Most indexes, with the possible exception of the FTSE 100 show signs of distribution. It is too early to tell whether this will mean a correction or merely consolidation.

January light crude, currently at $62.03/barrel, threatens another rally. The euro encountered resistance at $1.3350 against the dollar and is consolidating at $1.32; appearing headed for a test of the 2005 high of $1.37 in the longer term. Gold retreated to $623.90 after testing $650 and appears headed for a test of support at $615.

Probability of recession in the next four quarters increased to 44 per cent according to the Wright model. A rise above 50% would be cause for concern.

The Dow Industrial Average rallied to test resistance at 12350. The short retracement ending Friday is a bullish sign. Consolidation above 12200 would warn of an upward breakout.

Medium Term: The break below the trend channel of the last 5 months (drawn at 2 standard deviations around a linear regression line) signals that the up-trend is slowing and bearish divergence on Twiggs Money Flow (21-day) warns of distribution. The short-term pattern appears to favor another leg up, but a fall below 12000 would warn of a secondary correction.

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

A lower short-term high at [T] would mean that the Dow Jones Transportation Average is likely to test intermediate support at 4600. Failure of this level would indicate a test of primary support at 4150, but respect of 4600, on the other hand, would mean another test of resistance at 5000. Breakout above 5000 would confirm the existence of a bull market.

The Nasdaq Composite has encountered selling into the latest rally, as indicated by the break of the trendline on Twiggs Money Flow. A test of the new support level at 2370 remains likely. If the support level holds, that would confirm the up-trend, while failure would signal trend weakness.

The S&P 500 encountered mid-week resistance similar to the Dow.

Medium Term: The current up-swing continues, but bearish divergence on Twiggs Money Flow (21-day) warns of distribution. Watch for a break of the 5-month trendline which would warn of a retracement.

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

The FTSE 100 recovered strongly above 6100 (from the April high).

Medium Term: The small double bottom respected support at 6000, the 100-day moving average, and the long-term trendline. Twiggs Money Flow (21-day) recovered strongly above zero. A rise above the recent high of 6250 would complete a bull signal.

Long Term: The primary up-trend continues, with support at 5500.

The Nikkei 225 is encountering strong resistance at 16500, indicated by weak closes for the last two days.

Medium Term: Penetration of support at 15700, or reversal of Twiggs Money Flow (21-day) below the zero line, would warn of a test of primary support at 14200.

Long Term: The index remains in a primary up-trend. Primary support will be weakened if the index fails to test its previous high of 17500.

The All Ordinaries is having difficulty overcoming resistance at 5450/5460, with strong volume accompanying the consolidation. Readers will observe an ascending triangle between 5300 and 5460. While this is normally a continuation pattern in an up-trend, I would expect volume to dry up prior to a breakout. A fall below 5400 would indicate potential pattern failure, while breakout above 5460 would signal completion of the pattern and continuation of the up-trend.

Medium Term: A fall below 5300 would signal that the lower border of the trend channel (channel lines drawn at 2 standard deviations around a linear regression line) is likely to be tested, while upward breakout from the consolidation would indicate a test of the upper channel line. Twiggs Money Flow (21-day) displays a bearish divergence warning of distribution and favoring a downward breakout.

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