S&P 500 Approaches 1999 High

By Colin Twiggs
April 28, 2007 4.00 p.m. AET (2:00 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 headed for a test of the upper border of the trend channel. Reversal below the new support level of 12800, while not expected, would signal a test of the lower channel line. Close observation will reveal that the channel lines are not symmetrical: I have dragged the top channel line closer to the linear regression line because in this case data is not evenly distributed (around the LR line). Twiggs Money Flow (21-day) is climbing sharply, signaling strong accumulation.

Reversal below 12000 is highly unlikely, but would warn of another 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. We are in phase 3 of a bull market and strong primary trend moves are expected -- just don't be blinded by the euphoria.

Short Term: The Dow shows signs of a strong up-trend, with tall blue candles followed by short consolidations.

The Dow Jones Transportation Average is retracing to test the new support level at 5000. Respect of support would be a strong bull signal.

Fedex and UPS have failed to follow the index. Divergence would be a bearish sign for the economy.

The Nasdaq Composite is climbing steeply after the breakout above 2500, but another retracement to test the new support level remains possible. 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 is consolidating below resistance at its all-time high of 1500. Narrow consolidation would be a strong bull signal, while retracement below the recent low of 1375 would be bearish. Twiggs Money Flow (21-day) signals both short- and long-term accumulation after breaking above its previous peak.

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

LSE: United Kingdom

The FTSE 100 formed a short-term flag at its February high of 6450. An upward breakout is expected to test the upper border of the trend channel (drawn at 2 standard deviations around a linear regression line) which also coincides with the 1999 all-time high of 6950. Downward breakout from the flag, though less likely, would signal a test of the lower channel border.

Long Term: The primary up-trend continues. A fall below 6000 is not expected, but would warn of a test of primary support at 5500.

Nikkei: Japan

The Nikkei 225 is below 17500 and testing the lower border of the trend channel. A break below the lower border would warn of a test of support at the March low of 16600. And a fall below 16600 would be a strong bear signal, warning of a test of primary support at 14200. Respect of the lower channel line, on the other hand, would signal continuation of the up-trend. Declining Twiggs Money Flow (21-day) warns of short-term distribution.

Long Term: The primary trend remains up.

ASX: Australia

The All Ordinaries is at the upper border of the trend channel (drawn at 2 standard deviations around a linear regression line), and shows little inclination to follow the direction of US markets. Bearish divergence on Twiggs Money Flow (21-day) signals long-term distribution, while the sharp fall during recent weeks reflects the same pattern in the short-term. A swing to rest the lower border of the trend channel is likely, but I remain wary of the bullish influence of US markets.

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: Narrow consolidations are normally strong continuation patterns in a trend, but rising rather than falling volume warns us to exercise caution. A blue candle that closes above 6200 would signal continuation of the up-trend, while a further fall below 6150 would warn of a test of 6000.

"The Australian example provides evidence that removing large numbers of firearms from a community can be associated with a sudden and on-going decline in mass shootings, and accelerated declines in total firearm-related deaths, firearm homicides and firearm suicides."

~ Report by professor Simon Chapman and associate professor Philip Alpers from the University of Sydney's School of Public Health on the effectiveness of Australia's restrictive gun laws introduced after the 1996 Port Arthur massacre of 35 civilians.

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