Category Archives: Stock Markets

Analysis of major stock markets around the world.

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ASX 200 selling pressure builds as Aussie Dollar falls

The ASX 200 broke resistance at 5200, but bearish divergence on 13-week Twiggs Money Flow continues to warn of selling pressure.
ASX 200 Index

The daily chart also shows a bearish divergence, suggesting a test of support at 5100/5120. Failure would indicate a correction, while respect would confirm an advance to 5400*.
ASX 200 Index

* Target calculation: 5150 + ( 5150 – 4900 ) = 5400

Bipolar behavior of the market is highlighted by comparison of the ASX 50 Large Caps to the ASX Small Ords (ASX 300 – ASX 100). Small Caps tend to outperform Large Caps during a bull market, as can be seen from 2003 to 2007. But the current “bull market” gives out mixed signals, with Large Caps powering ahead while Small Caps remain in a down-trend. Demand for Large Caps seems to have been inflated by international capital flows.
ASX 50 Index
And the falling Aussie Dollar, with a target of $0.96* against the greenback, is likely to lead to retreat of the ASX 50 and ASX 200 indices.
Aussie Dollar

* Target calculation: 1.01 – ( 1.06 – 1.01 ) = 0.96

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Canada: TSX Composite recovery

The TSX Composite followed through above 12500, indicating another test of resistance at 12800/13000. Expect retracement to test the new medium-term support level at 12500, but respect is likely. Recovery of 13-week Twiggs Momentum above zero suggests continuation of the primary up-trend. Breakout above 13000 still appears some way off, but would offer a target of the 2011 high at 14300.
TSX Composite Index

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ASX 200 meets resistance

The ASX 200 is testing resistance at 5200. Breakout would signal an advance to 5400*. Reversal below 5100 is unlikely but would warn of a bull trap.  As would reversal of 21-day Twiggs Money Flow below zero.
ASX 200 Index

* Target calculation: 5150 + ( 5150 – 4900 ) = 5400

The Energy Sector XEJ recently completed an inverted head and shoulders reversal over six weeks, signaling an advance to 137. Bullish divergence on 13-week Twiggs Money Flow indicates long-term buying pressure. Breakout above 137 would offer a long-term target around 150*.
ASX 50 Index

* Target calculation: 135 + ( 135 – 120 ) = 150

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S&P 500 and Treasury yields surge

10-Year Treasury yields rallied sharply on Friday, breaking the new resistance level at 1.70%. Follow-through above 1.80% would confirm the decline is over, signaling another test of resistance at 2.00%/2.10%.
10-Year Treasury Yields
On the monthly chart we can see that breakout above resistance at 2.00%/2.10% would signal a primary up-trend and possible test of 4.00% in the next few years. Only a breakout above 4.00%, however, would end the secular bear-trend of the last three decades.
10-Year Treasury Yields

Last week Treasury yields were falling while stocks were rising. That changed on Friday, with the S&P 500 breaking through resistance at 1600, suggesting an advance to 1650. The index has exceeded its target of 1600* and seems overdue for a correction, but bullish sentiment is rising and the market can stay irrational longer than you can stay solvent (attributed to John Maynard Keynes). Oscillation above zero on 13-week Twiggs Money Flow indicates a healthy primary up-trend. A June quarter-end below 1500 now looks unlikely, but would present a long-term bear signal.

S&P 500 Index

* Target calculation: 1475 + ( 1475 – 1350 ) = 1600

Bellwether transport stock Fedex is testing support at $90. Respect of the rising trendline would signal the primary up-trend is intact. Recovery above $100 would confirm.
Fedex

Structural flaws in the US economy have not been addressed and uncertainty remains high, despite low values on the VIX. House prices are rising, largely due to institutional buying, but the overhang of shadow inventory is expected to delay recovery of housing construction. Mamta Badkar at Business Insider reports:

Shadow inventory fell 18 per cent year-over-year in January to 2.2 million units, according to CoreLogic’s latest report. This represents nine months’ supply.
…..down 28 per cent from its 2010 peak of 3 million units.

As traders we have to follow the trend, but in times like this it is important to remain vigilant.

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Australia: Why The Stock Market Has Been Bulletproof To Bad Economic News | Business Insider

Sam Ro quotes Gerard Minack in Business Insider:

To summarize: 1) we’ve seen this before, 2) we think the slowdown is temporary, 3) we think significant weakness will trigger stimulus, and 4) we think fiscal austerity is now less likely.

Still, Minack is pretty sure this resilience can’t hold for too much longer.

Read more at Why The Stock Market Has Been Bulletproof To The Bad Economic News | Business Insider Australia.

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Asia: Singapore breakout, ASX 200 selling pressure

Singapore’s Straits Times Index broke long-term resistance at 3300, signaling an advance to the 2007 high of 3900*. Troughs above zero on 13-week Twiggs Momentum strengthen the signal.
DJ Shanghai Index

* Target calculation: 3300 + ( 3300 – 2700 ) = 3900

India’s Sensex followed through above resistance at 19000. Breach of the descending trendline would indicate a primary advance to 22000*. 13-week Twiggs Money Flow below zero, however, signals selling pressure and reversal below 19000 would warn of another test of primary support at 18000.
BSE Sensex Index

* Target calculation: 20000 + ( 20000 – 18000 ) = 22000

China’s Shanghai Composite is again testing medium-term support at 2150. Failure of support would warn of a decline to test primary support at 1950/2000. Reversal above 2250, however, would penetrate the descending trendline, indicating another test of 2500.
Shanghai Composite Index

Japan’s Nikkei 225 continues to climb, with a steeply rising 13-week Twiggs Money Flow indicating strong buying pressure. Target for the advance is 15000*.
Nikkei 225 Index

* Target calculation: 11500 + ( 11500 – 8000 ) = 15000

The ASX 200 is testing resistance at 5150. Breakout would offer a target of 5400*, but bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Failure of support at 4900 would signal a reversal.
ASX 200 Index

* Target calculation: 5150 + ( 5150 – 4900 ) = 5400

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Europe: Dax faces selling pressure while UK and Italy rally

Germany’s DAX found support at 7500 and is again testing long-term resistance at 8000 (shown on the quarterly chart below). 13-Week Twiggs Momentum and Twiggs Money Flow both display bearish divergences, warning of selling pressure. Reversal below 7500 remains likely and would signal a correction to test the rising trendline.
DAX Index

* Target calculation: 7500 – ( 8000 – 7500 ) = 7000

Italy’s MIB index found support at 15000. Follow-through above 17000 would indicate a primary advance and penetration of resistance at 18000 would confirm the primary up-trend signaled earlier by bullish divergence on 13-week Twiggs Momentum.
FTSE MIB Index

* Target calculation: 18 + ( 18 – 15 ) = 21

The FTSE 100 is testing resistance at 6500. Rising 13-week Twiggs Money Flow and Twiggs Momentum both suggest that breakout is likely — which would signal an advance to 7000.
FTSE 100 Index

* Target calculation: 6500 + ( 6500 – 6000 ) = 7000

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Canada: TSX Composite bearish

The TSX Composite correction found support at 12000. Expect a rally to test resistance at 12500, but penetration of the rising trendline indicates weakness and breach of support at 12000 would be a strong bear signal. Bearish divergence on 13-week Twiggs Money Flow warned of a correction; a fall below zero would suggest a (primary trend) reversal.
TSX Composite Index

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S&P 500 at key resistance while Treasury yields fall

10-Year Treasury yields broke through support at 1.70%. Prior to 2012, the 1945 low of 1.70% was the lowest level in the 200 year history of the US Treasury. Expect a test of primary support at 1.40%.
10-Year Treasury Yields

Falling Treasury yields generally indicate a flight from stocks to the safety of bonds. The S&P 500, however, is consolidating below resistance at 1600. Breakout would suggest an advance to 1650, while reversal below 1540 would indicate a correction to the rising trendline at 1475. Recent weakness on 13-week Twiggs Money Flow favors a correction, but oscillation above zero indicates a healthy primary up-trend. A June quarter-end below 1500 would present a strong long-term bear signal.

S&P 500 Index

* Target calculation: 1475 + ( 1475 – 1350 ) = 1600

The Nasdaq 100 index is testing resistance at 2900. Breakout would offer a target of 3400*, but bearish divergence on 13-week Twiggs Money Flow favors a break of 2800 and test of the rising trendline at 2700.
Nasdaq 100

* Target calculation: 2900 + ( 2900 – 2500 ) = 3400

Gold rallied to test resistance at $1500/ounce. Breakout would suggest a bear trap and a rally to $1600, but respect of resistance is likely and would signal another test of support at $1330/1350. A gold bear market indicates falling inflation expectations, but that could also translate into lower growth in earnings and higher Price Earnings ratios.
Gold

Structural flaws in the US economy have not been addressed and uncertainty remains high, despite low values reflected on the VIX.

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ASX 200 correction over

The ASX 200 rallied strongly after breaking resistance at 5020. Breach of  the March high at 5150 is likely and would signal an advance to 5400*. A 21-day Twiggs Money Flow peak below zero would warn of strong selling pressure.
ASX 200 Index

* Target calculation: 5150 + ( 5150 – 4900 ) = 5400

The monthly chart offers a long-term target of 6000*.
ASX 50 Index

* Target calculation: 5000 + ( 5000 – 4000 ) = 6000

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Nikkei and ASX 200 rally, while China & Europe weaken

Respect of support at 1540 and the bottom trend channel indicates a S&P 500 rally to test 1600 and the upper channel line. Failure to break resistance at 1600 would warn of a correction as signaled by mild bearish divergence on 21-day Twiggs Money Flow.

S&P 500 Index

* Target calculation: 1350 + ( 1350 – 1100 ) = 1600

The FTSE 100 also respected support, at 6220, but a tall shadow on Monday warns of selling pressure. Reversal of 21-day Twiggs Money Flow below zero would strengthen the signal and breach of support (6220) would signal a test of the primary trendline at 6000.
FTSE 100 Index

* Target calculation: 6220 – ( 6420 – 6220 ) = 6020

Germany’s DAX broke medium-term support at 7500. A 21-day Twiggs Money Flow peak at zero warns of selling pressure. Follow-through below 7400 would signal a test of primary support at 7000. Recovery above 7600 is unlikely, but would test the descending trendline at 7700.
DAX Index

* Target calculation: 7500 – ( 8000 – 7500 ) = 7000

India’s Sensex broke resistance at 19000. Respect of support at 18000 and the rising trendline indicates the primary trend is intact. Mild bullish divergence on 21-day Twiggs Money Flow signals buying pressure. Expect consolidation or short retracement, but follow-through above the descending trendline at 19200 would indicate an advance to 20000.
BSE Sensex Index

* Target calculation: 19000 + ( 19000 – 18000 ) = 20000

China’s Shanghai Composite is testing medium-term resistance at 2250. Breakout would penetrate the descending trendline, indicating the correction is over.
Shanghai Composite Index
Unfortunately the Dow Jones Shanghai Index respected the descending trendline Tuesday, indicating another down-swing to the lower trend channel.
DJ Shanghai Index

Japan’s Nikkei 225 is the star performer, when measured in Yen. Sharp rallies, with frequent gaps, followed by short retracements indicates a strong up-trend. As does 21-day Twiggs Money Flow oscillating clear above the zero line.
Nikkei 225 Index

The ASX 200 met some resistance at 5020, but rising 21-day Twiggs Money Flow indicates buying pressure and breakout would signal a test of 5150.
ASX 200 Index

* Target calculation: 5025 + ( 5025 – 4900 ) = 5150

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Dramatic fall on S&P 500 – April 16th

Apologies. I deleted this April 16th post by accident.

The S&P 500 fell 220 basis points (2.2%) on Monday, blamed variously on disappointing growth figures from China, the fall in gold, and the Boston Marathon tragedy. I still suspect that the primary cause is the tectonic shift last week by the Bank of Japan.

“Where is the fall?” you may ask, when viewing the chart below. That is what I enjoy about monthly charts: they place daily moves in perspective. Breach of support at 1540 would indicate a small secondary correction, while breakout below 1490 would signal a correction back to the primary trendline. But the primary trend remains up. Only a fall through 1350 would suggest a reversal.

S&P 500 Index