Australia’s ASX 200 broke through resistance at 5660, signaling a fresh primary advance after several months in the doldrums. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Retracement to test new support at 5550/5650 is likely, but the target for the advance is 6150*.
* Target calculation: 5650 + ( 5650 – 5150 ) = 6150
The surge was driven by an RBA rate cut to a new low of 2.25%.
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Chart: The RBA takes Australia's benchmark rate to new historical low – pic.twitter.com/qnCELNK2be
— (((The Daily Shot))) (@SoberLook) February 3, 2015
The cut was largely unexpected. My view was (and is) that a cut is unnecessary, given that falling commodity prices (especially crude oil and LNG) are weakening the Aussie Dollar. Now that we have one, further cuts are likely.
Rate moves are like cockroaches – there's usually more than one. So expect another #RBA 0.25% rate cut to 2% around April
— Shane Oliver (@ShaneOliverAMP) February 3, 2015
US Markets
The S&P 500 continues to test support at 2000, but rising 13-week Twiggs Money Flow indicates long-term buying pressure. Breach of 1980/2000 is unlikely, but would warn of another correction. Recovery above the descending trendline would suggest the start of a fresh advance.
* Target calculation: 2000 + ( 2000 – 1800 ) = 2200
CBOE Volatility Index retreated below 20%, but only breakout below the triangle would reassure that the recent up-surge has passed — and risk has reverted to ‘low’ from ‘moderate’.
Europe
Germany’s DAX is heading for 11000* after breaking resistance at 10000. A 13-week Twiggs Momentum trough above zero confirms the primary up-trend.
* Target calculation: 10000 + ( 10000 – 9000 ) = 11000
The Footsie continues to test long-term resistance at 6900/7000. Breakout would signal a fresh primary advance, with a long-term target of 8000*. 13-Week Twiggs Money Flow is rising, but it will take considerable buying pressure to break through the 1999/2000 high.
* Target calculation: 7000 + ( 7000 – 6000 ) = 8000
China’s Shanghai Composite Index is retreating from resistance at its 2009 high of 3400. A small decline in 13-week Twiggs Money Flow indicates medium-term buying pressure is weakening. Reversal below 3100 would warn of a correction. Breakout above 3400 remains as likely, however, and would signal a fresh primary advance. The stimulus effect of lower energy prices may allow the PBOC scope to rein in monetary expansion, which would have a dampening effect on the current stock boom.
Chart: China's short-term rates are on the rise again. Why would the PBoC allow monetary conditions to tighten? pic.twitter.com/6JgDQBMGAS
— (((The Daily Shot))) (@SoberLook) February 3, 2015
The whole art of government consists in the art of being honest.
~ Thomas Jefferson