Markets remain soft

By Colin Twiggs
April 4th, 2011 3:00 a.m. ET (5:00 p.m. AEDT)

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 climbed steeply and is now testing the February high of 12400, but bearish divergence on 21-day Twiggs Money Flow highlights light volumes and profit-taking. Expect retracement to test for support.

* Target calculation: 12400 + ( 12400 - 11600 ) = 13200

S&P 500

The S&P 500 displays a similar bearish divergence on 21-day Twiggs Money Flow, warning of medium-term resistance.

* Target calculation: 1340 + ( 1340 - 1260 ) = 1420

Transport

The Dow Transport index formed a broadening wedge pattern; upward breakout would signal a fresh advance. Bellwether Fedex has been hit by higher oil prices, but there is no cause for alarm unless we see a fall below the recent ($85) support level.

Technology

The Nasdaq 100 Price Ratio shows the index is under-performing relative to the S&P 500 — another sign that the market is soft. Normally the Nasdaq streaks ahead of broader indexes during a primary advance. Declining 13-week Twiggs Money Flow also suggests weakness.

Canada: TSX

The $CADOW shows a similar bearish divergence on 21-day Twiggs Money Flow, warning of another correction.

Declining Twiggs Momentum on the TSX Composite suggests weakness. Reversal below zero, or below 13900 on the index chart, would warn of another test of support at 13500.

United Kingdom

The FTSE 100 closed above 6000 on Friday, indicating a test of 6100, but 21-day Twiggs Money Flow reversal below zero would warn of selling pressure.

* Target calculation: 6100 + ( 6100 - 5600 ) = 6600

Germany

The DAX also rallied sharply, but (declining) 13-week Twiggs Money Flow continues to warn of weakness.

France

Falling Momentum on the CAC-40 warns that the up-trend is slowing; reversal below zero would strengthen the signal.

India

The Sensex rallied above its trend channel, indicating that the primary down-trend is losing momentum. Twiggs Money Flow (13-week) remains below zero, however, and a peak below the zero line would signal continuation of the down-trend.

* Target calculation: 17500 - ( 18500 - 17500 ) = 16500

Singapore

The Straits Times Index also breached its trend channel, suggesting that the primary down-trend is losing momentum. Expect retracement to test for support after the steep ascent.

* STI Target: 2970 - ( 3120 - 2970 ) = 2820

Japan

The Nikkei 225 recovered more than a thousand points, but Momentum below zero warns of another test of support between 8600 and 8800.

South Korea

The Seoul Composite Index is testing its January high at 2120. Rising 21-day Twiggs Money Flow continues to indicate medium-term buying pressure. Reversal below 2100 is unlikely at present, but would test support at 2000.

* Target calculation: 1920 - ( 2000 - 1920 ) = 1840

Taiwan

The Dow Jones Taiwan Index broke above its trend channel, but Twiggs Momentum below zero warns of further weakness; a peak below zero would strengthen the signal. Failure of support at 195 is unlikely, but would warn of another down-swing.

China

The Shanghai Composite Index is consolidating between 2850 and 3000; upward breakout would indicate a test of 3200. Bearish divergence on 21-day Twiggs Money Flow, however, warns of selling pressure. Downward breakout would test primary support at 2650.

* Target calculations: 3100 + ( 3100 - 2700 ) = 3500

The Hang Seng Index gapped through resistance at 24000, a bullish sign indicating another test of 25000. Bullish divergence on 21-day Twiggs Money Flow confirms buying pressure.

Brazil: Bovespa

The Bovespa Index broke through 68000, signaling another test of 72000. Rising 13-week Twiggs Money Flow confirms strong buying pressure.

* Target calculation: 68000 + ( 68000 - 64000 ) = 72000

South Africa: JSE

The JSE Overall Index broke above its upper trend channel, while bullish divergence on 13-week Twiggs Money Flow indicates a test of 33000. Breakout above resistance would offer a target of 36000*.

* Target calculation: 33000 + ( 33000 - 30000 ) = 36000

New Zealand: NZX

The NZX50 broke through resistance while 13-week Twiggs Money Flow surged above zero, signaling a primary advance to 3550*.

* Target calculation: 3425 + ( 3425 - 3300 ) = 3550

Australia: ASX

The All Ordinaries is testing resistance at 5000. Rising Twiggs Money Flow (21-day) indicates buying pressure. Breakout above 5000 would offer a target of 5400*.

* Target calculation: 5000 + ( 5000 - 4600 ) = 5400

Bullish divergence on 13-week Twiggs Money Flow also indicates buying pressure. Expect an attempt at 5000.

Weapons are instruments of ill omen. When you have no choice but to use them it's best to remain tranquil and calm. You should never look upon them as things of beauty......this is to delight in the killing of men. And when you delight in the killing of men, you'll not realize your goal in the land.

~ Lao Tzu: The Te-Tao Ching (circa 500 BC)