Research & Investment | China storm

By Colin Twiggs
January 14th, 2015 4:30 p.m. AEDT (12:30 a.m. EST)

Advice herein is provided for the general information of readers and does not have regard to any particular person’s investment objectives, financial situation or needs. Accordingly, no reader should act on the basis of any information contained herein without first having consulted a suitably qualified financial advisor.

My newsletter on December 10th, warned of The Gathering Storm across global markets. A month later, concern over China is sapping investor confidence. Several exchanges signal a primary down-trend and more are approaching the tipping point.

The Dow Jones Global Index broke primary support at 300, warning of a decline to 260*. Follow-through below 290 confirms the signal — and a primary down-trend. A 6-month Twiggs Momentum peak below zero strengthens the signal.

DJ Global Index

* Target calculation: 300 – ( 340 – 300 ) = 260

North America

Declining profit margins proved a reliable indicator of recent recessions. The 10% year-on-year decline in Q3 is an early warning. Data for Q4 2015 is not yet available. A year-on-year fall of 20% would suggest that recession is imminent.

Profit Margins

The S&P 500 is headed for a test of primary support at 1870. Declining 21-day Twiggs Money Flow below zero warns of selling pressure. Breach of 1870 would confirm a primary down-trend. Respect of support is unlikely but would suggest another bear rally.

S&P 500 Index

* Target calculation: 1900 – ( 2100 – 1900 ) = 1700

CBOE Volatility Index (VIX) is rising. Breakout above 30 would warn of elevated risk.

S&P 500 VIX

Canada’s TSX 60 broke support at 750, confirming a primary down-trend. 13-Week Twiggs Momentum peaks below zero strengthen the bear signal. Target for the decline is 700*.

TSX 60 Index

* Target calculation: 800 – ( 900 – 800 ) = 700

Europe

Germany’s DAX is headed for a test of primary support at 9400. Reversal of 13-week Twiggs Money Flow below zero warns of selling pressure. Breach of support would signal a decline to 7500*.

DAX

* Target calculation: 9500 – ( 11500 – 9500 ) = 7500

The Footsie again breached 6000, warning of a primary down-trend. Declining 13-week Twiggs Money Flow below zero strengthens the signal. Follow-through below 5800 would confirm. Target for the decline is 5000*.

FTSE 100

* Target calculation: 6000 – ( 7000 – 6000 ) = 5000

Asia

The Shanghai Composite Index crossed below 3000 for the first time since August. Declining 21-day Twiggs Money Flow warns of medium-term selling pressure. Follow-through below 2900 would confirm another (primary) decline, with a target of 2400*.

Dow Jones Shanghai Index

* Target calculation: 3000 – ( 3600 – 3000 ) = 2400

Japan’s Nikkei 225 is back testing primary support at 17000. The peak at zero on 13-week Twiggs Momentum warns of a primary down-trend. Breach of support would confirm.

Nikkei 225 Index

* Target calculation: 17500 – ( 20000 – 17500 ) = 15000

India’s Sensex breached primary support at 25000. 13-Week Twiggs Money Flow peaks below zero indicate a primary down-trend. Expect retracement to test the new resistance level at 25000 but respect is likely. Target for the decline is 23000*.

SENSEX

* Target calculation: 26500 – ( 30000 – 26500 ) = 23000

Australia

The ASX 200 breached primary support at 5000, signaling another decline. Follow-through below 4900 would confirm. Declining 13-week Twiggs Money Flow below zero indicates selling pressure. Target for a decline is 4600 (medium-term), or 4000* in the long-term.

ASX 200

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

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