ColinTwiggs, Author at the patient investor

August 7, 2014

Gold finds support as Euro falls

Treasury yields warn of a decline
Euro trending lower
Dollar halts at resistance
Gold finds short-term support

Interest Rates and the Dollar

The yield on ten-year Treasury Notes retreated below 2.50 percent, warning of a decline to 2.00 percent*. Follow-through below 2.40 would confirm. 13-Week Twiggs Momentum below zero strengthens the signal. Reversal above 2.65 is unlikely, but indicate an advance to 3.00 percent.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The euro is in a primary down-trend, having broken primary support at $1.35. Target for the initial decline is $1.30*. Declining 13-week Twiggs Momentum below zero confirms the down-trend. Recovery above $1.35 is unlikely, but would warn of a bear trap.

EURUSD

* Target calculation: 1.35 – ( 1.40 – 1.35 ) = 1.30

The Dollar Index has run into resistance at 81.50, evidenced by tall wicks (“shadows”) on the last two weekly candles. Weakness in Europe is likely to drive the Dollar higher, while lower treasury yields would retard the advance. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend. Breakout above 81.50 would signal a primary advance to 84*. Reversal below 81.00 is unlikely, but would warn of another test of primary support at 79.00.

Dollar Index

* Target calculation: 81.50 – ( 81.50 – 79.00 ) = 84.00

Gold

Gold found short-term support at $1280/$1300. Oscillation of 13-week Twiggs Momentum around zero continues to indicate hesitancy. Breach of support at $1240/$1250 would warn of a primary down-trend. Recovery above $1350 remains unlikely at present, but would indicate another test of $1400/$1420.

Spot Gold

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

August 6, 2014

Cigarette Butts Offer Solution To Supercapacitors’ Energy Storage

Supercapacitors are superior to batteries because they can load up on energy and discharge it much faster. They store electrical charges, unlike batteries, which store energy in chemicals. Unfortunately their size makes them impractical for most non-industrial applications.

Now a South Korean research team have found a way to shrink the size of supercapacitors, replacing carbon nanotubes and graphene with an unlikely (and inexpensive) substitute: burnt cigarette butts.

Conventionally, the devices rely on carbon because it is inexpensive, has a high surface area, has strong electrical conductivity and is stable. Now the team from Seoul National University says it has found a way to transform the cellulose acetate fibers in cigarette filters into a carbon-based material in a single, simple step. The filters are burned using a technique called pyrolysis. The resulting material contains many pores of different sizes, thus increasing its surface area and thus its performance. This is important in creating a high-performing supercapacitor, according to Professor Jongheop Yi, a co-author of the study.

“A combination of different pore sizes ensures that the material has high power densities, which is an essential property in a supercapacitor for the fast charging and discharging,” Yi says.

The scientists attach this substance to one electrode in a three-electrode supercapacitor to learn how well it could absorb and release a charge. They found that their material stored more energy than conventional carbon, graphene and even carbon nanotubes. That means that their form factor can shrink.

August 6, 2014

Solar And Wind Power More Expensive Than Thought

A new paper from Charles Frank an economist at the Brookings Institution, a Washington think tank, argues that wind and solar power are not economically viable:

The paper examined four kinds of carbon-free energy – solar, wind, hydroelectric and nuclear – as well as low-carbon gas generation, and compared them with generators that burn fossil fuels. It also posited a value of $50 per metric ton of reduced carbon emissions and $16 per million BTUs of gas.

Frank calculated that electricity generated by a combination of nuclear, hydro and natural gas have much greater benefits than either wind or solar energy because wind and solar generators cost more to operate even though they require no fuel.

For example, nuclear plants run at about 90 percent of capacity compared with wind turbines, which are only about 25 percent efficient, and solar plants with only 15 percent efficiency. As a result, Frank wrote, nuclear plants avoid almost four times as much CO2 per unit of capacity as wind turbines, and six times as much as solar generators….

Hat tip to Oilprice.com

August 6, 2014

ASX equity shrinking

From Chris Pash:

Credit Suisse’s Equity Strategist Hasan Tevfik says the cost of debt is very low relative to the cost of equity….This means that few equities are being added to the Australian market because companies are using cheap debt, rather than going to their investors or shareholders, to raise cash for expansion or investment.

This is not a healthy sign — when companies use cheap debt, rather than equity, to fund acquisitions. Artificially low interest rates distorting companies’ WACC (weighted average cost of capital) could lead to poor investment decisions.

August 6, 2014

ASX 200 faces 3 major factors

The ASX 200 found short-term support, with a long tail at 5500, but there are no significant volumes to indicate a concentration of buyers. Expect further weakness unless the Dow and S&P 500 reverse direction overnight. The monthly chart below portrays a long-term view, from 2007 to the present. Three factors stand out:

medium-term support at 5400;
primary support at 5000/5050; and
bearish divergence on 13-week Twiggs Money Flow.

Respect of support at 5400 and the secondary trendline would signal continuation of the current strong primary trend. Breach would signal a test of primary support. Failure of primary support remains unlikely. But bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. The indicator often dips below zero in a weak trend, but reversal below zero after a large divergence would be a strong bear signal. One cannot, however, anticipate this. TMO could just as easily recover above the descending trendline, signaling that buyers are back in control.

ASX 200

* Target calculation: 5550 + ( 5550 – 5350 ) = 5750

August 6, 2014

Asian tigers and the PBOC

Asian stock markets are lifting on the prospect of increased trade with mainland China. Hong Kong’s Hang Seng Index broke long-term resistance at 24000, signaling a primary advance. But first expect retracement to test the new support level. Respect of 24000 would confirm the target of 27000*. A 13-week Twiggs Money Flow trough at zero indicates long-term buying pressure. Reversal below 24000 is unlikely, but would warn of a correction to the rising trendline.

Hang Seng Index

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

Singapore’s Straits Times Index is also retracing after breaking resistance at 3300. Follow-through above 3400 would confirm the target of 3600*. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend. Reversal below 3200 is unlikely, but would warn of another test of primary support at 3000.

Straits Times Index

* Target calculation: 3300 + ( 3300 – 3000 ) = 3600

China’s Shanghai Composite Index signals a primary up-trend after breaking resistance at 2150/2180, but I would wait for confirmation from a follow-through above resistance at 2250. The PBOC is aggressively injecting liquidity to revive a flagging economy. It may succeed in lifting the economy in the medium-term, but is not sustainable in the long-term and could well aggravate the situation. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout above 2250 would confirm a primary up-trend. Reversal below 2150 is unlikely at present, but would warn of another test of primary support at 1990/2000.

Shanghai Composite Index

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

India’s Sensex retraced to support at 25500, but is again testing resistance at 26000. Breakout would signal an advance to 27000*. Bearish divergence on 13-week Twiggs Money Flow indicates long-term selling pressure, but respect of the zero line (recovery above 10%) would suggest that buyers have taken control. Breach of 25000 is unlikely, but would warn of a correction to the primary trendline.

Sensex

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

Japan’s Nikkei 225 is retreating after a false break of resistance at 15500. Expect a test of support at 15000. Narrow consolidation normally ends in continuation of the trend; upward breakout would indicate a rally to 16000*. Declining 13-week Twiggs Money Flow, however, indicates medium-term selling pressure. Reversal below 15000 would warn of a test of primary support at 14000.

Nikkei 225

* Target calculation: 15000 + ( 15000 – 14000 ) = 16000

August 6, 2014

Europe: Dax selling pressure

Germany’s DAX is broke support at 9600, warning of a correction to 9000 — and a weakening primary up-trend. Decline of 13-week Twiggs Money Flow below zero reflects (long-term) selling pressure. Breach of primary support at 8900/9000 would signal a primary down-trend. Recovery above 9800/10000 is unlikely at present, but would indicate another advance.

DAX

* Target calculation: 9750 + ( 9750 – 9000 ) = 10500

Deutsche Post AG (y_DPW.DE) serves as a bellwether for European markets. Deutsche Post DHL couriers holds a similar position to that of Fedex in US markets. The stock broke support at 24.00/25.00, completing a rounding top. Decline of 13-week Twiggs Money Flow below zero reflects (long-term) selling pressure. Target for the breakout is 20.00*. A down-trend warns of slowing economic activity.

Deutsche Post AG

* Target calculation: 24 – ( 28 – 24 ) = 20

Dow Jones Euro Stoxx 50 is retracing to test support at 3000/3100. Breach of support would suggest a decline to 2500 as indicated on the monthly chart. Respect of support, however, would indicate another advance.

Dow Jones Euro Stoxx 50

* Target calculation: 3150 + ( 3150 – 3000 ) = 3300

A quarterly chart shows the Footsie consolidating in a long-term triangle below its previous high of 6950. Ascending triangles favor an upward breakout, but I would be cautious with the current outlook for Europe. Reversal below 6650 would warn of a correction to 6400/6500.

FTSE 100

* Target calculation: 6900 + ( 6900 – 6500 ) = 7300

August 5, 2014

Canada: TSX 60 primary up-trend

Canada’s TSX 60 retreated from its 2008 high at 900 and is testing short-term support at 870. Rising 13-week Twiggs Momentum indicates a strong primary up-trend. Respect of the primary trendline would suggest another primary advance, while penetration of the line would warn of trend weakness — and a correction to 800/820.

TSX 60

August 5, 2014

Dow and Fedex find support

Dow Jones Industrial Average is testing medium-term support at the December high of 16500. Respect of this line would indicate a healthy up-trend, while breach would warn of a correction to the primary trendline. Failure of primary support at 15400/15600 remains unlikely, but would warn of reversal to a down-trend. Completion of a 13-week Twiggs Money Flow trough above zero would suggest long-term buying pressure and another primary advance.

Dow Jones Industrial Average

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

The CBOE Volatility Index (VIX) remains below 20, suggesting continuation of the bull market.

VIX Index

Bellwether transport stock Fedex is also testing support at its December high ($144/$145). Respect 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 test of primary support at $129/$130.

Fedex

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

August 5, 2014

Two questions for Australian investors

Two questions for Australian investors:

Does the graph below show an up-trend?
Would it be a good time to buy this stock?

ASX 200

If your answer to both questions is NO, then why would you consider selling when we invert the price scale? The chart is the ASX 200 index. Use View >> Invert Price Scale, or Ctrl+I shortcut key to invert the chart.

ASX 200

* Target calculation: 5550 + ( 5550 – 5350 ) = 5750

The chart below is not inverted. The ASX 200 VIX tends to behave inversely to the index. A value of 12.2 suggests low risk typical of a bull market.

ASX 200

The Australian Dollar is retracing to test support at $0.92. Respect would indicate that buyers continue to dominate. Recovery above resistance at $0.94 would suggest an advance to $0.97. Follow-through above $0.945 would confirm. Breach of $0.92 remains unlikely, but would warn of a test of primary support at $0.8650/$0.87.

AUDUSD