Dow breaks support
By Colin Twiggs
January 21st, 2015 11:30 a.m. AEDT (7:30 p.m. EST)
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My newsletters on December 10th and January 14th warned of the approaching storm across global markets. The Dow Jones Industrial Average has now broken primary support at 16000, signaling a primary down-trend. Reversal of 13-week Twiggs Money Flow below zero, indicating selling pressure, strengthens the warning. Target for the decline is 14000*.
* Target calculation: 16000 - ( 18000 - 16000 ) = 14000
S&P 500 breach of primary support at 1870 confirms the Dow signal. The long tail on the latest candle indicates the continued presence of buyers (highlighted by rising 21-day Twiggs Money Flow). Expect retracement to test the new resistance level but respect is likely and follow-through below 1850 would be the final nail in the coffin. The medium-term target is 1700* but long-term, expect a test of 1500.
* Target calculation: 1900 - ( 2100 - 1900 ) = 1700
CBOE Volatility Index (VIX) testing 30 suggests elevated risk.
Gold and Treasury Yields
Bonds have benefited from the flight to safety, with 10-year Treasury Yields closing below 2.0%. Follow-through below 1.90% would suggest a test of the 2015 low at 1.65%.
Gold likewise rallied to $1100 per ounce. But falling oil prices and low inflation are likely to undermine any long-term demand for gold as a store of value.
We may learn wisdom by three methods: first, by reflection, which is noblest; second, by imitation, which is easiest; and third by experience, which is the most bitter.
~ The Analects of Confucius.
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