Latest Trading Diary
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Bears out in force
By Colin Twiggs
October 1st, 2015 6:00 p.m. AEST (4:00 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.
Bears continue to dominate equity markets. Patches of support are visible across North America, Europe and Asia but this is likely to be a secondary rally rather than a trend change.
The Russian bear is also playing up. This time in Syria. Senator John McCain sums up the escalating crisis in the Middle East in this 15-minute video.
The S&P 500 respected support between 1870 and 1900, rallying toward another test of resistance at 2000. The 21-day Twiggs Money Flow peak just above zero continues to indicate (medium-term) selling pressure. Recovery above 2000 is unlikely, but would signal a relieving rally. Breach of support at 1870 would confirm the primary down-trend.
* Target calculation: 1900 - ( 2000 - 1900 ) = 1800
The CBOE Volatility Index (VIX) holding above 20 indicates elevated market risk.
NYSE short sales remain subdued.
Dow Jones Industrial Average is testing support at 16000. Long tails on the last two weekly candles and recovery of 13-week Twiggs Money Flow above zero indicate strong support. Breach of 16000 would confirm a primary down-trend but we are likely to see a (secondary) bear rally beforehand.
Bellwether transport stock Fedex continues to warn of a contraction in economic activity.
And retail sales growth remains subdued.
A long tail on Canada's TSX 60 indicates continued support despite the breach of 790. Declining 13-week Twiggs Momentum below zero indicates a primary down-trend. Recovery above 820 is unlikely, but would suggest a bear trap.
* Target calculation: 800 - ( 900 - 800 ) = 700
Germany's DAX signals a primary down-trend, but appears to have found secondary support at 9500. Recovery of 13-week Twiggs Money Flow above zero would suggest a bear rally.
The Footsie found strong support at 6000, with long tails and 13-week Twiggs Money Flow recovering above zero. Penetration of the descending trendline is unlikely but would warn of a bear trap. Breach of support at 6000 is more likely and would confirm the primary down-trend.
The Shanghai Composite Index continues to test government-enforced support at 3000. Recovery above 3500 is most unlikely. Breach of 3000 would warn of another sharp sell-off.
Hong Kong's Hang Seng Index broke support at 21000, confirming the primary down-trend — signaled earlier by 13-week Twiggs Money Flow.
Japan's Nikkei 225 is testing primary support between 16500 and 17000. Gradual decline on 13-week Twiggs Money Flow suggests a secondary correction, but reversal of 13-week Momentum below zero warns of a primary down-trend. Breach of 16500 would confirm.
* Target calculation: 17500 - ( 19000 - 17500 ) = 16000
India's Sensex found support at 25000 before testing resistance at 26500. 13-Week Twiggs Money Flow trough above zero indicates strong buying pressure. Recovery above 26500 would warn of a bear trap. Reversal below 25000 is less likely, but would confirm the primary down-trend.
* Target calculation: 25000 - ( 26500 - 25000 ) = 23500
The ASX 200 also shows solid support at 5000, with rising 21-Day Twiggs Money Flow indicating medium-term buying pressure. Recovery above 5200 would indicate a bear rally. Breach of 5000 remains likely, however, and would confirm the primary down-trend.
* Target calculation: 5000 - ( 5400 - 5000 ) = 4600
I think anybody who is a great investor, a good investor, a successful investor has to be a person who can be both aggressive and defensive..... have enough fear to have the caution. But you can't let the fear control you.
~ Ray Dalio, Bridgewater Associates
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