Weak Asian markets warn of continued selling pressure

By Colin Twiggs
September 19th, 2011 7:30 a.m. ET (9:30 p.m. AET)

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Dow Jones Japan Index is testing long-term support at 50.00. 13-Week Twiggs Money Flow oscillating around zero indicates uncertainty; reversal below zero would warn of rising selling pressure. Breakout below 4800 would offer a target of 35.00*.

* Target calculation: 50 - ( 65 - 50 ) = 35

The Nikkei 225 Index is headed for a test of 7000* after breaking support at 9000 on the weekly chart.

* Target calculation: 9000 - ( 11000 - 9000 ) = 7000

Dow Jones South Korea Index is consolidating between 360 and 410 on the daily chart. 21-Day Twiggs Money Flow below zero warns of strong medium-term selling pressure. Downward breakout would offer a target of 290*.

* Target calculation: 9000 - ( 11000 - 9000 ) = 7000

HongKong sell-off accelerates

Dow Jones HongKong Index reversed below 400, warning of another down-swing. The secondary trendline and declining 63-day Momentum indicate that the sell-off is accelerating.

* Target calculation: 400 - ( 450 - 400 ) = 350

Weekly chart of the Shanghai Composite Index shows a primary down-swing to test support at 2300*. Reversal of 13-week Twiggs Money Flow below zero would warn of rising selling pressure. Failure of support would test the 2008 low of 1700.

* Target calculation: 2650 - ( 3000 - 2650 ) = 2300

The sell-off in Asian markets will impact on others with a strong mining sector: Australia, Brazil, South Africa and Canada.

DAX key reversal; FTSE rally fades

Germany's DAX Index shows a strong key reversal [R] on the weekly chart. Expect a rally, but we are in a bear market and resistance at 6500 is likely to hold. Reversal below 5400 would warn of another down-swing.

* Target calculation: 5500 - ( 6500 - 5500 ) = 4500

The FTSE 100 fell at Monday's open, but the weekly chart displays a particularly volatile consolidation edging higher. Breakout above 5400 would indicate a test of 5600/5700. Again, we are in a bear market; respect of resistance is likely and would warn of another test of 4800.

* Target calculation: 5000 - ( 5600 - 5000 ) = 4400

The big money is made by the sittin' and the waitin' — not the thinking. Wait until all the factors are in your favor before making the trade.

~ Jesse Livermore in Reminiscences of a Stock Operator by Edwin Lefevre.