Cement and electricity – not there yet

Buying looks a lot more robust than last week and more US-led gains are likely.

Electricity & Cement Production

An examination of electricity and cement production shows the US recovery has plenty of scope for further improvement. Cement production recovered from its dramatic fall in 2008 but remains at the bottom end of the normal range of 120 to 160.

Cement Production

Construction activity is recovering but is a long way below the over-heated levels of 2006. Figures on the graph below are adjusted for CPI.

Construction Spending

Electricity production remains stalled at 2008 levels. Severity of the Great Recession should ensure that low growth endures for longer than the last period of stagnation in the early 1980s.

Electricity Production Index

GDP may have resumed its long-term up-trend but it would be reassuring to see this supported by growing electricity output. Only when growth is restored can we say the economy is fully mended.

Electricity Production compared to Real GDP

North America

The S&P 500 posted two strong blue candles suggesting that the correction is now over. Expect resistance at the previous high of 2130. A 21-day Twiggs Money Flow trough above zero would indicate healthy buying pressure. Breakout above 2130 would signal a fresh advance, with a target of 2400*. Reversal below 2000 is unlikely, but would warn of another test of primary support at 1870.

S&P 500 Index

* Target calculation: 2130 + ( 2130 – 1870 ) = 2390

A CBOE Volatility Index (VIX) peak at 20 indicates market risk is returning to normal.

S&P 500 VIX

NYSE short sales remain subdued.

The Nasdaq 100 is testing its March 2000 high at 4800. Bearish divergence on 13-week Twiggs Money Flow continues to indicate selling pressure but the pattern appears secondary in nature and recovery above the declining trendline would suggest a breakout, offering a target of 5800*.

Nasdaq 100

* Target calculation: 4800 + ( 4800 – 3800 ) = 5800

Canada’s TSX 60 respected support at 765, suggesting another attempt at 825. The 13-week Twiggs Momentum peak below zero (-5%) remains a strong bear signal. Failure of support at 765 would confirm the primary down-trend.

TSX 60 Index

* Target calculation: 775 – ( 825 – 775 ) = 725


Germany’s DAX continues to test resistance at 11000. Troughs on 21-day Twiggs Money Flow above zero indicate medium-term buying pressure. Breakout above 11000 and the descending trendline would suggest another test of the previous high at 12400. Respect is unlikely, but would warn of another test of primary support at 9400/9500.


The Footsie is a lot weaker, only finding support at 6100. 21-Day Twiggs Money Flow oscillating below zero indicates persistent selling pressure. Reversal below 6250 would warn of another test of primary support at 6000. Breakout above 6500 is unlikely, but would suggest another test of 7000.

FTSE 100


The Shanghai Composite Index is testing its new support level at 3500. Declining 13-week Twiggs Money Flow indicates moderate selling pressure. Breach of 3500 would signal another test of 3000.

Dow Jones Shanghai Index

Japan’s Nikkei 225 respected support at 19000, confirming another test of resistance at 21000. Rising 13-week Twiggs Money Flow indicates buying pressure.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17000 ) = 21000

India’s Sensex broke the band of primary support at 26000/26500 but is edging lower in a trend channel, rather than a dramatic fall. Reversal of 13-week Twiggs Money Flow below zero would warn of rising selling pressure; a trough at zero would suggest buying pressure. Recovery above the upper channel at 27500 is unlikely at present, but would warn of a bear trap.


* Target calculation: 25000 – ( 27500 – 25000 ) = 22500


The ASX 200 respected primary support at 5000, suggesting another test of 5400. A 21-day Twiggs Money Flow trough above zero indicates medium-term buying pressure. Breach of 5000 is unlikely at present, but would warn of a (long-term) decline to 4000*.

ASX 200

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