Dow warns of reversal but S&P 500 hesitates

By Colin Twiggs
September 9th, 2013 3:00 am EDT (5:00 pm AET)

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Dow Jones Industrial Average bearish divergence on 13-week Twiggs Money Flow warns of a reversal. Failure of primary support at 14500/14600 would confirm. Recovery above 15000 would defer the test of primary support, but strong selling pressure should not be ignored.

Friday's long-legged doji candle on the S&P 500 (daily chart) indicates hesitancy. Follow-through above the descending trendline would suggest that the correction is over, while a fall below the longer-term rising trendline would warn that momentum is slowing and another test of primary support at 1560 is likely. Bearish divergence on 21-day Twiggs Money Flow indicates selling pressure. In the long-term, failure of primary support would offer a target of 1400*.

* Target calculation: 1550 - ( 1700 - 1550 ) = 1400

VIX below 20, however, continues to suggest a bull market.

Rising 13-week Twiggs Money Flow and consolidation above the preceding peak at 3040/3050 on the Nasdaq 100 also favors continuation of the primary up-trend.

Signals are mixed at present, but a stronger bear signal on the Dow, or an upward spike on the VIX, would tilt probabilities towards a reversal.

There are old traders and there are bold traders, but there are very few old, bold traders.

~ Ed Seykota