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Selling pressure rises

By Colin Twiggs
May 7th, 2014 5:00 am EDT (7:00 pm AET)

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.



Research & Investment: Performance update

Our ASX200 Prime Momentum strategy returned +30.04%* for the 12 months ended 30th April 2014, outperforming the benchmark ASX200 Accumulation Index by +19.58%.

ASX200 Prime Momentum

The S&P 500 Prime Momentum strategy has been running six months, since November 2013, and returned 7.79%* for the period, compared to 8.36% for the S&P 500 Total Return Index.

A sell-off of momentum stocks affected performance in April, but macroeconomic and volatility filters indicate low risk typical of a bull market and we see current weakness as a buying opportunity.

* Results are before fees, unaudited and subject to revision.

S&P 500

S&P 500 displays little direction while bearish divergence on 13-week Twiggs Money Flow continues to signal selling pressure. Reversal below 1850 would warn of a correction to test primary support at 1750. Breakout above 1900, however would signal an advance to 1950.

S&P 500

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

The primary trend remains upward and CBOE Volatility Index (VIX) below 14 continues to indicate low risk typical of a bull market.

VIX Index

The Nasdaq 100 is struggling to break 3600 and reversal below 3400 would warn of a down-swing to the primary trendline. 13-Week Twiggs Money Flow below zero warns of selling pressure, but breakthrough above 3600 would suggest another advance.

Nasdaq 100

* Target calculation: 3700 + ( 3700 - 3400 ) = 4000

The Russell 2000 is testing primary support at 11.00. Follow-through below 10.80 would confirm. Small caps outstripped large caps over the last 18 months, but now appear to be faltering. A 13-week Twiggs Momentum cross below zero would also warn of small cap reversal to a down-trend. A small cap down-trend would not necessarily mean large caps will follow: large caps significantly outperformed small caps for more than 3 years leading up to the 2000 Dotcom crash.

Russell 2000

Canada's TSX 60 is retracing, but unlikely to break support at 820 and the rising trendline. Rising 13-week Twiggs Money Flow, with troughs above zero, indicates long-term buying pressure. Respect of support would suggest an advance to the 2008 high of 900.

TSX 60

I have always been fond of the West African proverb "Speak softly and carry a big stick; you will go far."

~ Theodore Roosevelt (1900)

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