Author: ColinTwiggs

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Japan & South Korea

DJ South Korea Index is testing medium-term support at 390 Monday. Failure would signal a test of the primary level at 350. 63-Day Twiggs Momentum holding below zero suggests continuation of the primary down-trend.

Dow Jones South Korea Index

* Target calculation: 350 – ( 420 − 350 ) = 280

The weekly chart of Japan’s Nikkei 225 shows respect of resistance at 9000. Failure of primary support at 8400 would offer a target of 7800*. 13-Week Twiggs Money Flow below zero warns of rising selling pressure.

Nikkei 225 Index

* Target calculation: 8400 – ( 9000 − 8400 ) = 7800

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ASX 200 threatens support

The ASX 200 index is testing medium-term support at 4150. Bearish divergence on 21-day Twiggs Money Flow warns of selling pressure. Failure of support would test the primary level at 3850.

ASX 200 Index

* Target calculation: 3900 – ( 4300 − 3900 ) = 3500

A weekly chart of the All Ords shows a primary down-trend. Failure of support at 4200 would test 3900. Completion of a peak below zero on 63-day Twiggs Momentum would suggest another decline.

All Ordinaries Index Weekly Chart

* Target calculation: 4000 – ( 4500 − 4000 ) = 3500

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India & Singapore

The BSE Sensex is headed for a test of primary support at 16000/15800. Reversal of 13-week Twiggs Money Flow below zero warns of further selling pressure. Failure of primary support would offer a target of 14000*.

BSE Sensex Index

* Target calculation: 16 – ( 18 − 16 ) = 14

Westpac’s monthly Fearful Symmetry chronicle on the Indian economy makes an interesting point:

“The reality is that while India is an internally focused and investment-led economy — thus producing a low-beta response to swings in global growth — the financing of investment, at the margin, must come from abroad, so it is highly vulnerable to downswings that incorporate or are driven by negative financial shocks. Put simply, in India a slowdown in the global economy is felt principally through the hardening of its external financing constraint. That is in contrast to the majority of its East Asian (surplus) neighbours, where global shocks are primarily transmitted via an export-led deceleration in aggregate demand, or its non-China BRIC peers, where swings in commodity prices are the key variable.”

Given that almost half of foreign bank funding is sourced from Europe, expect a significant tightening of external finance and hence domestic investment.

Singapore’s Straits Times Index is headed for medium-term support at 2700. Failure of 2700 would indicate a test of primary support at 2500. Reversal of 63-day Twiggs Momentum deep below zero warns of a strong primary down-trend.

Straits Times Index

* Target calculation: 2500 – ( 2900 − 2500 ) = 2100

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Europe: breach of medium-term support would signal decline

Italy’s MIB index is testing medium-term support at 15000 on the weekly chart. Failure — and respect of the descending trendline — would warn of another decline, with a target of 9000*. Breach of primary support at 13000 would confirm.

FTSE MIB Index

* Target calculation: 13 − ( 17 − 13 ) = 9

France’s CAC-40 index is similarly testing support at 3000. Breach of support would warn of another decline — as would reversal of 13-week Twiggs Money Flow below zero. Failure of primary support at 2700 would offer a target of 2000*.

CAC-40 Index

* Target calculation: 2700 – ( 3400 − 2700 ) = 2000

The DAX is also testing medium-term support. Reversal below 5600 would warn of another test of primary support at 5000. Failure of 5000 would offer a target of 3600*.

DAX Index

* Target calculation: 5000 – ( 6400 − 5000 ) = 3600

Even the FTSE 100 index is testing medium-term support. 13-Week Twiggs Money Flow looks stronger than its European neighbors, but reversal below zero would warn of a further decline. Breach of medium-term support at 5350 would warn of a test of primary support at 4800.

FTSE 100 Index

* Target calculation: 4800 – ( 5600 − 4800 ) = 4000

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Praise for good regulation – macrobusiness.com.au

[Economist Stephen King] is generally quick to remind us that regulation creates markets. Without property law and contract law, markets, as we know them, won’t be able function at all. The framework in which to understand regulation is that good regulation creates functional markets and balances benefits between market players and society at large. Bad regulation creates dysfunctional markets, or none at all, and can impede production by market agents by creating new risks, and costly hurdles.

via Praise for good regulation – macrobusiness.com.au | macrobusiness.com.au.

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TSX 60 warns of another decline

Canada’s TSX 60 index broke medium-term support — at 680 on the weekly chart below. Respect of the descending trendline suggests another decline. Failure of primary support at 650 would confirm. 63-Day Twiggs Momentum deep below zero also indicates a strong primary down-trend. A conservative target for the decline would be 580*.

TSX 60 Index

* Target calculation: 650 − ( 720 − 650 ) = 580

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Nasdaq, Dow warn of correction

The NASDAQ 100 index broke support at 2300 on the weekly chart, warning of a correction to test primary support at 2000. A large bearish divergence on 13-week Twiggs Money Flow now warns of a primary down-trend; reversal below zero would strengthen the signal. Failure of support at 2000 would confirm.

Nasdaq 100 Index

* Target calculation: 2000 – ( 2400 – 2000 ) = 1600

Dow Jones Industrial Average broke out below its recent pennant, warning of another test of primary support at 10600. Breach of support at 11600 would confirm the signal. Reversal of 63-day Twiggs Momentum below its recent lows (-4%) would complete an “iceberg” — with the indicator just peaking above the zero line — indicating a primary down-trend.

Dow Jones Industrial Average

* Target calculation: 10600 – ( 12200 – 10600 ) = 9000

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Debt Crisis Contagion: The Euro Zone’s Deadly Domino Effect – SPIEGEL ONLINE – News – International

The main problem of a Greek exit from the euro zone is not necessarily the direct impact on banks. I believe our government when they say that they would be able to get that under control. The real problem is the next domino. The crisis will spread unchecked to Italy. If Greece leaves the euro zone, then owners of Greek bonds will lose their entire investment. At best, the Greeks would pay them back a small part of their investment — in almost worthless drachmas.

So what kind of investor in his or her right mind would purchase Portuguese, Spanish or Italian sovereign bonds in this kind of situation? Not even a yield of 7 percent can make up for all the risk that Italy won’t be able to pay back its debt. As things now stand, Italy’s debt accounts for 120 percent of its annual GDP, growth is close to zero and the country is currently slipping into a deep recession. In fact, it’s a matter of mathematical inevitability that Italy won’t be able to service its loans if interest rates on its sovereign debt don’t fall. Granted, there have to be reforms. But reforms don’t resolve an acute debt crisis. We’ve already learned that lesson from other crises.

via Debt Crisis Contagion: The Euro Zone’s Deadly Domino Effect – SPIEGEL ONLINE – News – International.

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