East to West: Sweeping conflagration

The tinder was dry and all it took was a spark from the US to set off a sweeping conflagration across global stock markets.

South Korea’s Seoul Composite Index broke support at 2450. Technically, Dow Theory requires a lower high followed by a new low to signal a reversal. What we have is a new low, without a preceding lower high. Often described as large correction, there has been debate over the years as to whether this constitutes a valid reversal. I prefer to sit on the fence: follow-through below 2300 would confirm reversal to a primary down-trend, while recovery above 2450 would signal a false alarm.

Seoul Composite Index

Japan’s Nikkei 225 Index remains in a primary up-trend, though retreat below the rising trendline at 21000 would warn of a loss of momentum.

Nikkei 225 Index

China’s Shanghai Composite Index was also hit hard. Primary support at 3250 has been breached but again by a large correction. Follow-through below 3000 would confirm the reversal.

Shanghai Composite Index

India’s NSE Nifty Index remains bullish, with Trend Index troughs above zero signaling long-term buying pressure. Breach of primary support at 10000 is unlikely.

Nifty Index

Target 10500 + ( 10500 – 10000 ) = 11000

In Europe, the DJ Euro Stoxx 600 is testing primary support at 366. Bearish divergence on the Trend Index warns of long-term selling pressure.

DJ Euro Stoxx 600

The Footsie retreated below two primary support levels, at 7300 and 7200, confirming reversal to a primary don-trend. Bearish divergence on the Trend Index warns of long-term selling pressure.

FTSE 100

In the US, it is hard to identify primary support levels as there has not been a decent correction for some time. Breach of support at 6200 appears unlikely, with Trend Index troughs above zero signaling long-term buying pressure.

S&P 500

While Canada’s TSX 60 is testing its primary level at 880. Again this is a large correction, so we may need to look elsewhere for confirmation if support at 880 is breached.

TSX 60

The extent of the market reaction reflects high levels of fear from investors. Valuations are high, especially in the US, and the emphasis has quickly swung to protecting existing profits and away from further gains.

6 thoughts on “East to West: Sweeping conflagration

  1. Neville Gobbert says:

    do you have any data on bit coin or a chart

  2. Solomon says:

    Colin, no …. no … no.

    These major markets’ trend up has now been broken. It’s got very little to do with ” waiting for Twiggs volatility index changes remaining above 2% ” , etc, etc, etc.

    Confidence in the markets have been shattered in terms of the time-compressed magnitude of the moves; risk-off will now dominate equity position-taking, as is evident in the price of 10year Treasuries over the last 12 months.

    I’d have a much more bearish tone to the markets = their price actions forces me to do that. = no need at all to ” look for further confirmation ”

    Sorry, mate.

  3. Parvez Dayal says:

    Hi Colin,
    Wondering how i can avail of your:
    “Twiggs Trend Index Weekly” indicator;
    myself in my Index watchlist when using Incredible Charts ??

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