Selling pressure surges around the globe

Canada’s TSX 60 fell sharply this week. Twiggs Trend Index below zero warns of long-term selling pressure. Breach of support at 880 would confirm a primary down-trend.

TSX 60

In the UK, the Footsie is testing primary support at 7300. Twiggs Trend Index below zero again warns of long-term selling pressure. Breach of support would signal a primary down-trend.

FTSE 100

Dow Jones Euro Stoxx 50 is testing long-term support at 3400. Twiggs Trend Index, again below zero, warns of long-term selling pressure

DJ Euro Stoxx 50

India’s Sensex is undergoing a correction after breaking its rising trendline and support at 31500. Expect strong support at 29000.

BSE Sensex

China’s Shanghai Composite Index is also testing support. Breach of 3200 would warn of another test of primary support at 3000.

Shanghai Composite Index

Europe: Mild correction

Dow Jones Euro Stoxx 50 is undergoing a correction to test medium-term support at 3500. Declining Twiggs Money Flow indicates moderate selling pressure but long-term troughs above zero suggest a bull market. Respect of support is likely and would signal an advance to the 2015 high at 3800*.

DJ Euro Stoxx 50

* Target calculation: 3650 + ( 3650 – 3500 ) = 3800

US Recovery on Track

The Leading Index calculated by the Philadelphia Fed has, in the past proved a reliable indicator of economic conditions. The latest value of 1.74% (December 2014) reflects a healthy recovery.

Philadelphia Fed Leading Index

Light vehicle sales also indicate consumer confidence. Annual sales to December 2014 of 16.8 million units are in the same realm as the buoyant conditions of 2004 to 2007.

Light vehicle sales

The Freight Transportation Services Index suggests that broader economic activity is also soaring.

Freight Transport Index

The S&P 500 successfully tested support at 2000, recovery above the declining trendline suggesting that the recent correction is over. Penetration of the descending trendline on 13-week Twiggs Money Flow would strengthen the signal. Breach of 1980/2000 is unlikely. Breakout above 2080 would indicate a fresh advance; follow-through above 2100 would confirm.

S&P 500 Index

* Target calculation: 2100 + ( 2100 – 2000 ) = 2200

CBOE Volatility Index is declining. Breakout below the recent triangle would indicate that risk has reverted to ‘Low’ from ‘Moderate’.

S&P 500 VIX

Europe

Dow Jones Euro Stoxx 50 index is consolidating above support at 3300 despite tensions between Greece and its Northern EMU partners. Respect of 3300 would indicate a fresh primary advance, with a long-term target of 3600*. Follow-through above 3425 would confirm.

Dow Jones Euro Stoxx 50

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

Asia

China’s Shanghai Composite Index found support at 3050, but declining 13-week Twiggs Money Flow warns of medium-term selling pressure. Failure to break resistance at 3400 is increasingly likely, and reversal below 3050 would warn of a test of the primary trendline at 2700. The stimulus effect of lower energy prices may cushion the fall but economic activity is declining and the PBOC faces a number of challenges.

Shanghai Composite Index

Japan’s Nikkei 225 Index has benefited from aggressive monetary expansion by the BOJ and is testing resistance at its 2007 high of 18000. Rising 13-week Twiggs Momentum reflects a healthy up-trend. Breakout above 18000 would signal another primary advance, with a target of 20000*.

Nikkei 225 Index

* Target calculation: 18000 + ( 18000 – 16000 ) = 20000

Long-term momentum of India’s SENSEX has been slowing since mid-2014. A fall below zero is unlikely, but would warn of a trend reversal. Respect of the secondary rising trendline would suggest another test of 30000, while breach would test primary support at 26500.

SENSEX

* Target calculation: 29000 + ( 29000 – 27000 ) = 31000

Australia

Australia’s ASX 200 is retracing to test its new support level at 5660. Respect would confirm a fresh primary advance. 13-Week Twiggs Money Flow holding above the zero line indicates medium-term buying pressure. Breakout above the descending flag would signal another advance, with a target of 6150*. Failure of support is unlikely.

ASX 200

* Target calculation: 5650 + ( 5650 – 5150 ) = 6150

DAX leads European advance

Germany’s DAX broke through resistance at 9000, sharply rising 13-week Twiggs Money Flow signaling strong medium-term buying pressure. Target for the current advance is 9500*. Reversal below 9000 is unlikely, but would warn of a correction to the primary trendline between 8000 and 8500.

DAX

* Target calculation: 8500 + ( 8500 – 7500 ) = 9500

Dow Jones Euro Stoxx 50 is testing support at its 2009/2011 high of 3000. Rising 13-week Twiggs Momentum suggests a primary up-trend. Respect of support at 3000 is likely and follow-through above 3100 would confirm an advance to 3500*.

Euro Stoxx 50

* Target calculation: 3000 + ( 3000 – 2500 ) = 3500

Spain’s Madrid General Index found medium-term resistance at 1000. A correction to test support at 900 is likely, with 13-week Twiggs Money Flow falling sharply. Respect of 900 would suggest a healthy primary up-trend. Reversal below 900 is unlikely, but would indicate the primary trend is weakening.

Madrid General Index

* Target calculation: 900 + ( 900 – 750 ) = 1050

The FTSE 100 is retracing to test support at 6600. Long tails indicate short-term buying pressure. Follow-through above 6800 would indicate an advance to the December 1999 high of 6950/7000*. Rising 13-week Twiggs Money Flow suggests medium-term buying pressure, but the specter of a long-term bearish divergence remains. Expect strong resistance at 7000. Reversal below 6600 is unlikely, but would warn of a correction to primary support at 6400.

FTSE 100

* Target calculation: 6700 + ( 6700 – 6400 ) = 7000

Footsie breakout while Europe hesitates

The FTSE 100 broke resistance at 6700, indicating an advance to 7000*. Rising 13-week Twiggs Money Flow signals buying pressure. Reversal below 6600 is unlikely, but would test primary support at 6400.

FTSE 100

* Target calculation: 6700 + ( 6700 – 6400 ) = 7000

Dow Jones Euro Stoxx 50 hesitated with a doji star above long-term resistance at 3000. Expect a test of the new support level, but rising 13-week Twiggs Momentum continues to suggest a healthy up-trend. Penetration of the secondary trendline would warn of a correction to the primary trendline — around 2750.

Euro Stoxx 50

* Target calculation: 3000 + ( 3000 – 2500 ) = 3500

Spain’s Madrid General Index warns of a correction, with an evening star accompanied by strong volume. The sharp fall on 13-week Twiggs Money Flow indicates short-term selling pressure. Respect of the rising trendline would confirm the primary up-trend, offering a target of 1050*. Reversal below 900 is unlikely, but would indicate the up-trend is weakening.

Madrid General Index

* Target calculation: 900 + ( 900 – 750 ) = 1050

Germany’s DAX, however, is a lot more bullish. Respect of the new support level at 8500 offers a medium-term target of 9300*. Reversal below 8500 is now unlikely, but would warn of a correction to the primary trendline at 8000.

DAX

* Target calculation: 8500 + ( 8500 – 7700 ) = 9300

European breakout

Dow Jones Euro Stoxx 50 — representing 50 leading stocks in the Eurozone — broke long-term resistance at 3000, while the 13-week Twiggs Momentum trough above zero suggests a healthy up-trend. Expect retracement to test the new support level; respect would signal a primary advance, while failure would test 2850, warning of a bull trap.

Euro Stoxx 50

* Target calculation: 3000 + ( 3000 – 2500 ) = 3500

The FTSE 100 is also strengthening, with rising 13-week Twiggs Money Flow indicating buying pressure. Breakout above 6700 would indicate an advance to 7000*. Reversal below support at 6400 is unlikely, but would warn of a primary down-trend.

FTSE 100

* Target calculation: 6700 + ( 6700 – 6400 ) = 7000