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Bullish outlook despite retracement

By Colin Twiggs
December 3rd, 2013 2:00 am ET (6:00 pm AEDT)

These extracts from my trading diary are for educational purposes. Any advice contained therein is provided for the general information of readers and does not have regard to any particular person's investment objectives, financial situation or needs and must not be construed as advice to buy, sell, hold or otherwise deal with any securities or other investments. Accordingly, no reader should act on the basis of any information contained therein without first having consulted a suitably qualified financial advisor. Full terms and conditions can be found at Terms of Use.


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.

Dow Jones Industrial Average

* 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.

S&P 500

* Target calculation: 1725 + ( 1725 - 1650 ) = 1800

CBOE Volatility Index (VIX) below 15 continues to indicate low market risk.

VIX Index

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.

Fedex

* 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.

Nasdaq 100

* 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.



Despite a voluminous and often fervent literature on "income distribution," the cold fact is that most income is not distributed: It is earned.

~ Thomas Sowell

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