Beware The Quarter-End

By Colin Twiggs
June 29, 4:30 a.m. ET (6:30 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.

USA

Fund managers are sprucing up their balance sheets for the quarter end — providing strong support for stocks until June 30th. Withdrawal of support thereafter would result in a significant correction across most major markets — testing earlier lows from March 2009. You may recall that a similar reversal occurred after the third quarter in 2007.

Fedex False Signal

Bellwether transport stock Fedex failed to follow-through below $50 (after breaking support at $52), rallying strongly to test the upper border of a gently descending trend channel. Twiggs Money Flow (21-Day), however, continues to warn of selling pressure; and breakout below the channel would signal a test of primary support at $34. Upward breakout is now as likely and would indicate a primary advance with a target of $90; calculated as 62 + ( 62 - 34 ).

Dow Jones Industrial Average

The Dow broke downwards from its trend channel and is testing support at 8300. Failure would confirm the down-swing to test primary support at 6500, reinforcing the warning on Twiggs Money Flow (21-Day) — where bearish divergence indicates selling pressure.

S&P 500

The S&P 500 is consolidating below resistance at 950. Upward breakout would signal a primary up-trend, but bearish divergence on Twiggs Money Flow (21-Day) warns of selling pressure. The longer-term (13-Week) indicator is more evenly balanced: reversal below 0.1 would warn of a down-swing, while a rise above 0.3 would indicate a breakout.
Reversal below 880 would test primary support at 670.

Technology

The Nasdaq 100 is stronger than the Dow and S&P 500. Breakout above 1500 would confirm another primary advance with a target of 1600 — calculated as 1300 + ( 1300 - 1000 ). Twiggs Money Flow (21-Day) holding above zero confirms buying pressure. Reversal below 1340 is unlikely, but would warn of a secondary correction.

Canada: TSX

TSX Composite breakout below its trend channel warns of a secondary correction, but Twiggs Money Flow (21-Day) indicates buying pressure. Expect another test of resistance at 10700. Reversal below 9700 is less likely — but would confirm a secondary correction.

United Kingdom: FTSE

FTSE 100 breakout below 4300 warns of a test of primary support at 3500 [red]. Bearish divergences on Twiggs Money Flow (21-Day and 13-Week) indicate strong selling pressure. Follow-through below 4200 would confirm the down-swing. Reversal above 4500 is unlikely, but would test primary resistance at 4650 [green].

Europe: DAX

DAX breakout below its trend channel warns of a down-swing to test primary support at 3600. Bearish divergences on Twiggs Money Flow (21-Day and 13-week), signal strong selling pressure. Follow-through below 4700 would confirm.

India: Sensex

Sensex breakout below the trend channel warns of a secondary correction to test support (from the large gap) at 12000. Bearish divergence on Twiggs Money Flow (21-Day) would be strengthened if the indicator crosses below zero. Reversal below 14000 would confirm the correction. Breakout above 15500 is unlikely, but would signal another primary advance.

Japan: Nikkei

Nikkei 225 recovery above 10000 would confirm a primary advance with a target of 12000. Rising Twiggs Money Flow (21-Day) indicates buying pressure. Reversal below 9000 is unlikely, but would warn of a secondary correction.

China

The Shanghai Composite Index continues in a strong primary up-trend. Breakout below the trend channel — or Twiggs Money Flow (21-Day) reversal below 0.1 — would warn of a secondary correction.

Hang Seng breakout below its trend channel warns of a secondary correction. Twiggs Money Flow (21-day), however, signals buying pressure. Recovery above 19000 would indicate another primary advance, while reversal below 17500 would signal a correction — to test 15000.

Australia: ASX

The CRB Commodities Index retraced to test the new support level at 245 [khaki]. Respect would confirm the primary up-trend, while failure of support at 230 would warn of a bull trap — and bearish sentiment for resources stocks.

The All Ordinaries broke through support at 3900 before retracing to test the new resistance level. Bearish divergence on Twiggs Money Flow (21-Day) warns of selling pressure. Having already broken out from the rising trend channel, reversal below 3750 would indicate a correction to test primary support at 3100 — confirmed if 3700 is penetrated.

The ASX 200 shows similar bearish divergence on Twiggs Money Flow (21-Day). Declining volume indicates a lack of commitment from buyers. Retreat below 3700 [orange] would confirm a secondary correction to test primary support at 3150.

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