Author: ColinTwiggs

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Draft Proposes Fast, Flexible Bailout Fund – WSJ.com

According to the draft guidelines, the EFSF would replace the European Central Bank in its role of intervening in sovereign-debt markets, but the EFSF’s scope for action would be more limited. The EFSF, for example, would only be allowed to purchase euro-denominated bonds in the open market that are issued by the public sector.

On primary market purchases—bonds bought directly from issuers—the EFSF purchases would be restricted to countries already receiving aid or precautionary credit and be limited to 50% of the total auction. Purchases of sovereign bonds in primary markets would require prior approval of European finance ministers.

The guidelines also…….. allows the fund to engage in limited leveraging of its assets.

via Draft Proposes Fast, Flexible Bailout Fund – WSJ.com.

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Commodities long-term trend

Brent crude is edging lower in a wide trend channel. Respect of the long-term ascending trendline (on the weekly chart) would suggest upward breakout from the channel — and a target of $150/barrel*. Recovery of 63-day Twiggs Momentum above zero would strengthen the signal.

Crude Oil

* Target calculation: 125 + ( 125 – 100 ) = 150

The CRB Commodities index is similarly testing its long-term rising trendline at 300. Penetration of the secondary descending trendline would indicate another primary advance on the monthly chart. The 63-day Twiggs Momentum peak below zero [R], however, warns of a primary down-trend. Failure of support at 290 would strengthen the signal.

CRB Commodities Index

* Target calculation: 370 +( 370 – 290 ) = 450

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Forex overview

The euro is consolidating above $1.365; failure of support would re-test $1.315, warning of another primary decline. A 63-day Twiggs Momentum peak below the zero line would confirm a strong primary down-trend.

EURUSD

* Target calculation: 1.32 – ( 1.40 – 1.32 ) = 1.24

The pound retraced to test resistance at $1.59/1.60 on the weekly chart. Declining 63-day Twiggs Momentum, below zero, suggests a strong down-trend. Reversal below $1.53 would offer a target of $1.46*.

GBPUSD

* Target calculation: 1.53 – ( 1.60 – 1.53 ) = 1.46

Canada’s Loonie resembles the Aussie dollar: reversal below short-term support at $0.975 would test $0.94. Respect of the descending trendline would also warn of a decline to $0.88*.

CADUSD

* Target calculation: 0.94 – ( 1.00 – 0.94 ) = 0.88

The Aussie dollar is testing support at $1.28 against its Kiwi counterpart after completing a double bottom. Respect of support would confirm the target of $1.32*.

AUDNZD

* Target calculation: 1.28 + ( 1.28 – 1.24 ) = 1.32

The greenback is ranging in a narrow band above ¥76, supported by the Bank of Japan. 63-Day Twiggs Momentum holding below zero confirms the strong down-trend.

USDJPY

The greenback recovered above R8.00 on the weekly chart against the South African Rand. Expect another test of R8.50. Upward breakout would warn of an accelerating up-trend that is likely to lead to a blow-off.

USDZAR

* Target calculation: 8.50 + ( 8.50 – 7.70 ) = 9.30

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Aussie Dollar down-trend

Another monthly chart — this time of the Aussie dollar against the greenback. The decline of the last 3 months found support at $0.94 before rallying to a high of $1.04. Breach of the rising trendline indicates that the primary up-trend has ended; confirmed by bearish divergence on 63-day Twiggs Momentum and reversal below zero. Failure of support at $0.94 would signal a decline to $0.84.

AUDUSD

* Target calculation: 0.94 – ( 1.04 – 0.94 ) = 0.84

The daily chart shows consolidation between $1.01 and $1.04 over the last week. Failure of support at $1.01 is likely and would warn of a decline to $0.94. Breakout above $1.04 and the descending trendline is unlikely, but would indicate a rally to the July high of $1.10.

AUDUSD

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Tough Day For Our Calamity Economy | ZeroHedge

In other parts of the economy, early warning signs are also flashing. Capital One, one of the largest credit card issuers in the US, reported that 30-day delinquencies were rising—consumers are getting strung out again. Two days ago, the Empire State Manufacturing index came in at -8.5, in negative territory for the fifth straight month. On a very dark note, its future general business conditions sub-index, which measures expectations, fell to its lowest level since February 2009, the depth of the financial crisis. International business travel has fallen off a cliff at the end of August. And ominously, inbound port traffic is down, probably due to declining expectations for holiday sales.

via Tough Day For Our Calamity Economy | ZeroHedge.

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Gold heads for $1600

Spot gold is headed for a test of support at $1600/ounce; failure would offer a target of $1500*. In the long term, the primary trend remains up and breakout above $1700 would signal an advance to $1900.

Spot Gold

* Target calculation: 1700 – ( 1900 – 1700 ) = 1500

Amex Gold Bugs index ($HUI) is headed for a test of primary support at 500 on the weekly chart. Failure would signal a primary down-trend with an initial target of 400* — and warn of a similar reversal for spot gold. Declining 63-day Twiggs Momentum slipped below zero to strengthen the bear signal.

Amex Gold Bugs Index

* Target calculation: 500 – ( 600 – 500 ) = 400

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Dollar Index: The big picture

When markets are volatile it often pays to take a step back and look at the big picture. A monthly chart shows the Dollar Index ranging between 70 and 90 since 2003, with the 80 level alternating as mid-range support/resistance. The index recently pulled back from resistance at 80 and will now either re-group for another attempt or medium-term support will give way, signaling a test of long-term support.

US Dollar Index Monthly

Zooming in to the daily chart shows narrow consolidation above medium-term support at 76.50. Breakout above 77.60 and the descending trendline would signal another test of 80, while failure of support at 76 would mean a decline to 73.50*.

US Dollar Index

* Target calculation: 76.5 – ( 79.5 – 76.5 ) = 73.5

In the long term, breach of 73.50 would test 70, while breakout above 80 would signal an advance to 90. If support at 70 fails, gold will rocket through $2000/ounce, but that is only likely to occur if the Fed rolls out QE3.

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The Day the U.S. Treasury Doomed America :: The Market Oracle

Average Treasury bond maturities reached a low of 50 months in 2009. They’ve since been lengthened a bit to 62 months, but that still leaves the U.S. Treasury with a major refinancing risk. The Treasury will have to refinance some $2 trillion of outstanding debt in the next year – and that’s in addition to the $1.5 trillion of new debt it’s going to have to issue in that time.

That doesn’t leave much room to maneuver if markets get sticky. It also leaves a serious potential budget hole.

via The Day the U.S. Treasury Doomed America :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website.

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And Now The Bundestag Demands A Say | ZeroHedge

According to FAZ, the German parliament, which made it all too clear wants to be heard in all future European bailout instances courtesy of the constitutional court decision in early September, has just announced it wants to be heard, this time for real, and decide, on any EFSF expansion facility and specifically the usage of more leverage to fight already unbearable systemic leverage.

via And Now The Bundestag Demands A Say | ZeroHedge.

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