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.
By Colin Twiggs
January 9th, 2016 12:30 a.m. EST (4:30 p.m. AEDT)
Batten down the hatches, the storm is here.
Nymex WTI Light Crude futures (March 2016) are testing support at $30 per barrel. There is no indication that this is the bottom and breach of $30 would be likely to test $20 per barrel.
* Target calculation: 30 – ( 40 – 30 ) = 20
Long-term interest rates are falling, with 10-year Treasury yields headed for another test of primary support at 1.5 percent. Breach of 1.7 percent would confirm. The flight from stocks is driving up Treasuries (and yields lower).
Flight to safety is (normally) synonymous with a strong Dollar, so the weakening Dollar Index is a surprise.
China must be selling off Dollar reserves to support the Yuan and restore confidence.
Too late, I’m afraid. That horse has bolted. Loss of confidence in the Yuan is driving demand for gold, with the spot metal rallying to $1200 per ounce. Resistance at the former support level makes retracement likely, but a trough that respects $1100 or narrow consolidation below $1200 would suggest reversal (to an up-trend). Breach of $1200 would offer a target of $1300*.
* Target calculation: 1200 + ( 1200 – 1100 ) = 1300
After forming a lower peak at 18000, Dow Jones Industrial Average is testing primary support at 16000. 13-Week Twiggs Momentum peak at zero warns of a primary down-trend. Breach of support would offer a target of 14000*.
* Target calculation: 16000 – ( 18000 – 16000 ) = 14000
The S&P 500 displays a similar pattern, testing primary support at 1850, with a 13-week Twiggs Momentum peak at zero. Breach of support would offer a target of 1500*.
* Target calculation: 1850 – ( 2150 – 1850 ) = 1550
A monthly chart shows VIX rising for another test of 30. Oscillation between 20 and 30 flags elevated market risk.
Australia’s ASX 200 retreated below primary support at 5000, signaling a primary down-trend. A 13-week Twiggs peak below zero already warns of a decline. Today’s close at 4832 confirms, offering a short-term target of 4600* and a long-term target of 4000*.
* Target calculation: 4850 – ( 5050 – 4850 ) = 4650; 5000 – ( 6000 – 5000 ) = 4000
Investors who plan to hold stocks through a possible down-turn should stop watching daily prices and listening to news reports. It will only weaken your resolve. I am comfortable with holding stocks with strong dividend streams, but wary of holding growth stocks as they normally suffer the biggest losses.
For traders this is a time of dangerous opportunity. Either shorting sectors likely to be worst hit or waiting for opportunities to buy gold stocks.