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S&P 500 not yet out of the woods

By Colin Twiggs
March 31st, 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 rallied off support at 1840/1850 but a weak close warns of further resistance. Bearish divergence on 21-day Twiggs Money Flow (not shown) indicates medium-term selling pressure. I have highlighted daily Volume that is more than 1 standard deviation outside the 50-day moving average on the graph below. The latest red bar showed strong resistance at triple-witching hour, but the last two rallies on low volume suggest a lack of commitment from buyers. Reversal below 1840 would signal a correction. Breakout above 1880 is less likely, but would signal an advance to 1950*.

S&P 500

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

CBOE Volatility Index (VIX) below 15, however, continues to indicate low risk typical of a bull market.

VIX Index

The Nasdaq 100 below 3600 indicates a correction. Penetration of the (secondary) rising trendline would strengthen the signal. Sharply falling 21-day Twiggs Money Flow, following bearish divergence, warns of strong selling pressure and a test of primary support at 3400/3420. Recovery above 3650 is unlikely, but would indicate another advance.

Nasdaq 100

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

Bellwether Transport stock Fedex is headed for another test of primary support at $128/$130. Reversal of 13-week Twiggs Money Flow below zero warns of strong selling pressure and a primary down-trend. Failure of primary support would confirm, suggesting a broad economic slow-down.

Fedex

Every strike brings me closer to the next home run.

~ Babe Ruth

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