Author: ColinTwiggs

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Brent Crude tests $105/barrel

Today’s bounce on world markets caused a rally of Brent Crude on the hourly chart, testing the former primary support level at $105/barrel. Institutional buying of stocks does not change the fundamentals: high crude oil prices will cause a double-dip recession. No action by the Fed can change this.

Brent Crude Oil

* Target calculation: 105 – ( 120 – 105 ) = 90

Retreat below resistance at $105 would confirm that Brent Crude has joined Light (WTI) Crude in a primary down-trend. Target for the down-swing is $90*.

We need a major re-adjustment of crude oil prices to set the global economy on a sound footing.

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Aussie dollar reveals source of ASX bounce

The Aussie dollar displays a similar long tail to the ASX 200, indicating that buying support on the Australian stock market came from international, not local, buyers. Dolphin tells us that institutional buyers moved in when AUD fell below parity against the greenback.

 

Australian Dollar

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ASX closes in positive territory

The ASX 200 closed in positive territory for the day, accompanied by strong volumes indicative of today’s institutional buying across the Asia-Pacific region. Expect a dead cat bounce — a rally to re-test resistance levels — but the bear market is not miraculously over and may take several months to resolve.

ASX 200 Index

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Strong bounce in Korea, Taiwan

What appears to be strong institutional buying caused a strong bounce across a slew of Asia-Pacific markets. Long tails and a sharp spike in volume indicate buying support and a rally to test resistance (at 410 on $KRDOW).

Dow Jones South Korea Index

The Dow Jones Taiwan Index shows an even stronger open-close reversal signal accompanied by big volume.

Dow Jones Taiwan Index

This is stronger than shorts taking profits or a few hooray Henrys snapping up bargains. The large volumes are indicative of institutions with deep pockets. Expect a decent rally, but it is likely to eventually fail. Not even Asian tigers are immune from a dead cat bounce — and bear markets take months to resolve, not just a few days.

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Euro-Zone Leaders Need – WSJ.com

So the euro zone still doesn’t look like it has a coherent plan for bringing the crisis to an end, which at this late stage would require a massive increase in the funds available to the EFSF (European Financial Stability Facility) or a willingness to guarantee all euro-zone government bond issuance as a single bloc.

via Euro-Zone Leaders Need – WSJ.com.

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Australia Can Build Its Way Out of Trouble – WSJ.com

In a recent report, ANZ estimates that Australia needs to spend about 600 billion Australian dollars (US$626 billion), or the equivalent of 8% of GDP, over the next five years to bring its infrastructure “up to acceptable standards.” It argues that the country needs to invest around 1% of GDP annually just to improve its road network over the medium term.

via Australia Can Build Its Way Out of Trouble – WSJ.com.

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Asia joins US stampede

The Singapore Straits Times Index closed at 2900 Monday, confirming a primary down-trend. Initial target for the down-swing is 2800*.

Singapore Straits Times Index

* Target calculation: 3000 – ( 3200 – 3000 ) = 2800

The Indian Sensex Index broke support at 17500, testing 17000 Monday before the close.  Target for the down-swing is  16000*.

India Sensex Index

* Target calculation: 17500 – ( 19000 – 17500 ) = 16000

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Japan Korea

The Nikkei 225 followed through below 9400 Monday, closing at 9100. Target for the breakout is 8600*.

Nikkei 225 Index

* Target calculation: 9400 – ( 10200 – 9400 ) = 8600

The South Korean market is one of the few to show some resilience, with the KOSPI falling more than 7 percent to 1806 before recovering about half of its losses to close at 1876.

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Quote: equal outcome or equal opportunity

What I’ve seen is a real divergence in world views between the President and his party and where most of us as conservatives are……. If you hear them speak it’s always about everyone must pay their fair share and I think the difference is we believe everyone should have a fair shot. It really is a difference between whether you think government is in place to ensure equal outcomes or whether we should as elected officials try to promote the situation where everyone has equal opportunity to go and earn the outcome.

~ House majority leader Eric Cantor

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Little bounce in China

The Shanghai Composite Index followed through below 2620 Monday, after breaking primary support at 2650 Friday, to confirm a primary down-trend. The index fell to 2500 before recovering weakly to 2527 by the close. HongKong fared slightly better, with the Hang Seng Index initially falling to 20000 but recovering to test 20500 by the close. Target for the down-swing is the 2010 low of 19000*.

* Target calculation: 22000 – ( 25000 – 22000 ) = 19000

Similarly, the Dow Jones HongKong Index broke support at 445 to signal a primary down-trend. Target for the down-swing is the 2010 low of 365.

Dow Jones HongKong Index

* Target calculation: 445 – ( 510 – 445 ) = 380

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