Author: ColinTwiggs

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ASX 200 stalls

Two short weekly candlesticks suggest the ASX 200 rally has stalled at 5500. Bearish divergence on Twiggs Money Flow warns of selling pressure. Reversal below the lower trend channel would warn of a test of primary support at 5000/5100. Breakout above 5600 is unlikely.

ASX 200

The ASX 300 Banks Index is testing resistance at 8000. Declining Twiggs Money Flow still warns of selling pressure. Breakout above 8000 would signal a primary up-trend but I would be cautious and wait for retracement to respect the new support level. There are some good fundamental reasons, like the real estate/apartment bubble, that suggest a reversal would be premature.

ASX 300 Banks Index

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US private investment dwindles

Private investment is declining as a percentage of GDP. Not a good sign when you consider that a similar decline preceded previous recessions.

Private Investment and Private Credit to GDP

Click graph to view full-size image.

Also a concern, when private credit is rising as a percentage of GDP while investment is falling. Crossover of the two lines would indicate that the private sector is borrowing more than it is investing. That is not likely to end well.

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Gold: Brief pause at $1250

At present, interest rates are driving gold. How long this will continue is hard to say. It depends on what shocks lie in store for the global financial system. Two pending rolls of the dice are the November 8 elections and negotiations over Britain’s exit from the EU.

Long-term Treasury yields are rising while gold is falling. Expectations of a rate rise after the November election are growing and a test of resistance at 2.0 percent is likely. But a lot depends on continued stability of financial markets.

10-Year Treasury Yields

Spot gold reacted to rising interest rates by breaking support at $1300/ounce, warning of a test of primary support at $1200. A brief pause at medium-term support at $1250 is indicated by a spinning top candlestick, signaling indecision. Support at $1250 is unlikely to hold but the primary up-trend is intact unless support at $1200 is broken.

Spot Gold

The ASX All Ordinaries Gold Index broke support at 4500, warning of a primary down-trend. The immediate target is 4000.

All Ordinaries Gold Index

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Why Putin will fail | UPI.com

From Harlan Ullman:

Frozen conflicts are not in Russia’s long-term interest. Of course, while the short-term aim of preventing Georgia and Ukraine from joining NATO because of contested borders is working, the long-term economic damage done to Russia will prove politically destructive. Putin certainly is riding a political tiger. However, he has no clear exit strategy for safely dismounting this dangerous beast. That is a fundamental predicament….

What should the United States do? First, common sense and not confrontation is the best means to exploit Putin’s political weaknesses. By threatening Russia, his public will rally around Putin. This does not mean granting concessions. It means being smart not petulant. It also means shifting NATO’s strategy to local defense based on a “porcupine” posture with emphasis on Stinger-like anti-air and Javelin anti-vehicle missiles all reinforced by alliance capabilities to blunt Russian cyber, propaganda, intimidation and other non-conventional forms of war.

Second, the United States needs to dial back on belligerent rhetoric. By all means plan for “full spectrum war.” But do not use a PR bullhorn to announce what is being done. Teddy Roosevelt applies — speak softly but carry a big stick….

Source: Why Russian President Vladimir Putin will fail – UPI.com

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May Looks Beyond Brexit | Bloomberg

Robert Hutton at Bloomberg discusses Theresa May’s speech, Wednesday, at the Conservative Party’s annual conference:

….May’s comments mark a change of emphasis from the views of her predecessor. In his 11 years as Tory leader, David Cameron argued that the party needed to show that it was in touch with modern Britain by focusing on climate change and gay rights. May, by contrast, argues that the party needs to reach “ordinary working-class people.”

She’ll say she sees the role of the government as providing “what individual people, communities and markets cannot.” And she’ll argue that this means “providing security from crime, but from ill health and unemployment too. Supporting free markets, but stepping in to repair them when they aren’t working as they should. Encouraging business and supporting free trade, but not accepting one set of rules for some and another for everyone else.”

….three senior figures in May’s administration said financial-services companies would get no special favors. The extracts of May’s speech suggest she thinks Cameron was too focused on that sector. “If we act to correct unfairness and injustice and put government at the service of ordinary working people,” she’ll say, “we can build that new united Britain in which everyone plays by the same rules, and in which the powerful and the privileged no longer ignore the interests of the people.”

Source: May Looks Beyond Brexit to Portray Herself as Workers’ Tribune – Bloomberg

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Gold breaches $1300/ounce

Spot gold broke support at $1300/ounce warning of a test of primary support at $1200. The up-trend has lost momentum, reflected by penetration of the rising trendline, but consolidation above $1200 would suggest that the trend is intact. Breach of $1200 is now as likely, however, and would warn of a test of the 2015 low at $1050/ounce.

Spot Gold

The ASX All Ordinaries Gold Index is testing support at 4500. Breach is likely and would warn of a primary down-trend.

All Ordinaries Gold Index

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Europe: DAX & Footsie on the mend

Germany’s DAX is testing support at 10500. Respect would confirm the primary up-trend. This week’s long tail and a Twiggs Money Flow trough above zero indicate buying pressure. Follow-through above 10800 would complete a bear trap — a bullish signal with a target of 11500*.

DAX

* Target calculation: 10500 + ( 10500 – 9500 ) = 11500

The FTSE 100 is also rallying, to test long-term resistance at 7000/7100. Rising troughs on Twiggs Money flow signal long-term buying pressure.

FTSE 100

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Gold loses direction

Inflationary pressures are low, Yuan depreciation is gradual, Europe looks like it will ‘muddle through’ on Brexit and Hillary Clinton is favorite to win the November election. No sudden shocks to spark a rally in Gold, with the spot metal consolidating in a narrow range above $1300/ounce. But life is like a box of chocolates. You never know what you’re gonna get. (Forrest Gump – 1994).

Spot Gold

* Target calculation: 1375 + ( 1375 – 1300 ) = 1450

Short retracement indicates that support at $1300/ounce is strong. Breakout above $1350 would signal a fresh advance, with a target of $1450*. Breach of support is less likely but would warn of a test of primary support at $1200/ounce.

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OPEC deal a fake

OPEC announced an agreement to cut production — to between 32.5 million and 33 million barrels per day from current levels of 33.2 million barrels — without agreement as to which members will bear the brunt of the production cuts. FGE Chairman Fereidun Fesharaki calls this “a fake deal” and explains that OPEC could not afford to come away from Algiers empty-handed.

http://video.cnbc.com/gallery/?video=3000555509

Nymex Light Crude rallied to $48/barrel and looks set to test resistance at $50. Breakout above $50 would signal a primary up-trend but respect is more likely, once the market gets past the headlines, and would suggest further consolidation between $40 and $50.

Nymex Light Crude

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