ColinTwiggs, Author at the patient investor

September 3, 2014

Gold Declines as the Dollar rises

A rising dollar, falling crude prices and low inflation all favor a down-trend for gold, while falling long-term interest rates are the only alleviating factor at present.

Gold broke support at $1280, indicating another test of primary support at $1200/ounce. Declining 13-week Twiggs Momentum below zero suggests a primary down-trend. Failure of medium-term support at $1240 would strengthen the bear signal. Breach of primary support would confirm.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

Gold Bugs Index, representing un-hedged gold stocks, has not yet followed. Breach of support at 235 would confirm another test of primary support at 205. Reversal of 13-week Twiggs Momentum below zero would strengthen the signal.

Gold Bugs Index

Silver, on the other hand is already testing primary support at $18.50/$19.00 per ounce. Breach of support would strengthen the bear signal for gold, while respect would suggest further consolidation.

Spot Silver

September 3, 2014

ASX 200 retraces to test new support level

The ASX 200 broke resistance at 5650, but is now retracing to test the new support level. Reversal below 5620 would warn of another test of 5450, but respect of support is more likely and follow-through above 5680 would confirm an advance, offering a target of 5850*. Completion of another 21-day Twiggs Money Flow trough above zero would strengthen the signal.

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

Low readings for the ASX 200 VIX are typical of a bull market.

ASX 200

September 3, 2014

Asian tiger leap

Hong Kong’s Hang Seng Index is retracing to test support at 24000. Respect is likely and recovery above 25000 would confirm a primary advance to 27000*. Rising 13-week Twiggs Money Flow signals buying pressure. Failure of support at 24000 is unlikely, but would warn of a correction.

Hang Seng Index

* Long-term target calculation: 24000 + ( 24000 – 21000 ) = 27000

China’s Shanghai Composite Index broke resistance at 2250, confirming a primary up-trend. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Expect retracement to test the new support level.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

India’s Sensex is testing resistance at the target of 27000*. Completion of a 13-week Twiggs Money Flow trough above zero indicates that buyers have taken control. Expect retracement to test the new support level at 26000. Penetration of the secondary trendline is unlikely, but would warn of a correction to the primary trendline.

Sensex

* Target calculation: 21000 + ( 21000 – 15000 ) = 27000

Japan’s Nikkei 225 index followed through above 15500, suggesting a test of resistance at 16000/16300. Declining 13-week Twiggs Money Flow continues to warn of medium-term selling pressure, but respect of the zero line would signal that buyers have taken control. Reversal below 15500 is unlikely, but would warn of a test of 14800.

Nikkei 225

September 3, 2014

Footsie resilient while Euro, DAX falter

The Euro is in a primary down-trend, having broken support at $1.35. Declining 13-week Twiggs Momentum (below zero) confirms. Expect short-term support at $1.31 on the weekly chart, with long-term support at $1.27/$1.28.

Euro

Germany’s DAX encountered resistance below 9700/9800 and 13-week Twiggs Money Flow below zero warns of selling pressure. Reversal below 9300 would warn of another test of primary support at 9000.

DAX

Dow Jones Euro Stoxx 50 found similar resistance at 3200. A 13-week Twiggs Money Flow trough above zero, however, would indicate buying pressure, while a fall below zero would warn that sellers dominate. Reversal below 3100 would warn of another test of primary support at 3000.

Dow Jones Euro Stoxx 50

The Footsie shows more resilience, testing long-term resistance at 6850/6900. 13-Week Twiggs Money Flow oscillating above zero indicates long-term buying pressure, but there is a major psychological barrier at 6900/7000 (the 1999 high) that has to be overcome. Breach of support at 6500 is unlikely, but would warn of a reversal.

FTSE 100

* Target calculation: 7000 + ( 7000 – 6000 ) = 8000

September 3, 2014

Dow finds support

Dow Jones Industrial Average retraced to test support at 17000. Respect is likely and would indicate a fresh advance. Follow-through above 17150 would confirm a target of 17500*. Recovery of 21-day Twiggs Money Flow above its July peak would strengthen the signal. Reversal below 16950 is unlikely, but would warn of another correction.

Dow Jones Industrial Average

* Target calculation: 16500 + ( 16500 – 15500 ) = 17500

The S&P 500 is also testing support — at 2000. Respect would offer a target of 2100*. Follow-through above 2005 would confirm. A small trough above zero on 21-day Twiggs Money Flow is encouraging, but reversal below 20% would warn of selling pressure. Failure of short-term support at 1985/1990 is unlikely, but would warn of another correction.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

Low CBOE Volatility Index (VIX) readings are typical of a bull market.

VIX Index

Bellwether transport stock Fedex respected support at $144/$145, indicating another advance. Follow-through above $154/$155 would confirm a healthy up-trend — for both the stock and the economy. Likewise, a 13-week Twiggs Money Flow trough above zero would suggest long-term buying pressure and another primary advance. Breach of support is unlikely, but would warn of a correction to primary support at $129/$130.

Fedex

* Target calculation: 145 + ( 145 – 130 ) = 160

September 2, 2014

S&P 500 E-mini tests support

The S&P 500 (September 2014) E-mini is retracing for another test of support at 2000. Markets were closed Monday for Labor Day. Respect of support is likely and would signal an advance to 2100*. Follow-through above 2004 would strengthen the signal. Breach of support at 2000 is unlikely, but would warn of another correction.

E-mini

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

August 30, 2014

Luc Vancraen: Can the EU still prevent an open war between Ukraine and Russia?

Interesting proposal from Luc Vancraen, an entrepreneur in Kyiv who holds a masters degree from Boston University:

If there is no Novorussia today it is because of the ferocious fighting of the Ukrainian armed forces. If the EU wants the Ukrainians to stop fighting after Donbas is liberated it will have to come up with a plan that convinces even the volunteer battalions that it is just a matter of time before Crimea returns to Ukraine.

The only way I can see this happen is through a Crimean Occupation Tax on all energy imported from Russia into the EU and all other countries that want to participate. President Putin will not like this tax at all but strangely enough it might be enough for him to belief that this could stop the Ukrainian army. It buys him time and he can speculate on convincing the EU to drop it later through good behaviour even though this won’t be easy with a name like this.

The tax will be paid on all Russian gas, oil and coal sold in the EU. Who pays this tax? Initially it will be EU citizens through their energy bills. This allows Putin through the Russian propaganda to trivialise these sanctions and to laugh with the stupidity of the EU that sanctions itself. But don’t underestimate the creativity of the energy companies. They will find other suppliers and this helps the EU to reduce dependency from a supplier they can no longer trust. Russia will be faced very fast with a serious dilemma. Lowering energy prices to include the tax so that it remains competitive with suppliers that don’t need to pay this or totally losing the biggest customer on earth. Simulations show that after just two years it is Russia that is paying this tax to avoid totally losing the EU as a customer.

August 30, 2014

Garry Kasparov: It’s a War, Stupid! | TIME

From Gary Kasparov:

As always when it comes to stopping dictators, with every delay the price goes up. Western leaders have protested over the potential costs of action Ukraine at every turn only to be faced with the well-established historical fact that the real costs of inaction are always higher. Now the only options left are risky and difficult, and yet they must be tried. The best reason for acting to stop Putin today is brutally simple: It will only get harder tomorrow.

August 30, 2014

The Great Myth: World War I Was No Accident | The Diplomat

From Zachary Keck:

…As the wise philosopher Rob Farley once cautioned in these pages, “accidental wars rarely happen,” and instead are usually the result of deliberate state policy. And in this regard, WWI is no exception, at least according to Dale C. Copeland.

In his instant classic, Origins of Major Wars, Copeland developed a theory he called “dynamic differentials theory” to explain the causes of great power conflicts. To slightly oversimplify, dynamic differentials theory argues that declining states initiate wars when they are still clearly militarily superior but they believe they are in deep and irreversible decline relative to the rising state.

In such a situation, the leaders of the declining state come to see war as the only way to prevent the rising state from overtaking it as the most powerful nation in the system, thereby becoming a major security threat. Dynamic differentials theory posits that these leaders are most likely to initiate war when they believe they have maximized their relative power– that is, when they believe their relative military power is peaking and delaying war will only allow the rising nation to grow relatively stronger….

August 30, 2014

EU moves to ramp up Russia sanctions | Al Jazeera

From AlJazeera:

French President Francois Hollande stressed that a failure by Russia to reverse a flow of weapons and troops into eastern Ukraine would force the bloc to impose new economic measures.”Are we going to let the situation worsen, until it leads to war?” Hollande said at a news conference. “Because that’s the risk today. There is no time to waste.”