S&P 500 not yet out of the woods
By Colin Twiggs
March 31st, 2014 4:00 am ET (7:00 pm AEDT)
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*.
* Target calculation: 1850 + ( 1850 - 1750 ) = 1950
CBOE Volatility Index (VIX) below 15, however, continues to indicate low risk typical of a bull market.
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.
* 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.
Every strike brings me closer to the next home run.
~ Babe Ruth