ColinTwiggs, Author at the patient investor

July 18, 2014April 18, 2024

S&P 500 pregnant pause

S&P 500 advance to 2000 likely.
VIX continues to indicate a bull market.
ASX 200 finds support.

A Harami candlestick formation on the S&P 500 suggests continuation of the up-trend. Harami means ‘pregnant’ in Japanese. Expect a test of the psychological barrier at 2000. 21-Day Twiggs Money Flow recovery above the descending trendline would confirm that short-term selling pressure has ended. Further resistance is likely at the 2000 level — and at 4000 on the Nasdaq 100. Short retracement or narrow consolidation would suggest another advance. Reversal below 1950 is unlikely, but would warn of a correction to 1900 and the rising trendline.

S&P 500

* Target calculation: 1900 + ( 1900 – 1800 ) = 2000

CBOE Volatility Index (VIX) spiked to 15 on news of the Israeli incursion into Gaza and the downing of Malaysian airlines flight MH17 over Eastern Ukraine, but soon retreated to 12 and remains indicative of a bull market.

S&P 500 VIX

The ASX 200 retreated below support at 5525/5530 on the hourly chart, but long tails at 5500 indicate buying pressure and another attempt at 5550 is likely. An open above 5530 would confirm. Breakout above 5550 would suggest a long-term advance to 5800*. Reversal below 5450 is unlikely, but would signal another test of 5350.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

July 18, 2014

Flight MH17: The smoking gun

The following tweet and video purportedly show a BUK surface-to-air missile system being moved by UKR rebels from the area near the MH17 crash site — with two empty missile tubes.

Video of UKR rebels moving BUK system away from area where plane was downed; it only has 2 of 4 missiles left http://t.co/1RnjKwtkEG

— grasswire (@grasswire) July 18, 2014

Hat tip to The Interpreter

July 18, 2014

MH17 is the third plane this week shot down over Ukraine under mysterious circumstances – Vox

From Max Fisher:

…at first, people were wondering if rebels even had the capability to shoot down a high-flying commercial airliner like MH17. But there was another incident just on Monday, July 14, that did not get very much attention at the time. That day, over eastern Ukraine, an Antonov AN-26 Ukrainian military transport plane was hit by a missile while flying over eastern Ukraine — at 21,000 feet altitude. That’s far beyond the range of a shoulder-fired system like the MANPADS.

July 17, 2014

Malaysia Airlines MH17 crash: Deleted posts suggest Ukraine rebels downed jet in error

From The Straits Times:

…a message on the official Twitter account of the Donetsk People’s Republic had announced hours earlier that insurgents had seized a series of Russian-made Buk systems capable of soaring to that height.

“@dnrpress: self-propelled Buk surface-to-air missile systems have been seized by the DNR from Ukrainian surface-to-air missile regiment A1402,” said the post.

That tweet was later deleted as well.

July 17, 2014

What We Know So Far About the Passenger Jet Shot Down in Ukraine

From Elias Groll & Reid Standish:

Update: 1:10 p.m.Prior to the Malaysian Airlines jet’s shoot down, pro-Russian separatist leader Igor Strelkov posted on the Russian social networking site, VKontakte, claiming responsibility for shooting down a Ukrainian AN-26 transport plane. However, after news emerged of the downed Malaysian Airlines plane, Strelkov’s page appears to have been scrubbed of the post.Strelkov’s page claimed responsibility for taking down a Ukrainian jet and posted and accompanying video that shows smoke rising from what is now believed to be the crash site of the passenger jet. Below is a screengrab of Strelkov’s VKonkakte page that includes the post claiming responsibility for the downed transport plane. That post now appears to have been removed. Donetsk separatist boss Strelkov, Kremlin’s proxy in war, says he ordered shootdown thinking plane was Ukrainian pic.twitter.com/uaWKVlsA7q — Strobe Talbott @strobetalbott July 17, 2014 After reports emerged that a passenger jet had been shot down, Strelkov said that his forces were not responsible and that they lacked the capability to shoot down a plane flying at that altitude. The plane was reportedly flying at an altitude of about 33,000 feet.Meanwhile, additional images are emerging of the crash site, including the horrifying image below that was carried by Russian television:

July 17, 2014

ASX encounters resistance

The ASX 200 gapped up at today’s open, but encountered strong selling at recent highs of 5550 — evidenced by large volume on the hourly chart. The index retreated, but respect of support at 5525/5530 and the rising trendline indicates buyers remain in control. Breakout above 5550 would signal another primary advance, with a long-term target of 5950*.

ASX 200

* Target calculation: 5450 + ( 5450 – 5050 ) = 5950

July 17, 2014

Gold retreats as Dollar strengthens

Treasury yields remain weak
The Dollar strengthens
Inflation looks weak despite rising TIPS spread
Gold retreats

Interest Rates and the Dollar

The yield on ten-year Treasury Notes continues to test support at 2.50 percent. Failure would indicate a decline to 2.00 percent; follow-through below 2.40 would confirm. 13-Week Twiggs Momentum below zero continues to warn of a primary down-trend. Recovery above 2.65 is less likely, but would suggest the correction is over, with a medium-term target of 2.80 and long-term of 3.00 percent.

10-Year Treasury Yields

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

The Dollar Index found short-term support at 80.00. Follow-through above 80.50 indicates another test of 81.00. Recovery of 13-week Twiggs Momentum suggests a primary up-trend. Breakout above 81.00 would strengthen the signal; above 81.50 would confirm. Breach of 80.00 is unlikely at present, but would warn of another test of primary support at 79.00.

Dollar Index

Low interest rates and a stronger dollar suggest inflation expectations are falling, but this is not yet evident on the TIPS spread (10-Year Treasury Yields minus 10-Year Inflation-Indexed Yields).

10-Year Treasury Yields minus 10-Year Inflation Indexed (TIPS) Yields

Gold

Gold is nonetheless falling, in line with weaker inflation expectations. Follow-through below $1300 would test support at $1240. And breach of $1240 would threaten another primary decline, with a target of $1000*. Oscillation of 13-week Twiggs Momentum around zero, however, suggests hesitancy, with no strong trend. Recovery above $1350 is unlikely at present, but would indicate another test of $1400/$1420.

Spot Gold

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

July 16, 2014

Australia: UBS eyes $23b capital hit to big banks

Chris Joye at AFR reports on a recent study by UBS banking analysts Jonathon Mott and Adam Lee. The two believe that David Murray’s financial system inquiry is likely to recommend an increase of 2 to 3% in major banks tier 1 capital ratios.

Based on an extra 3 per cent capital buffer for too-big-to-fail banks, UBS finds that the major banks would have to “increase common equity tier one capital by circa $23 billion above current forecasts by the 2016 financial year end”.

…This automatically lowers the major banks’ average return on equity at the end of the 2016 financial year from 15.4 per cent to 14.3 per cent, or by about 116 basis points across the sector. Commonwealth Bank and Westpac come off best according to the analysis, with ANZ and National Australia Bank hit much harder.

Readers should bear in mind that capital ratios are calculated on risk-weighted assets and not all banks employ the same risk-weightings, with CBA more highly leveraged than ANZ. As I pointed out earlier this week, regulators need to monitor both risk-weighted capital ratios and un-weighted leverage ratios to prevent abuse of the system.

Bear in mind, also, that a fall in return on equity does not necessarily mean shareholders will be worse off. Strengthening bank balance sheets will lower their relative risk, improve their cost of funding, and enhance valuations.

July 16, 2014

The world’s lightest sports car

The Elemental RP-1 carbon fiber framed British sports car weighs in at only 450 kg, about one-third the weight of a VW Golf compact.

RP-1

World’s first 3D carbon fiber printer

The world’s first 3D carbon fiber printer will also soon reach the market. Nidhi Goyal writes:

Developer Gregory Mark, of MarkForged, unveiled his first working prototype of the world’s first carbon fiber 3D printer at SolidWorks World 2014 in San Diego recently. The printer can print in carbon fiber, fiberglass, nylon and PLA and can generate extremely stable, lightweight objects. Carbon fiber is 20 times stiffer and five times stronger than ABS plastic with a strength that exceeds steel….At $5,000, the Mark One printer is slightly more expensive than a normal 3D printer….

Could be useful if you have a fender-bender.

July 16, 2014

Netherlands Held Liable for 300 Deaths in Srebrenica Massacre – NYTimes.com

From DAN BILEFSKY and MARLISE SIMONS at the New York Times:

The Dutch Supreme Court, which was upholding a 2011 decision by an appellate court, said that even though United Nations commanders were in charge of the peace mission at Srebrenica, in the days after the Bosnian Serb takeover, Dutch authorities had “effective control” over the troops and therefore shared liability.

Srecko Latal, a political analyst who until recently worked with the nonprofit International Crisis Group in Sarajevo, Bosnia, said by phone that the verdict was important for showing that peacekeepers had both a moral and a legal responsibility to protect civilians….

The Srebrenica tragedy highlights two important issues:

Why are lightly armed UN peace-keeping forces being sent into conflict areas where they are incapable of offering effective protection from heavily-armed protagonists? You don’t have a strong negotiating position when your opponent has tanks and artillery.
Who is responsible if troops under UN command obey orders?