The Bulls Are Back

By Colin Twiggs
April 21, 2007 5.00 p.m. AET (1:00 a.m. ET)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment advice. Full terms and conditions can be found at Terms of Use.

USA: Dow, Nasdaq and S&P500

The Dow Jones Industrial Average is trending strongly after breaking above its previous high. The recent correction [A] failed to test support at the previous high of 11600: a clear sign that we are entering phase 3 of a bull market. Twiggs Money Flow (21-day) is climbing sharply, signaling long-term accumulation.

Reversal below 12000 is highly unlikely, but would signal a secondary correction.

Long Term: The primary up-trend continues. The first line of support is at the May 2006 peak of 11600, with primary support at the June 2006 low of 10700. Recognize that the market is awash with too much money chasing too few stocks (courtesy of the Fed) and may be in for a good run, but don't be blinded by the euphoria.

Short Term: The Dow broke through resistance at the previous high of 12800 on massive volume. A sharp rally is likely, as those left behind attempt to climb on board, while retracement to test the new support level would indicate some residual caution.

The Dow Jones Transportation Average broke through resistance at 5000 and its previous high of 5200, signaling continuation of the primary up-trend -- and the wider bull market.

Fedex and UPS have both found support and appear to be following the index.

The Nasdaq Composite broke through resistance at 2500, a short retracement [A] confirming the new support level. Twiggs Money Flow (21-day) signals long-term accumulation having respected the zero line for several months.

Long Term: The primary up-trend continues, with support at 2350 and 2000.

The S&P 500 broke through 1460 and is testing the key 1500 resistance level. Twiggs Money Flow (21-day) now signals both short- and long-term accumulation after breaking above the previous peak. Narrow consolidation below 1500 would be a further bullish sign.

Long Term: The primary trend is up, with support levels at 1325 and 1220.

LSE: United Kingdom

The FTSE 100 is expected to test the upper border of the standard deviation channel -- close to the key resistance level of 6800/6900. Twiggs Money Flow (21-day) is rising steeply, signaling strong accumulation.

Long Term: The primary up-trend continues. A fall below 6000 is highly unlikely, but would warn of a test of primary support at 5500.

Nikkei: Japan

The Nikkei 225 continues to whipsaw around resistance at 17500/17600, but so far has remained within the confines of the trend channel. The long-term target of 21000 [ 17600 + ( 17600 - 14200 )] is in doubt until a retracement clearly respects support at the 2006 high. A Twiggs Money Flow (21-day) break below zero, or the index falling below 17000, would warn of a secondary correction.

Long Term: The primary trend remains up, with support at the June 2006 low of 14200.

ASX: Australia

The All Ordinaries shows signs of profit-taking with a strong bearish divergence on Twiggs Money Flow (21-day). The index is at the upper border of the trend channel (drawn at 2 standard deviations around a linear regression line) and I would normally be on the alert for signs of a reversal. However, bullish sentiment from US markets is likely to brush this aside.

Long Term: The primary up-trend continues, with the first line of support at the May 2006 high of 5300 and primary support at the June 2006 low of 4800.

Short Term: Further profit-taking is evident, with strong volume for the first four days of the week and weak closes Tuesday to Thursday. Reversal below 6150 would be a bearish sign, but bullish sentiment from the US is expected to boost the index above Wednesday's close, signaling continuation of the rally.

Failure? I never encountered it.
All I ever met were temporary setbacks.

~ Bill Marriott

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