S&P 500 and Dow: correction is over

By Colin Twiggs
June 18th, 2012 1:00 a.m. ET (5:00 p.m. AET)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment or trading advice. Full terms and conditions can be found at Terms of Use.

The S&P 500 closed Friday above resistance at 1340, confirming the bullish divergence on 21-day Twiggs Money Flow (hat tip johnb). Expect retracement to test the new support level, followed by a rally to the March/April high of 1420. Wait for breakout on the Nasdaq 100 to confirm the Dow and S&P 500 signals.

Dow Jones Industrial Average broke medium-term resistance at 12600/12700, indicating a rally to 13300. Expect retracement to first test the new support level. A bounce off the zero line by 13-week Twiggs Money Flow indicates medium-term buying pressure — and a likely rally — but the long-term bearish divergence remains and suggests strong resistance at 13300.

Nasdaq 100 has penetrated its descending trendline, signaling a bottom, but has yet to break resistance at 2580 — which would signal an advance to 2800 and confirm the Dow/S&P signals. Bullish divergence on 21-day Twiggs Money Flow indicates medium-term buying pressure.

Asia-Pacific stocks surge on Greek election results

ASX 200 Index is testing resistance at 4120 after Greek voters narrowly favored the New Democracy party in Sunday’s election — meaning that Greece is likely to remain in the euro-zone. Bullish divergence on 21-day Twiggs Money Flow indicates medium term buying pressure — following breach of the descending trendline suggested that the correction was over. Follow-through above 4150 would strengthen the signal, offering a target of the May high at 4450.

Dow Jones South Korea Index respected support at 402. Breakout above 420 would confirm that the down-trend is over. Recovery of 63-day Twiggs Momentum above zero would strengthen the signal.

Dow Jones Japan Index is testing the descending trendline and short-term resistance at 49. 63-Day Twiggs Momentum still reflects a primary down-trend, but breach of the descending trendline would warn that a bottom is forming.

Dow Jones Hong Kong Index is testing medium-term resistance at 388. Breach of the descending trendline warns that a bottom is forming. Upward breakout would indicate a rally to 440. Recovery of 63-day Twiggs Momentum above zero would strengthen the signal.