Big Five Face The Bear

By Colin Twiggs
June 7, 2010 7:30 a.m. ET (9:30 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.

The Dow is at a watershed, testing primary support at 9900. Failure would warn of a bear trend. With the Nikkei 225, Shanghai Composite, and FTSE 100 already indicating primary down-trends, a signal from the Dow would be likely to lead the DAX, the last of the big five, into a global bear market.


Dow Jones Industrial Average

Failure of support at 9900 would warn of a bear market. A similar signal on the S&P 500 or Nasdaq would confirm. The initial target for a down-swing would be 9000*. Twiggs Money Flow (21-day) respect of the zero line (from above) is unlikely but would warn of a bear trap.

Dow Jones Industrial Average

* Target calculation: 10000 - ( 11000 - 10000 ) = 9000

S&P 500

S&P 500 breakout below 1050 would signal a primary down-trend. Bearish divergence on Twiggs Money Flow (13-week) warns of long-term selling pressure. Recovery above 1100 is unlikely, but would indicate that the correction has ended.

Standard & Poors 500 chart


Transport indicators often lead primary indexes into a down-trend, but in this case they lag, offering some hope of a recovery.

Dow Jones Transportation Average


The Nasdaq 100 also lags behind, but breakout below 1800 would test primary support at 1730. Bearish divergence on Twiggs Money Flow (13-week) warns of a decline. Recovery above 1900 is unlikely, but would suggest that the correction has ended.

Nasdaq 100

Canada: TSX

The TSX Composite is headed for a test of short-term support at 11400. Failure would test primary support at 11000*. Bearish divergence on Twiggs Money Flow (13-week) warns of long-term selling pressure.

TSX Daily

* Target calculation: 11400 - ( 11800 - 11400 ) = 11000

United Kingdom: FTSE

The FTSE 100 is testing primary support at 5050 on Monday. Failure would signal a primary down-trend — confirmed if short-term support at 4900 is broken. Twiggs Money Flow (21-day) reversal while below the zero line would warn of strong selling pressure.

FTSE 100 Daily

Germany: DAX

The DAX lags the other major indexes, but failure of short-term support at 5700 would test primary support at 5400*. Twiggs Money Flow (13-week) penetration of the rising trendline would warn of a down-trend.

German DAX

* Target calculation: 5700 - ( 6000 - 5700 ) = 5400

India: Sensex

The Sensex broke its descending trendline, signaling an advance to 18000*. Rising Twiggs Money Flow (13-week) indicates buying pressure. In the long term, reversal below 15800 would signal a primary down-trend, while breakout above 18000 would offer a target of 20000.

Sensex India

* Target calculation: 17000 + ( 17000 - 16000 ) = 18000

Japan: Nikkei

The Nikkei 225 fell to 9500 on Monday, respecting the new resistance level at 10000 and confirming the primary down-trend. The breakout offers a target of 9000*. Twiggs Money Flow (21-day) respect of the declining trendline would signal strong selling pressure.

nikkei 225 japan

* Target calculation: 10000 - ( 11000 - 10000 ) = 9000

South Korea

The Seoul Composite reversed above its descending trendline to indicate an advance to 1750. Twiggs Money Flow (13-week) holding high above zero indicates long-term buying support — despite rising tensions with North Korea.

Seoul Composite Index

* Target calculation: 1750 + ( 1750 - 1550 ) = 1950


The Shanghai Composite Index respected resistance at 2700, falling to 2500 Monday to confirm the primary down-trend. Twiggs Money Flow (13-week) reversal below zero would strengthen the signal.

Shanghai Composite Index China

* Target calculations: 2900 - ( 3150 - 2900 ) = 2650

The Hang Seng Index gapped below 19500 on Monday, signaling a primary down-swing with a target of the July 2009 low at 17000*. Twiggs Money Flow (13-week) breakout from the red/blue triangle would indicate future direction.

Hang Seng Index Hongkong

* Target calculations: 19500 - ( 22000 - 19500 ) = 17000

Australia: ASX

The All Ordinaries respected the new resistance level at 4500, confirming the primary down-trend. Failure of short-term support at 4250 would strengthen the signal, as would Twiggs Money Flow (21-day) reversal while below the zero line. The medium-term target for the down-swing is 4000*.

ASX All Ordinaries

* Target calculation: 4500 - ( 5000 - 4500 ) = 4000

The ASX 200 displays a similar red/blue triangle on Twiggs Money Flow (13-week) to the Hang Seng; breakout will indicate future direction.

ASX 200

William Ernest Henley (1849–1903) as a child was diagnosed with tuberculosis of the bone. He wrote these lines (commonly known as Invictus) at the age of 25, after his left leg was amputated. Despite his illness Henley went on to lead an active life as poet, critic and editor.

Out of the night that covers me,
Black as the pit from pole to pole,
I thank whatever gods may be
For my unconquerable soul.

In the fell clutch of circumstance
I have not winced nor cried aloud.
Under the bludgeonings of chance
My head is bloody, but unbowed.

Beyond this place of wrath and tears
Looms but the Horror of the shade,
And yet the menace of the years
Finds and shall find me unafraid.

It matters not how strait the gate,
How charged with punishments the scroll,
I am the master of my fate:
I am the captain of my soul.