Low volumes on the recent rally and rising volume on the latest retracement signal trend weakness on the Dow and S&P 500. Next Friday is triple-witching hour, when options and futures contracts on market indexes expire in the last hour of trading, and could expose weaknesses in the market.

The Dow Transport Index confirms general economic activity is declining, but strong increases in hourly wage data have raised fears of further rate hikes. The yield differential remains negative and is likely to cause problems in the months ahead.

Crude oil is falling sharply. Gold is likely to weaken and the dollar to strengthen.

The Dow Industrial Average is retracing sharply and appears headed for a test of intermediate support at 11250. Failure of this level would signal a secondary correction that may test primary support at 10700.

Medium Term: The index continues to present low volumes, placing a question-mark over buyers' ability to break through major resistance at 11650. Twiggs Money Flow (21-day) reversed to zero, signaling uncertainty.

Long Term: The Dow continues in a primary up-trend, with resistance from the all-time high at 11650 and support at 10700.

The Dow Jones Transportation Average and lead indicators Fedex and UPS confirm that the economy is slowing -- all having started primary down-trends.

The Nasdaq 100 displays a bullish inverted hammer on Thursday [Th]. An open above the body of the candle would signal the start of another rally, with shorts protecting their profits. A rise above 1580 would confirm -- and a Twiggs Money Flow (21-day) trough above zero would be another bullish sign. A fall below 1560 would signal failure -- and a test of intermediate support at 1540.

Rising volume on the latest S&P 500 retracement is a bearish sign, especially after low volume during the last rally. Expect a test of intermediate support at 1290. If that fails, we could see a test of primary support at 1220. Respect of 1290, on the other hand, would signal an attempt at the May high of 1325.

Medium Term: A Twiggs Money Flow (21-day) trough above zero would be bullish.

Long Term: The S&P 500 remains in a slow primary up-trend.

Treasury yields

Strong rises in hourly wage data rekindled fears of further rate hikes, causing a retracement in the recent down-trend in 10-year Treasury note yields. 

Medium Term: The yield differential (10-year T-notes minus 13-week T-bills) reversed towards zero (as short-term yields fell). The trend has not reversed and we can expect further weakness.

Long Term:  Probability of recession in the next four quarters increased to 33 per cent, according to the Wright Model (developed by Fed economist Jonathan H Wright). According to the model, negative yield differentials and increases in the fed funds rate raise the likelihood of a recession. A spike that reaches 50% would warn of a stronger down-turn than the "soft-landing" most investors hope for.

Gold

Spot gold formed a bearish descending triangle with support at $600. A downward breakout would signal a test of primary support at $540.

Medium Term: Falling crude oil prices should weaken gold and strengthen the dollar.

Long Term: The primary trend is upward, but remains weak.

Crude Oil

Light Crude is in a strong down-trend after breaking through support at $72. The next major support level is at $59/$60, but do not rule out a retracement to test the new resistance level (at $72).

Currencies

The US Dollar Index formed an ascending triangle in the last few weeks, mirroring the descending triangle on the gold chart. An upward breakout would signal an attempt at 87.00. Though less likely, a fall below 84.50 would warn of a test of major support at 83.50 (and a bullish sign for gold).

United Kingdom

The FTSE 100 made a downward breakout from a bearish rising wedge -- confirmed if intermediate support at 5850 fails. Watch for a test of primary support at 5500.

Medium Term: Twiggs Money Flow (21-day) is bearish after a sharp fall.

Long Term: The primary up-trend continues until primary support at 5500 is penetrated.

Japan

The Nikkei 225 is headed for a second test of the new support level at 15700.

Medium Term: The intermediate rally is likely to test resistance at the April high of 17500. Twiggs Money Flow (21-day) formed a narrow triangle around the zero line, indicating continued uncertainty. 

Long Term: The primary up-trend is up.

ASX Australia

The All Ordinaries made a false break through resistance at 5100, reversing on the day following the breakout. Long tails in the last two days indicate buying at the first line of support -- a bullish sign. If support at 5050 holds, expect another breakout.

Medium Term: Another breakout above 5100 would signal a test of the May high of 5300. Failure of intermediate support at 4950 appears less likely, but would signal a test of primary support at 4800. Twiggs Money Flow (21-day) is rising, signaling accumulation.

Long Term: The All Ordinaries continues in a primary up-trend.