S&P 500 correction threat

By Colin Twiggs
March 25th, 2014 4:00 am ET (7:00 pm AEDT)

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The S&P 500 continues to threaten a correction. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure. Breach of support at 1840 would confirm a correction, while recovery above 1880 would signal an advance to 1950*.

S&P 500

* Target calculation: 1850 + ( 1850 - 1750 ) = 1950

CBOE Volatility Index (VIX) at 15, however, suggests low market risk.

VIX Index

The Nasdaq 100 already indicates a correction after bearish divergence on 21-day Twiggs Money Flow and breach of support at 3640. Follow-through below 3600 would confirm, warning of a test of primary support at 3400/3420. Recovery above 3650, however, would signal that all bets are off.

Nasdaq 100

* Target calculation: 3600 + ( 3600 - 3400 ) = 3800

Bellwether Transport stock Fedex is headed for another test of primary support at $129/$130 on the monthly chart. Recovery above $145 would offer a target of $170*, but breach of support would warn of a primary down-trend — suggesting a broad economic slow-down. Breach of the (secondary) rising trendline, and support at $120, would strengthen the signal.

Fedex

* Target calculation: 145 + ( 145 - 120 ) = 170

Canada's TSX 60 is testing resistance at 820 on the monthly chart. Sharp divergence on 13-week Twiggs Money Flow warns of medium-term selling pressure. Reversal below 814 would warn of a correction, while follow-through above 826 would signal an advance to 850*.

TSX 60

* Target calculation: 810 + ( 810 - 770 ) = 850


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