Europe and Asia pull back
By Colin Twiggs
July 27th, 2015 4:00 p.m. AET (2:00 a.m. EDT)
Advice herein is provided for the general information of readers and does not have regard to any particular person's investment objectives, financial situation or needs. Accordingly, no reader should act on the basis of any information contained herein without first having consulted a suitably qualified financial advisor.
Germany's DAX retreated below 11500, warning of a bull-trap and correction to test support at 10700/11000. Recovery above 11750 is unlikely at present.
* Target calculation: 12500 + ( 12500 - 11000 ) = 14000
The Footsie similarly retreated below 6750, warning of another test of 6450/6500. Reversal of 13-week Twiggs Money Flow below zero would indicate a primary down-trend.
* Target calculation: 7000 + ( 7000 - 6500 ) = 7500
China's Shanghai Composite is likely to find stubborn resistance at 4000. Government efforts to stem the crash are unlikely to restore credibility to stock prices. The large divergence on 13-week Twiggs Money Flow continues to warn of selling pressure.
* Target calculation: 4000 - ( 5000 - 4000 ) = 3000
Japan's Nikkei 225 is the least bearish, testing resistance at 21000. Breakout would confirm a fresh advance.
* Target calculation: 21000 + ( 21000 - 19000 ) = 23000
India's Sensex is testing new support at 28000, while 13-week Twiggs Money Flow warns of medium-term selling pressure. Breach of support is likely, but respect of support at 27000 would signal an up-trend.
* Target calculation: 30000 + ( 30000 - 27000 ) = 33000
The ASX 200 respected resistance at 5650/5700 but 13-Week Twiggs Money Flow oscillating above zero continues to indicate long-term buying pressure. Respect of support at 5400 is likely and recovery above 5700 would signal another test of 6000.
The prevailing wisdom is that markets are always right. I take the opposition position. I assume that markets are always wrong. Even if my assumption is occasionally wrong, I use it as a working hypothesis. It does not follow that one should always go against the prevailing trend. On the contrary, most of the time the trend prevails; only occasionally are the errors corrected. It is only on those occasions that one should go against the trend. This line of reasoning leads me to look for the flaw in every investment thesis.... I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Or, if I think the trend has been carried to excess, I may probe going against it. Most of the time we are punished if we go against the trend. Only at an inflection point are we rewarded.
~ George Soros
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