Dow & FTSE Warn Of Selling Pressure
By Colin Twiggs
May 22, 2009 1:30 a.m. ET (3:30 p.m. AET)
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Correction to Thursday's Forex Newsletter
The US Dollar Index pulled back to test the new resistance level. Respect of 83 confirms the primary down-trend and offers a target of the December low of 79, calculated as 83 - [ 87 - 83 ]. Reversal above 83 is most unlikely, but would warn of a bear trap.
Stocks
US: Dow Industrials
The Dow is consolidating between 8200 and 8600. Wednesday's large volume and weak close indicate strong resistance at the upper border. Bearish divergence on Twiggs Money Flow (21-Day) signals selling pressure. Breakout below 8200 would end the bear rally of recent months — and warn of a down-swing to test primary support at 6500. Reversal above 8600 is unlikely, and would test primary resistance at 9000.
UK: FTSE 100
The FTSE 100 displays a similar bearish divergence on Twiggs Money Flow (21-Day). Reversal below 4300 would signal a primary decline to test support at 3500. Breakout above 4500 is unlikely, but would test primary resistance at 4650.
Japan: Nikkei 225
The Nikkei 225 is more positive, consolidating in a narrow range below primary resistance at 9500 on declining volume. Twiggs Money Flow (21-Day) is neutral. Breakout above 9500 would signal the start of a primary up-trend — with a target of 12000, calculated as 9500 + [ 9500 - 7000 ]. Reversal below 9000 is less likely, but would warn of a down-swing to test primary support at 7000.
India: Sensex
The Sensex is in a primary up-trend. The upward gap, on the recent election results, should be a positive sign, but strong bearish divergence on Twiggs Money Flow (21-Day) warns of selling pressure. A fall to 12250 would close the gap, completing an island reversal and warning of a test of primary support at 8000. Confirmed if support at 10500 is penetrated.
Australia: All Ordinaries
The All Ordinaries is also testing the lower border of its trend channel, following bearish divergence on Twiggs Money Flow (21-Day). Failure of support at 3700 would signal the end of the bear rally of recent months — and test primary support at 3100. Confirmed if 3600 is broken or Twiggs Money Flow (21-Day) crosses to below zero. Reversal above 3800 is unlikely, but would signal continuation of the bear rally.
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