Crude and stocks retrace

By Colin Twiggs
March 29, 2016 5:00 p.m. AEDT (2:00 a.m. EDT)

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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.

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.

* 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.

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.

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.

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.

* 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.

* 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.

* 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.

* 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.

* 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*.

* 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*.

* 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.

A wise man proportions his belief to the evidence.

~ David Hume (1711-1776)

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