There is profit-taking across a broad range of markets, perhaps induced by the US mid-term elections and the uncertainty resulting from the political shift. While there may be some weakness, this does not amount to a change in the primary trend which remains positive.

Crude oil is consolidating between $57 and $62/barrel. Whether this will lead to a reversal of the recent down-trend is too early to tell. The dollar continues to weaken, headed for a test of $1.30 against the euro, the high of the last 6 months. Gold continues in a strong up-trend after a bullish, short, mid-week retracement.

Probability of recession in the next four quarters remains at 41 per cent according to the Wright model. A climb above 50% would be cause for concern.

The Dow Industrial Average encountered resistance at the October high of 12175, highlighted by higher volume on Thursday [Th]. However, Friday's doji candle signals uncertainty and we could see another attempt at a new high.

Medium Term: A fall below 12000 would signal a test of the first line of primary support at 11650/11700. A close above 12175, on the other hand, would indicate that the target of 12700 (calculated as 11650 + {11650 - 10700}) is still achievable. Divergence on Twiggs Money Flow (21-day) favors the bearish scenario.

Long Term: The Dow is in a primary up-trend with support at 10700.

The Dow Jones Transportation Average respected support at 4600 and appears ready to test resistance at 5000. A break above the May high would signal reversal to a primary up-trend and confirm the existence of a bull market.

Note how closely the index shadows Fedex. Divergences between the two have often preceded a trend reversal in the past.

The Nasdaq Composite Index broke above its April high of 2370, a positive sign for the broader equity market, and the Nasdaq 100 appears about to follow suit. Divergence on Twiggs Money Flow (21-day) warns of a retracement, possibly testing the 100-day moving average.

The S&P 500 is consolidating at the upper trend channel (drawn at 2 standard deviations around a linear regression line).

Medium Term: Divergence on Twiggs Money Flow (21-day) warns of a reversal to test the lower border of the channel.

Long Term: The S&P 500 is in a primary up-trend with support at 1220.

The FTSE 100 respected support at 6100, but the marginal new high warns of further weakness.

Medium Term: Twiggs Money Flow (21-day) exhibits a bearish triple divergence, warning of another test of support at 6100. Failure of this level would signal a secondary correction -- more serious because we are only marginally above the April high and a correction would be likely to test primary support at 5500. If, on the other hand, support at 6100 holds, the target of 6700 (calculated as 6100 + {6100 - 5500}) is still achievable.

Long Term: The primary up-trend continues.

The Nikkei 225 penetrated the lower border of the trend channel (drawn at 2 STD around a linear regression line) and is headed for the 100-day moving average. A clear break below these two lines would be a bear signal.

Medium Term: Twiggs Money Flow (21-day) is also trending lower, a bearish sign. A retracement that respects the moving average (from below) would signal a test of primary support at 14200 -- more bearish because of the failure to reach 17500 and make a new high.

Long Term: The index remains in a primary up-trend.

The All Ordinaries retraced for two days before consolidating with an inside day on Friday, strong volume indicating buying support. A rise above Thursday's high would signal the start of another (expected) short-term rally, while a fall below Thursday's low would warn of another short-term down-swing to test the new support level of 5320.

Medium Term: Expect a test of the upper border of the trend channel (channel lines are drawn at 2 standard deviations around a linear regression line). Twiggs Money Flow (21-day) is above zero and trending upwards, signaling long-term accumulation.

Long Term: The All Ordinaries remains in a primary up-trend with support at 4800.