Obama Shanghai Stimulus
By Colin Twiggs
February 09, 0:30 a.m. ET (4:30 p.m. AET)
These extracts from my trading diary are for educational purposes and should not be interpreted as investment or trading advice. Full terms and conditions can be found at Terms of Use.
Gold
Spot gold is testing resistance at the October 2008 high of $930. Narrow consolidation between $900 and $930 would be a bull signal, while reversal below the rising trendline would warn of a test of primary support at $700. In the longer term, breakout above $930 would signal a test of $1000.
USA
Dow Jones Industrial Average
The Dow respected support at 7900/8000 and is headed for another test of 8400. Twiggs Money Flow (21-Day) holding above the zero line indicates buying pressure. Breakout above 8400 is likely and would test 9000; reversal below 7900 would test 7500. In the long term, the primary trend is down and breakout below 7500 would offer a target of 6000; calculated as 7500 - ( 9000 - 7500 ). Recovery above 9000 would signal a bear market rally with a target of 10000.
S&P 500
The S&P 500 continues to signal buying support, with Twiggs Money Flow (13-Week) testing the upper border of the trend channel. Breakout would indicate that the down-trend is weakening. Expect a rally to accompany Senate approval of president Obama's new stimulus package : recovery above 880 and a test of resistance at 950. Reversal below 800, while not expected, would indicate a test of 750. In the long term, the primary trend is down and failure of primary support at 750 would offer a conservative target of 600; calculated as 750 - ( 900 - 750 ).
Transport
Fedex and the Dow Transport index are responding to the proposed stimulus package, but the primary trend remains down, signaling further long-term weakness in the economy.
Technology
The Nasdaq 100 is testing resistance at 1300 and Twiggs Money Flow (21-day) holding above zero confirms buying pressure. Breakout is likely, and would offer a target of 1600, while reversal below 1140 would warn of a test of the January low of 1040.
Canada: TSX
The TSX Composite is testing resistance at 9000, while Twiggs Money Flow (21-Day) above zero signals buying pressure. Breakout is likely and would signal a test of 9500; reversal below 8500 would test support at 7700/8000. In the long term, the primary trend is down and reversal below 8000 would offer a target of 6500; calculated as 8000 - (9500 - 8000). Recovery above 9500 would offer a target of 10500.
United Kingdom: FTSE
The FTSE 100, while weaker than most US indexes, also displays short-term buying pressure: the latest retracement respected the zero line on Twiggs Money Flow (21-Day). Breakout above 4300 would reach 4600. Reversal below 4000, while less likely, would test primary support at 3800. In the long term, the primary trend is down and reversal below 3800 would offer a target of 3000; calculated as 3800 - (4600 - 3800). Breakout above 4600 is not expected, but would indicate a primary trend reversal.
Europe: DAX
The DAX broke through 4500 and Twiggs Money Flow (21-day) rising above the zero line signals buying pressure. Expect a test of 5000. In the longer term, the primary trend is down and reversal below support at 4000 would offer a target of 3000; calculated as 4000 - (5000 - 4000). Breakout above 5000 is less likely, but would suggest a target of 6000.
India: Sensex
The Sensex continues to test resistance at 9500, influenced by positive sentiment in the US. Breakout would offer a target of 10500, while respect would test primary support at 8500. Twiggs Money Flow (21-Day) reversal above zero would signal buying pressure. In the long term, the primary trend is down and reversal below 8500 would offer a target of the 2005 low of 6000; calculated as 8500 - ( 11000 - 8500 ).
Japan: Nikkei
The Nikkei 225 reflects selling pressure, with Twiggs Money Flow (21-Day) respecting the zero line from below. Breakout above 8300 would signal a test of 9500; reversal below 7500 would test 7000. In the longer term, the primary trend is down and breakout below 7000 would offer a conservative target of 5000; calculated as 7000 - (9000 - 7000).
China
The Hang Seng index broke through short-term resistance at 13500, indicating a test of 16000. Reversal below 12500 is now unlikely, but would test primary support at 11000. In the longer term, Twiggs Money Flow (13-week) reversal above zero would signal that the primary down-trend is weakening. Breakout below 11000 would offer a target of 8500, the 2003 low. Reversal above 16000, while less likely, would offer a target of 21000.
The Shanghai Composite confirms buying pressure with a short retracement [SR] respecting the new support level at 2100. The calculated target is 2400; that is 2100 + ( 2100 - 1800 ).
In the long term, the rise above 2100 signals a primary trend reversal. Breakout above the downward trend channel and Twiggs Money Flow (13-Week) reversal to an up-trend both confirm the signal.
Australia: ASX
The All Ordinaries continues to test 3500. Bouyant copnditions in US markets should help support the index despite a weak Twiggs Money Flow (21-Day). Breakout would test 3700, while respect would retreat to support at 3300.
In the long term, both the All Ords and ASX 200 display broad consolidation in a primary down trend. ASX 200 reversal above 3800 would signal a trend reversal, but continuation of the down-trend is more likely. Breakout below 3300 would offer a target of 2700, the 2003 low. Recovery above 3800 would offer a target of 4300; calculated as 3800 + ( 3800 - 3300 ). Twiggs Money Flow (13-Week) reversal above the zero line would warn that the primary down-trend is weakening.
No people in history have ever survived who thought they could protect their freedom by making themselves inoffensive to their enemies.
~ Dean Acheson