Bear Trap Recovery?

By Colin Twiggs
June 14, 2010 3:30 a.m. ET (5:30 p.m. AET)

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A number of major markets, including the Nikkei 225 and Shanghai Composite, have indicated the start of a primary down-trend, but there are now signs of a widespread resurgence, with bullish divergence on Twiggs Money Flow (13-week) warning of a bear trap.

USA

Dow Jones Industrial Average

The Dow recovered above its declining trendline, while Twiggs Money Flow (13-week) displays a bullish divergence. Breakout above 10300 would indicate a bear trap.

Dow Jones Industrial Average

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

S&P 500

S&P 500 paints a similar picture and recovery above 1100 would signal that the correction has ended.

Standard & Poors 500 chart

Transport

Transport indicators are testing primary support. Respect would strengthen hope of a recovery.

Dow Jones Transportation Average

Technology

The Nasdaq 100 shows a similar bullish divergence on Twiggs Money Flow (13-week). Recovery above 1900 would signal the end of the correction.

Nasdaq 100

Canada: TSX

The TSX Composite respected short-term support at 11400, and recovery above 11800 would signal another test 12300. Twiggs Money Flow (13-week) remains weak and failure of support at 11400 would test of primary support at 11000.

TSX Daily

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

United Kingdom: FTSE

The FTSE 100 recovered above its descending trendline, and bullish divergence on Twiggs Money Flow (13-week) warns of a reversal. Breakout above 5250 would confirm a bear trap.

FTSE 100 Daily

Germany: DAX

DAX recovery above its descending trendline would support the bullish divergence on Twiggs Money Flow (13-week), suggesting a fresh primary advance.

German DAX

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

India: Sensex

Sensex recovery above 17200 would confirm Twiggs Money Flow (13-week) breakout above its descending trendline, signaling an advance to 18000*.

Sensex India

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

Japan: Nikkei

The Nikkei 225 is weaker, with declining Twiggs Money Flow (13-week) indicating selling pressure. Failure of support at 9400 would offer a target of 9000*. Recovery above 10000 is less likely, but would warn of a bear trap.

nikkei 225 japan

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

South Korea

The Seoul Composite is advancing to 1750. Expect some resistance at 1700. Strong bullish divergence on Twiggs Money Flow (13-week) indicates an advance to 1950*.

Seoul Composite Index

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

China

The Shanghai Composite Index remains in a primary down-trend. Small bullish divergence on Twiggs Money Flow (13-week) indicates short-term buying support. The long-term target for the decline remains at 2100*, but positive signs on the Hang Seng suggest a recovery. Breakout above 2700 would warn of a bear trap.

Shanghai Composite Index China

* Target calculations: 2900 - ( 3500 - 2700 ) = 2100

The Hang Seng Index gapped above 20000 on Monday, warning of a bear trap. Bullish divergence on Twiggs Money Flow (13-week) would support the picture — strengthened if there is a breakout above the descending trendline.

Hang Seng Index Hongkong

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

Commodities & Resources Stocks

The Baltic Dry Index is weakening, and is supported by the Baltic Panamax index (which has not been subjected to such a large influx of new vessels as the Capesize class). Declining shipping rates would reflect a fall-off in demand for dry-bulk commodities such as iron ore and coal.

Baltic Dry Index

Australia: ASX

The All Ordinaries is closed on Monday but Friday's trade closed above 4500, warning of a bear trap. Rising Twiggs Money Flow (21-day) indicates short-term buying pressure.

ASX All Ordinaries

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

The ASX 200 also closed above 4500, while bullish divergence on Twiggs Money Flow (13-week) warns of a fresh advance to 5000.

ASX 200


Concern should drive us into action and not into a depression.
No man is free who cannot control himself.

~ Pythagoras (582 B.C. - 497 B.C.)