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.

* 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.

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