US rally encounters resistance

By Colin Twiggs
September 28th, 2011 5:30 a.m. ET (7:30 p.m. AET)

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Dow Jones Industrial Average tall shadow (or wick) on the latest candlestick [R] indicates rising selling pressure. With excitement about a European bailout deal fading, expect a test of support at 10600. Failure would indicate another down-swing, with a target of 10000*.

Dow Jones Industrial Average

* Target calculation: 11000 - ( 12000 - 11000 ) = 10000

S&P 500 Index shows continued consolidation between 1120 and 1220 on the weekly chart. 13-Week Twiggs Money Flow below zero indicates selling pressure. Failure of support at 1120 would test the 2010 low at 1020*/1000.

S&P 500 Index

* Target calculation: 1120 - ( 1220 - 1120 ) = 1020

NASDAQ 100 Index shows an evening star reversal warning, completed if price reverses below 2200. 63-Day Twiggs Momentum holding below zero reminds that we are in a primary down-trend. Breach of the lower trend channel would warn of another down-swing, with a target of 1750*.

Dow Jones South Korea Index

* Target calculation: 2050 - ( 2350 - 2050 ) = 1750

China, Hong Kong continue down-trend

Dow Jones Shanghai Index continued a down-swing Wednesday to test the lower border of its downward trend channel. 21-Day Twiggs Money Flow declining below zero warns of strong selling pressure.

Dow Jones Shanghai Index

The Shanghai Composite index is headed for support at its target of 2350. 63-Day Twiggs Momentum declining below zero reminds that we are in a primary down-trend. Expect some retracement or consolidation at support. Failure would warn of a decline to 2000*.

Shanghai Composite Index

* Target calculation: 2350 - ( 2700 - 2350 ) = 2000

Hang Seng Index found resistance at 18000 on Wednesday after rallying earlier in the week. The primary trend is down and 13-week Twiggs Money Flow (below zero) warns of selling pressure. Resistance at 19000 is expected to hold, followed by down-swing to 16000*.

Hang Seng Index

* Target calculation: 17500 - ( 19000 - 17500 ) = 16000

Japan & South Korea

Bullish divergence on Japan�s Nikkei 225 index (13-week Twiggs Money Flow) warns of a bear market rally. Breakout above the upper channel of the broadening wedge pattern would confirm. The primary trend, however, remains downward; breakout below the lower channel at 8400 would warn of a down-swing to 7800*.

Nikkei 225 index

* Target calculation: 8400 - ( 9000 - 8400 ) = 7800

The Seoul Composite is weaker on Wednesday after a sharp rally earlier in the week. 13-Week Twiggs Money Flow continues to threaten a break below zero. Breakout below the lower border of the broadening wedge formation would signal another primary decline.

Seoul Composite Index

* Target calculation: 1650 - ( 1900 - 1650 ) = 1400

The public, with their eyes fixed on the stock market, saw little – that week. The wise stock operators saw much – that year. That was the difference.

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