US correction confirmed

By Colin Twiggs
February 4th, 2014 2:00 am ET (6:00 pm AEDT)

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Research & Investment: Performance update

ASX200 Prime Momentum strategy returned +28.65%* for the 12 months ended 31st January 2014, outperforming the benchmark ASX200 Accumulation Index by +17.59%. The S&P 500 strategy, started in November 2013, returned 3.21% for the first 3 months, outperforming the S&P 500 Total Return Index by 1.21%.

* Results are unaudited and subject to revision.

US correction confirmed

The S&P 500 broke support at 1770, confirming a secondary correction. At times like this it pays to look at monthly charts to gain a long-term perspective. The first line of support is at 1700. Respect of the secondary trendline would flag a weak correction indicative of a strong up-trend. Breach of that level, however, would suggest a strong correction to 1550 and the primary trendline. The scale of the bearish divergence on 13-week Twiggs Money Flow, when compared to the divergence in 2007, suggests medium-term selling pressure — typical of a secondary correction rather than a (primary) reversal.

S&P 500

CBOE Volatility Index (VIX) crossed to above 20, suggesting moderate risk, but not yet cause for concern.

VIX Index

The Nasdaq 100 retreated below 3500, warning of a correction. Again, the bearish divergence on 13-week Twiggs Money Flow appears secondary and no threat to the primary up-trend.

Nasdaq 100

Winning is not a sometime thing, it is an all the time thing. You don't do things right once in a do them right all the time.

~ Vince Lombardi