Consolidation In Bearish Market

By Colin Twiggs
August 2, 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.

Global markets remain bearish despite encouraging signs from Asia, with India, Singapore, Hong Kong and South Korea all signaling advances. The big five markets are distinctly bearish, however, with only the DAX remaining in a primary up-trend. I have added a slightly different perspective today, with greater focus on long-term momentum, and include coverage of France and Singapore to provide a wider overview of Asia and Europe. I will include these markets from time to time when they offer an interesting perspective.

USA

Dow Jones Industrial Average

The Dow continues to consolidate in a broadening wedge, Friday's long tail and rising Twiggs Money Flow (21-day) suggest another rally. Reversal below short-term support at 10000, however, remains as likely and would indicate a downward breakout. The primary trend remains down, with a long-term target of 9000*.

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

S&P 500

Bearish divergence on the 63-day Twiggs Momentum Oscillator continues to warn of a primary down-trend, despite the S&P 500 recovering above its former primary support level at 1050.

* Target calculation: 1050 - ( 1200 - 1050 ) = 900

Transport

Bellwether transport stock Fedex has recovered above its primary support level, but remains in a primary down-trend. UPS respected primary support, but the acid test will come with the next correction.

Technology

The Nasdaq 100 is also headed for a test of the upper border of its broadening wedge, but bearish divergence on the 63-day Twiggs Momentum Oscillator continues to warn of a primary down-trend. Reversal below 1730 would confirm.

Canada: TSX

The TSX Composite is losing Momentum and reversal below 11500 would signal another test of primary support at 11000. Declining 63-day Twiggs Momentum warns of a down-trend.

United Kingdom: FTSE

The FTSE 100 is headed for a test of the upper border of its broadening wedge, but the primary trend remains down. Bearish divergence on the 63-day Twiggs Momentum Oscillator continues to signal a primary down-trend.

* Target calculation: 5000 - ( 5800 - 5000 ) = 4200

Germany: DAX

The DAX is still in a primary up-trend, forming a large triangle at 6000. Upward breakout would signal a new primary advance with a target of 6900*, but bearish divergence on the 63-day Twiggs Momentum Oscillator warns of reversal to a primary down-trend.

* Target calculation: 6300 + ( 6300 - 5700 ) = 6900

France: CAC-40

The CAC-40 is in a primary down-trend, having broken primary support at 3600 some time ago, and is now consolidating in a wide range around the former support level. Expect a test of resistance at 3800, but bear in mind that upward breakouts in a primary down-trend are notoriously unreliable. And the declining 63-day Twiggs Momentum Oscillator below zero warns of further weakness.

* Target calculation: 3600 - ( 4000 - 3600 ) = 3200

India: Sensex

The Sensex recovered above 18000, closing Monday at 18100. Expect a primary advance to 20000*. A completed higher trough on Twiggs Money Flow (13-week) would confirm strong buying pressure.

* Target calculation: 18000 + ( 18000 - 16000 ) = 20000

Singapore

The Straits Times Index gapped above 3000 Monday to close at 3025. The upward breakout suggests a fresh primary advance, but wait for breakout from the broadening wedge to confirm. The 63-day Twiggs Momentum Oscillator is leveling out, holding above zero, as with the Sensex, to signal continuation of the primary up-trend.

Japan: Nikkei

The Nikkei 225 after a promising start Monday, retreated to test support at 9500. The primary trend is down and declining Twiggs Money Flow (13-week) indicates selling pressure. Breakout below primary support at 9200 would offer a target of 8200*.

* Target calculation: 9200 - ( 10200 - 9200 ) = 8200

South Korea

The Seoul Composite rallied Monday to close above 1780. Expect a primary advance to 1950*. Twiggs Money Flow (13-week) holding high above zero indicates buying pressure. Reversal below 1720 is unlikely, but would warn of a bull trap.

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

China

The Shanghai Composite Index is headed for a test of resistance at 2700. Respect would signal another down-swing; confirmed if support at 2350 is broken. The primary trend remains downward and 63-day Twiggs Momentum Oscillator well below zero shows little sign of a reversal.

The Hang Seng Index broke through 21000 last week, signaling a primary up-trend. Monday's opening gap and strong close above 21400 strengthens the signal. Rising 63-day Twiggs Momentum Oscillator indicates a recovery. Reversal below 19800 is now unlikely, but would warn of a bear trap.

* Target calculations: 19000 - ( 21000 - 19000 ) = 17000

Australia: ASX

The All Ordinaries broke through 4500 and is headed for a test of 4650. Bear in mind that upward breakouts in a primary down-trend are notoriously unreliable. The primary trend remains down and and 63-day Twiggs Momentum Oscillator shows little sign of a reversal.

Twiggs Money Flow (13-week) on the ASX 200 is holding above zero and recovery above the April peak at 20% would indicate a reversal. Again, bear in mind that upward breakouts in a primary down-trend are unreliable.

* Target calculation: 4200 - ( 4600 - 4200 ) = 3800

About all I can say for the United States Senate is that it opens with a prayer and closes with an investigation.

~ Will Rogers (1879 - 1935)

	Consolidation In Bearish Market By Colin Twiggs August 2, 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. Global markets remain bearish despite encouraging signs from Asia, with India, Singapore, Hong Kong and South Korea all signaling advances. The big five markets are distinctly bearish, however, with only the DAX remaining in a primary up-trend. I have added a slightly different perspective today, with greater focus on long-term momentum, and include coverage of France and Singapore to provide a wider overview of Asia and Europe. I will include these markets from time to time when they offer an interesting perspective. USA Dow Jones Industrial Average The Dow continues to consolidate in a broadening wedge, Friday's long tail and rising Twiggs Money Flow (21-day) suggest another rally. Reversal below short-term support at 10000, however, remains as likely and would indicate a downward breakout. The primary trend remains down, with a long-term target of 9000. Target calculation: 10000 - ( 11000 - 10000 ) = 9000 S&P 500 Bearish divergence on the 63-day Twiggs Momentum Oscillator continues to warn of a primary down-trend, despite the S&P 500 recovering above its former primary support level at 1050. * Target calculation: 1050 - ( 1200 - 1050 ) = 900 Transport Bellwether transport stock Fedex has recovered above its primary support level, but remains in a primary down-trend. UPS respected primary support, but the acid test will come with the next correction. Technology The Nasdaq 100 is also headed for a test of the upper border of its broadening wedge, but bearish divergence on the 63-day Twiggs Momentum Oscillator continues to warn of a primary down-trend. Reversal below 1730 would confirm. Canada: TSX The TSX Composite is losing Momentum and reversal below 11500 would signal another test of primary support at 11000. Declining 63-day Twiggs Momentum warns of a down-trend. United Kingdom: FTSE The FTSE 100 is headed for a test of the upper border of its broadening wedge, but the primary trend remains down. Bearish divergence on the 63-day Twiggs Momentum Oscillator continues to signal a primary down-trend. * Target calculation: 5000 - ( 5800 - 5000 ) = 4200 Germany: DAX The DAX is still in a primary up-trend, forming a large triangle at 6000. Upward breakout would signal a new primary advance with a target of 6900, but bearish divergence on the 63-day Twiggs Momentum Oscillator warns of reversal to a primary down-trend. Target calculation: 6300 + ( 6300 - 5700 ) = 6900 France: CAC-40 The CAC-40 is in a primary down-trend, having broken primary support at 3600 some time ago, and is now consolidating in a wide range around the former support level. Expect a test of resistance at 3800, but bear in mind that upward breakouts in a primary down-trend are notoriously unreliable. And the declining 63-day Twiggs Momentum Oscillator below zero warns of further weakness. * Target calculation: 3600 - ( 4000 - 3600 ) = 3200 India: Sensex The Sensex recovered above 18000, closing Monday at 18100. Expect a primary advance to 20000. A completed higher trough on Twiggs Money Flow (13-week) would confirm strong buying pressure. Target calculation: 18000 + ( 18000 - 16000 ) = 20000 Singapore The Straits Times Index gapped above 3000 Monday to close at 3025. The upward breakout suggests a fresh primary advance, but wait for breakout from the broadening wedge to confirm. The 63-day Twiggs Momentum Oscillator is leveling out, holding above zero, as with the Sensex, to signal continuation of the primary up-trend. Japan: Nikkei The Nikkei 225 after a promising start Monday, retreated to test support at 9500. The primary trend is down and declining Twiggs Money Flow (13-week) indicates selling pressure. Breakout below primary support at 9200 would offer a target of 8200. Target calculation: 9200 - ( 10200 - 9200 ) = 8200 South Korea The Seoul Composite rallied Monday to close above 1780. Expect a primary advance to 1950. Twiggs Money Flow (13-week) holding high above zero indicates buying pressure. Reversal below 1720 is unlikely, but would warn of a bull trap. Target calculation: 1750 + ( 1750 - 1550 ) = 1950 China The Shanghai Composite Index is headed for a test of resistance at 2700. Respect would signal another down-swing; confirmed if support at 2350 is broken. The primary trend remains downward and 63-day Twiggs Momentum Oscillator well below zero shows little sign of a reversal. The Hang Seng Index broke through 21000 last week, signaling a primary up-trend. Monday's opening gap and strong close above 21400 strengthens the signal. Rising 63-day Twiggs Momentum Oscillator indicates a recovery. Reversal below 19800 is now unlikely, but would warn of a bear trap. * Target calculations: 19000 - ( 21000 - 19000 ) = 17000 Australia: ASX The All Ordinaries broke through 4500 and is headed for a test of 4650. Bear in mind that upward breakouts in a primary down-trend are notoriously unreliable. The primary trend remains down and and 63-day Twiggs Momentum Oscillator shows little sign of a reversal. Twiggs Money Flow (13-week) on the ASX 200 is holding above zero and recovery above the April peak at 20% would indicate a reversal. Again, bear in mind that upward breakouts in a primary down-trend are unreliable. * Target calculation: 4200 - ( 4600 - 4200 ) = 3800 About all I can say for the United States Senate is that it opens with a prayer and closes with an investigation. ~ Will Rogers (1879 - 1935)	Share: A+ A− FREE 12-month subscription to The Patient Investor Get the insights you need to stay ahead in financial markets when you sign up to Incredible Charts premium service by 31 December. Start Now Incredible Charts Try our popular premium stock charting software, with proprietary trading tools and powerful stock screens. More than 420K downloads Suitable for Windows 10 & 11 Start with a 5-day Free Trial Download Premium Web Charts Premium cross-platform web charts with proprietary trading tools and powerful stock screens. No downloads or installation required. Suitable for Windows, macOS, and Linux operating systems. 5-day Free Trial Trading Diary Free education, with technical updates and macro outlook. 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