Author: ColinTwiggs

Posted on

S&P 500 advance

The S&P 500 found support at 1850, signaling an advance to 1950*. Repeated troughs high above zero on 13-week Twiggs Money Flow indicate strong long-term buying pressure

S&P 500

CBOE Volatility Index (VIX) below 15 continues to reflect low market risk typical of a bull market.

VIX Index

The Nasdaq 100 respected support at 3600, but bearish divergence on 13-week Twiggs Money Flow warns of medium-term selling pressure. Failure of support would warn of another correction. Follow-through above 3700, however, would offer a target of 3800*.

Nasdaq 100

* Target calculation: 3600 + ( 3600 – 3400 ) = 3800

Bellwether Transport stock Fedex found support at $130 on the monthly chart. Breakout above $145 would offer a target of $170*. Rising 13-week Twiggs Money Flow indicates buying pressure. A bullish sign for the broader economy. Reversal below $130 is unlikely, but would warn of a decline to $120.

Dow Jones Industrial Average

* Target calculation: 145 + ( 145 – 120 ) = 170

Posted on

Dollar falls: Outflow to safe haven?

Rising gold prices would normally signal increased inflation expectations and higher Treasury yields, but the present situation is distorted by tensions in Ukraine and increased demand for gold as a safe haven. The yield on ten-year Treasury Notes found support at 2.60 percent and is now testing medium-term resistance at 2.80 percent. Breakout would indicate an advance to 3.50 percent*; confirmed if there is follow-through above 3.00 percent. Bearish divergence on 13-week Twiggs Momentum continues to warn of weakness and reversal below 2.60 remains as likely, testing primary support at 2.50 percent.

10-Year Treasury Yields

* Target calculation: 3.00 + ( 3.00 – 2.50 ) = 3.50

Rising Treasury yields and a weakening dollar may reflect international outflows from the Dollar in search of a safe haven. The Dollar Index is testing primary support at 79.50/79.60. Breach would signal a primary down-trend; confirmed if support at 79.00 is broken. The 13-week Twiggs Momentum peak below zero suggests further weakness.

Dollar Index

* Target calculation: 79.5 – ( 81.5 – 79.5 ) = 77.5

Posted on

Gold signals up-trend

Spot gold encountered resistance at $1350/ounce. Retracement that respects $1300 and the rising trendline would suggest an advance to $1400. Crossover of 13-week Twiggs Momentum above zero indicates a primary up-trend, especially following a bullish divergence on the weekly chart. Breakout above $1400 would confirm the signal, but still seems a long way off.

Spot Gold

The Gold Bugs Index is similarly testing resistance at 250. Breakout would signal an advance to 280. Again, bullish divergence on 13-week Twiggs Momentum and crossover above zero indicate a primary up-trend. Reversal below 210 is unlikely, but would warn of continuation of the down-trend.

Gold Bugs Index

Posted on

Income inequality: Ask the wrong question, get the wrong answer

John Mauldin writes

That income inequality stifles growth is not simply the idea of two economists in St. Louis. It is a widely held view that pervades almost the entire academic economics establishment. Nobel prize-winning economist Joseph Stiglitz has been pushing such an idea for some time (along with Paul Krugman, et al.); and a recent IMF paper suggests that slow growth is a direct result of income inequality, simply dismissing any so-called “right-wing” ideas that call into question the authors’ logic or methodology.

The suggestion that income inequality stifles growth is a fraud, designed to promote a socialist agenda of redistributing wealth to the poor. We are currently experiencing slow growth because of the GFC, not because of rising income inequality.

The real question that needs to be answered is: which system best promotes growth and improves the living standards of the broad population? Evidence of the last 100 years is difficult to dispute. Socialism has an abysmal track record in uplifting the poor, while capitalism has fueled a massive upliftment in living standards over more than a century. High rates of tax on top income earners kills growth and redistribution to the impoverished does little to improve their living standards, whereas low tax rates encourage growth and raise living standards.

To recover from the GFC we need to allow capitalism to flourish instead of impeding it at every turn.

Read more at The Problem with Keynesianism | John Mauldin.

Posted on

China will never support Putin on Crimea

Offering the people of Crimea a referendum — on whether to secede from Ukraine and join the Russian Federation — may appeal to Vladimir Putin but he should not expect support from China. For two very simple reasons: Hong Kong and Taiwan. China claims these two territories as part of China, but there are no prizes for guessing the outcome if a similar referendum (to secede) were held in either territory.

Posted on

Mass Privatization, State Capacity and Economic Growth in Post-Communist Countries | Hamm, King & Stuckler (2012)

From the abstract of a paper by Hamm, King and Stuckler:

We perform cross-national panel regressions for a sample of 30 post-communist countries between 1990 and 2000, and find that mass privatization programs negatively affected economic growth, state capacity, and property rights protection.

Read more at Hamm, King, Stuckler (2012) – Mass privatization (submitted manuscript).pdf.

Posted on

Environmental quality is improving, not declining | Library of Economics and Liberty

Terry L. Anderson writes

….Thanks largely to the pioneering work of the late economist Julian Simon and, more recently, to the work of statistician Bjørn Lomborg, abundant data show that we are not running out of resources, that we are not destroying our environment, and that the plight of human beings is improving rather than diminishing. Simon’s confidence in challenging Ehrlich’s pessimistic thinking came from his belief that people respond to scarcity by conserving on scarcer resources and by reducing waste and hence pollution.

Doubting Simon’s logic and data, Bjørn Lomborg, a statistician and political scientist, set out to prove him wrong by examining reams of data on various environmental claims…..

Read more at Environmental Quality: The Concise Encyclopedia of Economics | Library of Economics and Liberty.

Posted on

The importance of regulation

Capitalism without regulation is prone to excesses, driven by individuals pursuing their own self-interest. Price-gouging and provision of inferior quality goods and services are held in check by competition, but there are other aberrations against public morals, or not in the public interest, that require regulation. Historical examples would be the use of slaves, the opium trade, usury, prostitution, child labor, conquest and exploitation of primitive cultures, and sale of weapons or related technology to a nation’s enemies.

Regulation is also required to curb monopolistic practices, where competition is ineffective. There is much talk of the importance of free markets, but unregulated markets are not free. They are prone to cheating, corruption and abuse of market power. What is needed are efficient markets, where there are:

  • low barriers to entry for new participants
  • low transaction costs
  • equal access to information, at the same time

Stock markets are often quoted as an example of an efficient market. Regulation has contributed to this over the years by policing illegal activities such as insider trading, front-running, wash sales, pump and dump, price manipulation, squeezes, and disseminating false or misleading information. But lately the prevalence of high-speed trading has eroded investor confidence, as most market participants no longer have access to price information at the same time. If this continues, the onus is on regulators to allow competitors to set up efficient markets for investors.

Powered by WordPress / WordPress Maintenance Service By Website Helper