More inverted scallops

By Colin Twiggs
September 24, 2016 5:00 a.m. EDT (7:00 p.m. AEST)

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Global

Dow Jones Global Index respected the new support level at 316/320, confirming another advance. Follow-through above 325 would complete an inverted scallop with a target of 355*. Momentum troughs above zero flag trend strength.

* Target calculation: 325 + ( 325 - 295 ) = 355

North America

The S&P 500 is retracing for a test of short-term support at 2150. Respect of the rising trendline would signal a test of 2200. Breakout above 2200 would complete an inverted scallop (or fish hook) with a target of 2400*. Declining Twiggs Money Flow, however, warns of selling pressure. Breach of 2050 would test medium-term support at 2100.

* Target calculation: 2100 + ( 2100 - 1800 ) = 2400

The Dow Jones Industrial Average also displays a potential inverted scallop on the weekly chart. Follow-through above 18600 would confirm but bearish divergence on Twiggs Money Flow again warns of selling pressure. Tall shadows on the last two candles also suggest short-term selling pressure. Breach of support at 18000 would warn of a test of primary support at 17000.

* Target medium-term: 18500 + ( 18500 - 18000 ) = 19000

The St Louis Fed Financial Stress Index (STLFSI) continues to indicate low market stress.

The STLFSI measures the degree of financial stress in the markets and is constructed from 18 weekly data series: seven interest rate series, six yield spreads and five other indicators. Each of these variables captures some aspect of financial stress. Accordingly, as the level of financial stress in the economy changes, the data series are likely to move together.

The Yield Differential, calculated by subtracting 3-month from 10-year Treasury Yields, is trending lower. This warns that the yield curve is flattening but we are still above the danger area below 1.0 percent.

A flat yield curve squeezes bank interest margins and often precedes a credit contraction.

But there is little sign of slowing credit growth so far.

Australia

The ASX 200 is headed for another test of resistance at 5600. Bearish divergence on Twiggs Money Flow warns of selling pressure. Breakout above 5600 is unlikely and breach of the lower trend channel would warn of a test of primary support at 5000/5100.

* Target calculation: 5400 + ( 5400 - 5100 ) = 5700

The ASX 300 Banks Index formed a bullish higher trough above 7200 and is again testing resistance at 8000. Declining Twiggs Money Flow, however, warns of selling pressure. Respect of resistance remains likely. Breakout, however, would signal a primary up-trend.

In my youth I stressed freedom, and in my old age I stress order. I have made the great discovery that liberty is a product of order.

~ Will Durant