twiggs Money Flow, with higher troughs above the zero line, indicates strong buying pressure. Target for the advance is 3550*. Reversal below 3350 would warn of a correction. Short corrections and narrow consolidations are typical of an accelerating trend. Unsustainable in the long-term, accelerating trends almost inevitably lead to a sharp correction.
* Target calculation: 3400 + ( 3400 - 3250 ) = 3550
Overall, I am bullish on the US market. Attempting to time entries and exits from secondary movements is expensive and our strategy at Research & Investment is to remain in the market unless risks become elevated.
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