Crude futures (Light Crude December 2015 – CLZ2015) broke support at $44.70 per barrel, warning of another test of primary support at $40. Follow-through below $43 would confirm. Supply continues to exceed demand and breach of $40 would offer a (long-term) target of $30*. Recovery above $50 per barrel is most unlikely unless there is a serious disruption to supply.
* Target calculation: 40 – ( 50 – 40 ) = 30
Markets remain tentative and we continue to limit our exposure to roughly 50% of portfolio value. The danger is that you avoid the steam engine but get hit by the caboose when you step back on the tracks. It is safer to wait until the anxiety subsides.
The S&P 500 encountered moderate resistance at the previous high of 2130. Retracement is mild and looks promising for the next attempt at 2130. Decline of 21-day Twiggs Money Flow is gradual, indicating light selling pressure. Breakout above 2130 would signal a fresh primary advance. Reversal below 2050 is unlikely, but would warn of another test of primary support at 1870.
* Target calculation: 2130 + ( 2130 – 1870 ) = 2390
CBOE Volatility Index (VIX) indicates market risk is easing.
NYSE short sales remain subdued.
A long-term chart shows the Nasdaq 100 testing its March 2000 high of 4800. Bearish divergence on 13-week Twiggs Money Flow continues to indicate selling pressure but the pattern appears secondary in nature and recovery above the declining trendline would suggest a breakout.
Canada’s TSX 60 reversed below 800, warning of another decline. Failure of 775 would strengthen the signal. A 13-week Twiggs Momentum peak at -5% is a strong bear signal.
* Target calculation: 775 – ( 825 – 775 ) = 725
Germany’s DAX continues to test resistance at 11000. Recovery of 13-week Twiggs Money Flow above zero indicates medium-term buying pressure. Breakout above 11000 and the descending trendline would suggest another test of the previous high at 12400. Respect is less likely, but would warn of another test of primary support.
The Footsie is weakening, having respected resistance at 6500. A sharp fall on 13-week Twiggs Money Flow indicates medium-term selling pressure. Breach of 6250 would warn of another test of primary support at 6000. Breakout above 6500 is less likely, but would suggest another test of 7000.
The Shanghai Composite Index broke resistance at 3500 and rising 13-week Twiggs Money Flow indicates buying pressure. It would be prudent to wait for a higher trough before interpreting this as a reversal.
Japan’s Nikkei 225 broke resistance at 19000. Expect retracement to test the new support level; respect would confirm another test of 21000. Rising 13-week Twiggs Money Flow indicates buying pressure.
* Target calculation: 19000 + ( 19000 – 17000 ) = 21000
India’s Sensex fell through the former band of primary support at 26000/26500. 13-Week Twiggs Money Flow troughs above zero continue to indicate long-term buying pressure, but failure to recover above 26500 in the short-term would be a strong bear signal. Follow-through below 25000 would confirm a primary down-trend.
* Target calculation: 25000 – ( 27500 – 25000 ) = 22500
The ASX 200 broke medium-term support at 5150, warning of another test of primary support at 5000. Another 13-week Twiggs Money Flow trough above zero would indicate strong support at 5000. Breach of 5000 is unlikely at this stage, but would warn of a (long-term) decline to 4000*.
* Target calculation: 5000 – ( 6000 – 5000 ) = 4000
Solid job numbers have boosted the prospects for an interest rate hike before the end of the year. Employment is growing steadily, having exceeded its 2008 high by more than 4.2 million new jobs.
Unemployment is falling as job growth holds above 2.0 percent a year.
Long-term interest rates are rising, with 10-year Treasury yields headed for a test of resistance at 2.50 percent after breaking through 2.25 percent. Recovery of 13-week Twiggs Momentum above zero indicates an up-trend. Breakout above 2.50 percent would confirm.
The Dollar strengthened in response to rising yields, the Dollar Index breaking resistance at 98. Respect of zero by 13-week Twiggs Momentum indicates long-term buying pressure. Breakout above 100 would confirm another advance, with a target of 107*.
* Target calculation: 100 + ( 100 – 93 ) = 107
Gold fell as the Dollar strengthened, testing primary support at $1100/ounce. 13-Week Twiggs Momentum peaks below zero indicate a strong (primary) down-trend. Follow-through below $1080 would signal another decline, with a target of $1000/ounce*.
* Target calculation: 1100 – ( 1200 – 1100 ) = 1000
From Elliot Clarke at Westpac:
Recent softer gains for nonfarm payrolls cast doubt over labour market momentum, giving cause for some to question whether the FOMC would be able to deliver a first hike before the year is out.
The October report changed that view, with the 271k gain for payrolls taking the month-average pace back up to 206k as the unemployment rate declined to 5.0%.
There is certainly more room for improvement in the US labour market. But subsequent gains need to come at a more measured pace.
We continue to anticipate that a first rate hike will be delivered at the December FOMC meeting.
Read more at Northern Exposure: October payrolls justifies December move
The S&P 500 is testing resistance at the previous high of 2130. Down-turn on 21-day Twiggs Money Flow warns of short-term selling pressure; a fall below zero would indicate strong resistance. Reversal below 2050 is unlikely, but would indicate another test of primary support at 1870.
* Target calculation: 2000 + ( 2000 – 1870 ) = 2130
A declining CBOE Volatility Index (VIX) indicates market risk is easing.
NYSE short sales remain subdued.
Nasdaq 100 broke resistance at 4700 and is approaching its previous (March 2000) high of 4816. 13-Week Twiggs Money Flow is rising steeply but expect resistance at 4800. Breakout would be a positive sign for the large cap S&P 500 and Dow Industrial indices.
Canada’s TSX 60 is far more hesitant, testing stubborn resistance at 825. Breakout would signal a fresh advance, but follow-through below 800 would be bearish and failure of 775 would warn of another decline. Recovery of 13-week Twiggs Momentum above -5% would offer some hope, but the index remains tentative.
* Target calculation: 775 – ( 825 – 775 ) = 725
Germany’s DAX is consolidating below resistance at 11000; a bullish sign. Recovery of 13-week Twiggs Money Flow above zero indicates medium-term buying pressure. Breakout above 11000 and the descending trendline would suggest another test of the previous high at 12400.
The Footsie is similarly testing resistance at 6500. Breakout would suggest another test of the previous high at 7100. 13-Week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Reversal below 6250 is unlikely, but would warn of another test of primary support at 6000.
The Shanghai Composite Index is testing resistance at 3500. Rising 13-week Twiggs Money Flow indicates buying pressure. Breakout would signal an advance to 4000, but I remain wary because of government intervention.
Japan’s Nikkei 225 is testing resistance at 19000. Breakout would signal another test of 21000. Respect is less likely, but reversal below 18500 would warn of another test of primary support at 17000.
* Target calculation: 19000 + ( 19000 – 17000 ) = 21000
India’s Sensex is testing the former primary support level at 26500 after encountering resistance at 27500. Rising 13-week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Respect of 26500 is likely and would indicate continuation of the rally (to 28500). Failure of support would warn of a primary decline.
* Target calculation: 25000 – ( 27500 – 25000 ) = 22500
The ASX 200 is testing medium-term support at 5150. Reversal of 21-day Twiggs Money Flow below zero indicates medium-term selling pressure. Breach of 5150 is likely and would warn of another test of primary support at 5000. Recovery above 5400 is unlikely at this stage, but would suggest an advance to 6000.
* Target calculation: 5000 – ( 5400 – 5000 ) = 4600
We aren’t born with the ability to make good decisions; we learn it.
~ Ray Dalio, Bridgewater Associates
A strong dollar and low inflation weaken demand for gold. The spot metal broke medium-term support at $1150/ounce and is headed for a test of primary support at $1100. Another 13-week Twiggs Momentum peak below zero signals continuation of the primary down-trend.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000
From Barry York:
It is very hard for tyrants and dictators to control a populace that has access to global telecommunications….
Ten years ago, 16% of the world’s population accessed the Internet. Today it is 40% – and growing. Satellites are the key to extending access to remote areas of the planet.
Satellite manufacture is entering a new phase with mass production in the near future. Google has a plan to build 180 satellites that will bring the Internet to the remote and poor parts of the planet. A more ambitious venture, involving Sir Richard Branson, the founder of Virgin Airlines, seeks to put 648 small light-weight satellites into orbit in the coming years to ensure that there will be affordable Internet access for the four billion humans currently without it….
Read more at Arthur C Clarke, satellites and democracy – On Line Opinion – 30/10/2015
Marc Faber: China Has Credit Bubble of Epic Proportions https://t.co/pZtgampX6f
— Colin Twiggs (@Colin_Twiggs) October 30, 2015
GDP rose at an annual rate of 1.5 percent in Q3, according to advance estimate https://t.co/vWMdoOL9TA pic.twitter.com/PFNZ7lXa8D
— St. Louis Fed (@stlouisfed) October 29, 2015
From Elliot Clarke at Westpac:
In assessing the strength and persistence of US growth, it is important to recognise the impact that inventories and net exports continue to have on headline results. Inventories added significantly to growth through the first half of 2015 on rapid inventory accrual; but a more modest pace of stocking in Q3 resulted in a 1.4ppt subtraction from quarterly GDP growth. Similarly, while net exports reduced the annualised Q1 headline outcome by 1.9ppts, it subsequently added modestly to growth in Q2, circa 0.2ppts. If we omit both factors from our assessment (and thereby focus on domestic final demand, DFD), we see a robust, enduring underlying growth trend. Annualised DFD growth in 2015 averages out at 2.7% – or 3.3% if we focus solely on the past six months, when the weather was more favourable.
On the whole, stripping away the impact of inventories and net exports, the past two years have seen a material improvement in the growth trend. This acceleration has primarily been the result of stronger consumption growth, particularly within the services sub-sector and in housing construction. Given the ongoing improvement in the labour market and credit availability as well as robust consumer confidence, this trend should endure into 2016.
Construction spending is the key.
From Frik Els at Mining.com:
“It’s going down significantly,” Katie Hudson, managing director and senior investment manager at Goldman Sachs Asset Management Australia told the Financial Review on Wednesday: “The major producers are adding incremental volume at around $US20 a ton, that gives you a sense of where the vulnerability is.”
Iron ore miners invested north of $100 billion in new projects and expansions since the start of the decade and most of those projects are now delivering or will do so soon. The big three producers are following a scorched earth policy of raising output and slashing costs to weather low prices and push out competitors.
This week top producer Vale announced record third quarter shipments of 88 million tonnes despite idling 13 million tonnes worth of high cost operations. More astonishing is the fact that the Rio de Janeiro-based company was able to reduce cash costs to just $12.70 per tonne (it’s in the high teens at Rio Tinto and BHP).
Read more at Iron ore price crashes through $50 | MINING.com