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Crude and stocks retrace

By Colin Twiggs
March 29, 2016 5:00 p.m. AEDT (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.

Crude oil continues to influence stock prices. Light Crude (June 2016 Futures) respected resistance at $42.80/barrel. Reversal below $39 would warn of another test of primary support at $32. Penetration of the descending trendline suggests that a bottom is forming. Breach of $32 is therefore unlikely but would offer a target of $22/barrel*. Further consolidation between $32 and $42 remains likely.

WTI Light Crude June 2016 Futures

Global

Dow Jones Global Index respected its descending trendline and reversal below 300 would suggest another test of primary support at 270. 13-Week Twiggs Momentum peaks below zero continue to warn of a strong primary down-trend.

Dow Jones Global Index

* Target calculation: 270 - ( 300 - 270 ) = 240

North America

Corporate buybacks are likely to dry up during April earnings season, leaving expected outflows from managed funds to exert downward pressure on stock prices.

A pennant consolidation below 2050 suggests continuation of the rally to test 2100. But 13-week Twiggs Momentum below zero warns of a primary down-trend. I remain wary of this rally. Reversal below 2000 would warn of another test of primary support at 1820 to 1870.

S&P 500 Index

A CBOE Volatility Index (VIX) below 16 indicates that (short-term) market risk has eased. But longer-term measures continue to warn of elevated risk.

S&P 500 VIX

Canada's TSX 60 consolidation in a narrow band below resistance at 800 suggests continuation of the rally. Recovery of 13-week Twiggs Momentum above zero would indicate that the primary down-trend has ended. Penetration of the descending trendline suggests that a bottom is forming. Reversal below 780 would warn of another test of primary support, while completion of a higher trough would signal a primary up-trend.

TSX 60 Index

Europe

Dow Jones Euro Stoxx 50 retreat below 3000 indicates another test of primary support at 2700. A lower peak on 13-week Twiggs Momentum would warn of a strong down-trend. Recovery above 3100 is unlikely but would suggest a test of the descending trendline at 3300.

DJ Euro Stoxx 50

* Target calculation: 3000 - ( 3500 - 3000 ) = 2500

Germany's DAX encountered resistance at 10000. Breakout would indicate a test of the descending trendline. Declining 13-week Twiggs Momentum below zero, however, warns of a primary down-trend. Retreat below 9300 would signal another decline.

DAX

* Target calculation: 9500 - ( 11000 - 9500 ) = 8000

Narrow consolidation below resistance at 6250 suggests continuation of the Footsie rally to 6500. Again, 13-week Twiggs Momentum below zero warns of a primary down-trend. Reversal below 6000 would indicate another test of primary support at 5500. Breach of the descending trendline suggests that a bottom is forming, so penetration of primary support is unlikely. And completion of a higher trough would signal a primary up-trend.

FTSE 100

* Target calculation: 6000 - ( 6500 - 6000 ) = 5500

Asia

The Shanghai Composite Index is testing resistance at 3000. A more dovish stance from the Fed has eased pressure on the Yuan and increased liquidity. Coupled with promises of a further $370 billion in infrastructure spending, that could push the index above 3000. But I would be surprised to see a trend reversal. Declining 13-week Twiggs Momentum below zero continues to indicate a strong primary down-trend.

Shanghai Composite Index

* Target calculation: 3000 - ( 3600 - 3000 ) = 2400

Japan's Nikkei 225 Index also encountered stubborn resistance: at 17000. Respect would warn of another test of 15000. Breakout would encounter further resistance at 18000. Declining 13-Week Twiggs Momentum below zero warns of a strong down-trend.

Nikkei 225 Index

* Target calculation: 17000 - ( 20000 - 17500 ) = 15000

India's Sensex retraced after breaking resistance at 25000. Respect of support would signal a test of the upper trend channel at 26000. Declining 13-week Twiggs Momentum below zero indicates a strong primary down-trend. Respect of the trend channel is likely and would warn of another test of 22500*.

SENSEX

* Target calculation: 25000 - ( 27500 - 25000 ) = 22500

Australia

The ASX 200 is testing support at 5000 after respecting the descending trendline. Declining 13-week Twiggs Momentum below zero warns of a primary down-trend. Breach of 5000 would warn of another test of primary support at 4700. Breach of 4700 would offer a target of 4200*.

ASX 200

* Target calculation: 4700 - ( 5200 - 4700 ) = 4200

The ASX 300 Banks Index respected its descending trendline. Breach of 78.00 warns of another test of primary support at 72.00. Declining 13-week Twiggs Momentum below zero again warns of a primary down-trend.

ASX 300 Banks

A wise man proportions his belief to the evidence.

~ David Hume (1711-1776)

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