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S&P 500 correction threat

By Colin Twiggs
March 25th, 2014 4:00 am ET (7:00 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.


The S&P 500 continues to threaten a correction. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure. Breach of support at 1840 would confirm a correction, while recovery above 1880 would signal an advance to 1950*.

S&P 500

* Target calculation: 1850 + ( 1850 - 1750 ) = 1950

CBOE Volatility Index (VIX) at 15, however, suggests low market risk.

VIX Index

The Nasdaq 100 already indicates a correction after bearish divergence on 21-day Twiggs Money Flow and breach of support at 3640. Follow-through below 3600 would confirm, warning of a test of primary support at 3400/3420. Recovery above 3650, however, would signal that all bets are off.

Nasdaq 100

* Target calculation: 3600 + ( 3600 - 3400 ) = 3800

Bellwether Transport stock Fedex is headed for another test of primary support at $129/$130 on the monthly chart. Recovery above $145 would offer a target of $170*, but breach of support would warn of a primary down-trend — suggesting a broad economic slow-down. Breach of the (secondary) rising trendline, and support at $120, would strengthen the signal.

Fedex

* Target calculation: 145 + ( 145 - 120 ) = 170

Canada's TSX 60 is testing resistance at 820 on the monthly chart. Sharp divergence on 13-week Twiggs Money Flow warns of medium-term selling pressure. Reversal below 814 would warn of a correction, while follow-through above 826 would signal an advance to 850*.

TSX 60

* Target calculation: 810 + ( 810 - 770 ) = 850


Russia has made its choice in favor of democracy. Fourteen years ago, independently, without any pressure from outside, it made that decision in the interests of itself and interests of its people — of its citizens. This is our final choice, and we have no way back.

~ Vladimir Putin (2005)

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