Aussie under the pump but ASX finds support

The Aussie Dollar is now testing support at $0.89 after negative projections from Nouriel Roubini’s team. Reversal of 13-week Twiggs Momentum below zero warns of a primary down-trend, but expect further support at $0.8650/$0.8700. Breach would confirm a target of $0.80*.

AUDUSD

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

The ASX 200 is testing support at 5300/5350. Long tails on the last two candles suggest short/medium-term buying pressure, but 13-week Twiggs Money Flow below zero warns of long-term selling pressure. Recovery above 5450 would suggest another rally, while breach of 5300 would warn of a fall to 4900/5000*.

ASX 200

* Target calculation: 5350 – ( 5700 – 5350 ) = 5000

The ASX 200 VIX is rising, but remains at levels typical of a bull market.

ASX 200

India, Japan bullish but China hesitates

Hong Kong’s Hang Seng Index is testing support at 24000. Breach of the rising trendline warns of a correction. 13-Week Twiggs Money Flow holding above zero continues to indicate long-term buying pressure. Respect of support at 24000 would suggest another advance; confirmed if there is follow-through above 25000. Breach of support, however, would also warn of a correction — to the primary trendline around 22000.

Hang Seng Index

* Long-term target calculation: 24000 + ( 24000 – 21000 ) = 27000

China’s Shanghai Composite Index is consolidating below resistance at its 2013 high. Rising 13-week Twiggs Money Flow continues to indicate medium-term buying pressure. Breakout above 2350 would signal a fresh advance, while reversal below 2250 would warn of a correction.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

India’s Sensex recovered above 27000, suggesting an advance to 28000*. Rising 13-week Twiggs Money Flow suggests medium-term buying pressure. Breach of the secondary rising trendline is unlikely, but would warn of a correction.

Sensex

* Target calculation: 27000 + ( 27000 – 26000 ) = 28000

Japan’s Nikkei 225 index is testing resistance at its 2013 high of 16300. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout above 16300 would offer a long-term target of 18000*. Reversal below 16000 is unlikely, but would warn of a correction.

Nikkei 225

* Target calculation: 16000 + ( 16000 – 14000 ) = 18000

Europe finds resistance

Germany’s DAX is testing resistance at 9800. Breakout would signal another advance, while follow-through above 10000 would confirm. Bearish divergence on 13-week Twiggs Money Flow followed by a dip below zero, however, warns of long-term selling pressure. Reversal below 9600 would warn of another test of primary support at 9000/8900.

DAX

Dow Jones Euro Stoxx 50 is testing resistance at its recent high of 3300. Breakout would suggest an advance to 3600*, but bearish divergence on 13-week Twiggs Momentum (and Twiggs Money Flow) warns that sellers dominate. Reversal below 3200 would indicate another test of primary support at 2975/3000.

Dow Jones Euro Stoxx 50

The Footsie is testing medium-term support at 6750. Breach would warn of another test of primary support at 6400/6500. Oscillation of 13-week Twiggs Money Flow above zero, however, continues to warn of long-term buying pressure. Breakout above long-term resistance at 6900 would signal a primary advance.

FTSE 100

* Target calculation: 7000 + ( 7000 – 6000 ) = 8000

Canada: TSX 60 correction

Canada’s TSX 60 broke short-term support at 890, warning of a correction. Respect of support at 865 would confirm that the primary trend is intact, while failure would indicate weakness. Reversal of 13-week Twiggs Momentum below zero is unlikely, but would warn of reversal to a (primary) down-trend.

TSX 60

* Target calculation: 900 + ( 900 – 865 ) = 935

Quarter-end turbulence

We are now approaching the September quarter-end, normally a volatile time for stocks. Investment managers tend to re-balance their portfolios after month-end, selling off poor performers and increasing cash balances to later take advantage of new opportunities. The result is that stocks tend to dip in October. If the fundamental under-pinning of the market is strong, they soon recover and continue on its merry way. But if there are serious flaws, the sell-off can turn into a rout — as in 1987 and 2007.

At present the market outlook appears sound and the bull market is likely to continue. I often use transport stock Fedex as a bellwether for the US economy. If the economy is robust, you can expect Fedex to display a solid up-trend. If weak, Fedex tends to lead the market lower. In November 2007 for example, on the monthly chart below, Fedex signaled a bear market several months ahead of the major indices. The present situation is quite the opposite, with the Fedex in a strong bull-trend, having recently respected support at $145. A 13-week Twiggs Money Flow trough above zero also suggests buying pressure. Economic activity is clearly improving.

Fedex

* Target calculation: 145 + ( 145 – 130 ) = 160

The S&P 500 break above 2010 proved to be a false break, with the market headed for a re-test of support at 1980. Breach would indicate another correction. Declining 21-day Twiggs Money Flow now indicates medium-term selling pressure; a fall below zero would warn of a primary down-trend.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) remains low, however, suggesting continuation of the bull market.

VIX Index

Dow Jones Industrial Average also retreated, testing its new support level at 17150. Reversal below 16950 would indicate a correction, while respect would suggest another advance. Declining 21-day Twiggs Money Flow also suggests medium-term selling pressure.

Dow Jones Industrial Average

* Target calculation: 16500 + ( 16500 – 15500 ) = 17500

My conclusion is that the bull market is sound, but likely to encounter some turbulence over the quarter-end. There may be a secondary correction, but respect of recent support levels would indicate a fresh advance.

S&P bullish but Asia, Europe weak

Weekly highlights:

  • Scotland votes “No” and the Pound rallies
  • Treasury yields (long-term) are rising and the Dollar strengthens
  • Gold and crude oil fall
  • European stocks remain bearish
  • Asian stocks also remain bearish despite Hong Kong/Shanghai breakout
  • US stocks still reflect a bull market

Stock markets

Dow Jones Europe Index is retracing after a weak rally that reached 335. Failure of support at 320 would signal a primary down-trend. Follow-through below 315 would confirm. A 13-week Twiggs Momentum peak below zero strengthens the bear signal.

* Target calculation: 320 – ( 340 – 320 ) = 300

Dow Jones Asia Index is testing primary support at 3200 despite bullishness on the Hang Seng and Shanghai Composite. Bearish divergence on 13-week Twiggs Momentum warns of a test of 3100. Breach of 3200 would signal a primary down-trend, while follow-through below 3100 would confirm.

* Target calculation: 3100 + ( 3100 – 2800 ) = 3400

The S&P 500 recovered above 2000 to signal a fresh advance. Follow-through above 2010 confirms a target of 2100*. Reversal below 1980 is unlikely. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) remains low, typical of a bull market.

S&P 500 VIX

The ASX 200 correction found support at 5300/5350. But 13-week Twiggs Money Flow below zero, after a long-term bearish divergence, warns of further weakness. Breach of 5300 would indicate a test of 5000. Recovery above 5550 is unlikely, but would suggest a fresh advance.

ASX 200

* Target calculation: 5650 + ( 5650 – 5350 ) = 5950

Dow, S&P 500 make new highs

Dow Jones Industrial Average followed through above 17150, confirming a primary advance to 18000*. Rising 21-day Twiggs Money Flow suggests buying pressure. Reversal below support at 16950 is most unlikely, but would warn of a correction.

Dow Jones Industrial Average

* Target calculation: 17150 + ( 17150 – 16350 ) = 17950

The S&P 500 similarly followed through above 2010, confirming a primary advance with a target of 2070*. Reversal below support at 1980 is most unlikely, but would warn of a correction.

S&P 500

* Target calculation: 1990 + ( 1990 – 1910 ) = 2070

CBOE Volatility Index (VIX) is now back at 12, continuing to indicate low risk typical of a bull market.

VIX Index

S&P 500 healthy bounce

The S&P 500 bounced off support at 1980/1985 and is once again testing resistance at 2000. Follow-through above 2010 would confirm a primary advance, targeting 2100*. Failure of short-term support at 1980 remains unlikely, but would warn of a correction to 1950.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) retreated below 13, indicating low risk typical of a bull market.

VIX Index

Dow Jones Industrial Average breakout above 17150 would strengthen the bull signal, offering a target of 17500*. Rising 21-day Twiggs Money Flow suggests buying pressure. Reversal below support at 16950 is unlikely, but would warn of a correction.

Dow Jones Industrial Average

* Target calculation: 16500 + ( 16500 – 15500 ) = 17500

Aussie dollar leads ASX lower

The Australian Dollar found short-term support at $0.90 after last week’s fall. Reversal of 13-week Twiggs Momentum below zero warns of another decline, but expect support at $0.89/$0.90 and at $0.8650/$0.8700. Breach of the latter would confirm a target of $0.80*.

AUDUSD

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

The ASX 200 is testing a wide band of support between 5420 and 5460. Reversal of 21-day Twiggs Money Flow below zero warns of strong selling pressure. Breach of the rising trendline would suggest a correction to test the primary trendline around 5000. Support levels are indistinct because of frequent back-filling, however, and could establish anywhere between 5300 and 5450.

ASX 200

The ASX 200 VIX is rising, but levels below 20 are typical of a bull market.

ASX 200

Asian stocks cautious

Hong Kong’s Hang Seng Index is retracing to test support at 24000. Rising 13-week Twiggs Money Flow indicates sustained buying pressure. Respect of 24000 would suggest another primary advance, while failure would warn of a correction. Breakout above 25000 would offer a target of 27000*.

Hang Seng Index

* Long-term target calculation: 24000 + ( 24000 – 21000 ) = 27000

China’s Shanghai Composite Index is consolidating at its 2013 high. Rising 13-week Twiggs Money Flow reflects medium-term buying pressure. Breakout above 2340 would strengthen the primary up-trend, but retracement to test the new support level at 2250 remains as likely.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

India’s Sensex retreated below short-term support at 27000. Bearish divergence on 13-week Twiggs Money Flow continues to warn of long-term selling pressure, but another trough above zero would negate this. Breach of the secondary rising trendline would warn of a correction, while respect would suggest further gains.

Sensex

* Target calculation: 21000 + ( 21000 – 15000 ) = 27000

Japan’s Nikkei 225 index is testing resistance at 16000. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout above 16300 would signal another advance. Reversal below 15500 is unlikely, but would warn of a correction.

Nikkei 225

* Target calculation: 16000 + ( 16000 – 14000 ) = 18000

DAX and Footsie show resilience

Germany’s DAX is retracing in a flag pattern after several weeks of healthy advance. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Continuation is likely and breach of resistance at 9800 would indicate another test of 10000. Reversal below 9300 is unlikely.

DAX

Dow Jones Euro Stoxx 50 retreated from its recent high of 3300. Respect of 3200, however, would suggest an advance to 3600*; confirmed if the index breaks above 3300. Respect of the zero line by 13-week Twiggs Money Flow would indicate medium-term buying pressure, while reversal below zero would be bearish.

Dow Jones Euro Stoxx 50

Long tails on the Footsie indicate support at 6800. A “no” vote in the Scottish independence referendum may precipitate another test of long-term resistance 6900, while a “yes” outcome would most likely cause a correction. But any losses are likely to be short-lived as any negotiations settle into a long, drawn-out process.

FTSE 100

* Target calculation: 7000 + ( 7000 – 6000 ) = 8000

Canada: TSX threatens breakout

Canada’s TSX 60 consolidating in a narrow range below resistance at the 2008 high of 900 is a bullish sign. Breakout would offer a medium-term target of 935*. 13-Week Twiggs Money Flow oscillating high above zero indicates healthy buying pressure. Reversal below 890 would warn of a test of support at 865/870, but penetration of the rising trendline is unlikely.

TSX 60

* Target calculation: 900 + ( 900 – 865 ) = 935

Dow finds support

Dow Jones Industrial Average found short-term support at 16950/17000. Follow-through above 17050 would indicate another attempt at 17150. And breakout above 17150 would offer a target of 17500*. Recovery of 21-day Twiggs Money Flow above 20% would indicate buying pressure. Reversal below support at 16950 is unlikely, but would test the rising trendline around 16700.

Dow Jones Industrial Average

* Target calculation: 16500 + ( 16500 – 15500 ) = 17500

The S&P 500 is testing support at 1980/1985. Monday’s long tail suggests short-term buying pressure; strengthened if 21-day Twiggs Money Flow starts to rise. Recovery above 2000 would indicate another rally. Follow-through above 2010 would signal an advance to 2100*. Failure of short-term support at 1980 is unlikely, but would warn of a correction to 1950.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) readings remain low, typical of a bull market.

VIX Index

The Nasdaq 100 is retracing to test its new support level at 4000. Respect of support is likely and would suggest an advance to 4250*. Failure of support at 4000, however, would warn of a correction to the primary trendline, around 3850. Completion of another 13-week Twiggs Money Flow trough above zero would strengthen the bull signal.

Nasdaq 100

* Target calculation: 4000 + ( 4000 – 3750 ) = 4250

ASX selling pressure

The ASX 200 is falling sharply despite strong performance in China. Breach of the rising trendline (around 5400) would indicate a correction to test the primary trendline around 5000. The support level is indistinct because of frequent back-filling and could establish anywhere between 5300 and 5450. Reversal of 13-week Twiggs Money Flow below zero after a bearish divergence warns of strong selling pressure. Respect of support at the secondary trendline is therefore unlikely.

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

The ASX 200 VIX is rising, but low levels remain typical of a bull market.

ASX 200

Dow Jones Shanghai Index continues to make strong gains since commencing a primary up-trend, but expect further resistance between 310 and 315, at the 2013 high.

DJSH

Europe uneasy

Weekly highlights:

  • The Dollar is strengthening
  • Treasury yields (long-term) are rising
  • Gold and crude oil are falling
  • European stocks are bearish
  • US stocks remain bullish

The tenuous ceasefire in Eastern Ukraine appears to be holding, but Europe faces another challenge this week, with a Scottish referendum on independence. Predictions of financial mayhem in the event of a “Yes” vote are, I feel, exaggerated in an attempt to influence the outcome. The official position of the UK government is:

“If a majority of those who vote want Scotland to be independent then Scotland would become an independent country after a process of negotiations.”

The “process of negotiations” is likely to be comprehensive and would resolve most outstanding uncertainties in an orderly fashion. There has been much debate over economic issues, but it is no coincidence that the referendum is being held in the same year as the 700th anniversary of the Battle of Bannockburn, when Scots under Robert the Bruce defeated an English army led by Edward II to regain their independence.

Stock markets

Dow Jones Euro Stoxx 50 remains hesitant, retreating from resistance at 3300. Consolidation above 3200 would be a bullish sign, while breach of 3100 would threaten primary support at 3000. Another 13-week Twiggs Money Flow trough above zero would indicate buying pressure, but reversal below zero would warn of a down-trend.

* Target calculation: 3300 + ( 3300 – 3000 ) = 3600

The S&P 500 is edging lower and follow-through below 1980 would indicate another correction. Respect of support at 1950, however, would suggest that the up-trend is intact. Sideways movement on 21-day Twiggs Money Flow, reflects further consolidation.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) below 20 is typical of a bull market.

S&P 500 VIX

China’s Shanghai Composite Index breakout above 2250 signals a primary up-trend. The monthly chart, however, reflects further resistance at 2450/2500*. Rising 13-week Twiggs Money Flow indicates accelerating buying pressure. Reversal below 2250 is most unlikely, but would suggest further consolidation between 2000 and 2250.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

The ASX 200 broke support at 5540/5560, warning of a correction. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure. Respect of support at 5440/5460 would indicate that the primary up-trend is intact, while a fall below 5360 would warn of a down-trend.

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

European resistance

Germany’s DAX found resistance at 9700/9800. Recovery of 13-week Twiggs Money Flow above zero indicates short-term buying pressure, but the long-term signal remains bearish. Reversal below 9300 would warn of another test of primary support at 9000.

DAX

Dow Jones Euro Stoxx 50 is testing resistance at the recent high of 3300. But declining 13-week Twiggs Money Flow again warns of long-term selling pressure. Breakout above 3300 is unlikely but would suggest another advance, while reversal below 3200 — or Twiggs Money Flow below zero — would warn of another correction.

Dow Jones Euro Stoxx 50

The Footsie appears unfazed by threats of Scottish independence, testing long-term resistance at 6850/6900. 13-Week Twiggs Money Flow troughs above zero indicate healthy buying pressure, but there is a major psychological barrier at the 1999 high of 6900/7000. Narrow consolidation below this level would be a bullish sign, while a correction to test primary support at 6500 would suggest further hesitancy.

FTSE 100

* Target calculation: 7000 + ( 7000 – 6000 ) = 8000

Asian stocks pause

Hong Kong’s Hang Seng Index continues to encounter resistance at 25000, but respect of support at 24000 and rising 13-week Twiggs Money Flow indicate sustained buying pressure. Breakout would offer a target of 27000*.

Hang Seng Index

* Long-term target calculation: 24000 + ( 24000 – 21000 ) = 27000

China’s Shanghai Composite Index is consolidating after breaking resistance at 2250. Rising 13-week Twiggs Money Flow reflects medium-term buying pressure. The primary trend is up, but expect retracement to test the new support level at 2250.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

India’s Sensex has reached its long-term target of 27000*, shown here on a quarterly chart. Bearish divergence on 13-week Twiggs Money Flow continues to warn of long-term selling pressure. Respect of the zero line appears likely and would suggest a further advance, but a fall below zero would warn of a decline to test the rising trendline.

Sensex

* Target calculation: 21000 + ( 21000 – 15000 ) = 27000

Japan’s Nikkei 225 index continues its advance towards 16300. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 15500 is unlikely, but would warn of a test of 14800.

Nikkei 225

ASX 200 finds support

The ASX 200 found support above 5560 and is likely to re-test resistance between 5640 and 5680. Breakout would signal an advance with a target of 5850*. Completion of another 21-day Twiggs Money Flow trough above zero would indicate renewed buying pressure. Reversal below 5540, however, would warn of a test of support between 5440 and 5500 (the rising trendline).

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

Readings for the ASX 200 VIX remain low, typical of a bull market.

ASX 200