US: Earnings scare

By Colin Twiggs
October 19th, 2012 8:00 p.m. ET (11:00 a.m. AET)

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Disappointing quarterly earnings from Google, Microsoft, Intel, IBM and McDonald's over the past week led to a sell-off on Friday. The S&P 500 is again testing support at 1430. Reversal of 21-day Twiggs Money Flow below zero warns of renewed (medium-term) selling pressure — a peak below zero would strengthen the signal. Breach of 1430 would signal a correction; follow-through below 1420 would confirm.

S&P 500

* Target calculation: 1420 + ( 1420 - 1280 ) = 1560

The Dow Jones Industrial Average is similarly testing support at 13300 (weekly chart). Bearish divergence on 63-day Twiggs Momentum indicates a weakening up-trend, and reversal below zero would warn of a primary down-trend. Reversal below 13000 and the primary trendline would suggest that a top is forming. Recovery above 13650 is unlikely but would indicate an advance.

Dow Jones Industrial Average

* Target calculation: 13 + ( 13 - 12 ) = 14



Pyramiding instructions appear on dollar bills. Add smaller and smaller amounts on the way up. Keep your eye open at the top.

~ Ed Seykota

Colin Twiggs

Author: Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.

He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.