The TSX 60 is retracing to test support at 700. Respect would indicate an advance to the 2012 high of 725. Rising 63-day Twiggs Momentum suggests a primary up-trend; a trough above zero would strengthen the signal. Only breakout above 725 would confirm.
* Target calculation: 725 + ( 725 – 640 ) = 810
Bellwether transport stock Fedex fell hard in the last week, testing support at $84. Breakout would confirm the primary down-trend signaled by 63-day Twiggs Momentum below zero. A down-trend on Fedex would warn of slowing activity in the broader economy.
A daily chart of the S&P 500 index shows narrow consolidation above 1450. Bearish divergence on 21-day Twiggs Money Flow continues to warn of selling pressure. Reversal below 1450 would indicate a test of 1400.
Weekly chart of the Nasdaq 100 shows the index hesitating below 2900. Expect retracement to test the new support level at 2800.
* Target calculation: 2800 + ( 2800 – 2450 ) = 3150
China’s Shanghai Composite Index followed through below recent support at 2050. Declining 13-week Twiggs Money Flow, below zero, indicates selling pressure. Target for the decline is 1800*.
* Target calculation: 2150 – ( 2500 – 2150 ) = 1800
South Korea’s Seoul Composite Index is headed for a test of 2050. The 13-week Twiggs Money Flow trough above zero suggests a primary up-trend. Breakout above 2050 would confirm.
* Target calculation: 2050 + ( 2050 – 1750 ) = 2350
India’s Sensex broke through 18500, confirming the primary up-trend. The trough above zero on 13-week Twiggs Money Flow indicates buying pressure. Expect retracement to test the new support level.
* Target calculation: 18.5 + ( 18.5 – 16.0 ) = 21.0
Singapore’s Straits Times Index is testing medium-term resistance at 3100. Rising 63-day Twiggs Momentum, above zero, indicates a primary up-trend. Breakout above 3100 would indicate an advance to 3300*.
* Target calculation: 3000 + ( 3000 – 2700 ) = 3300
Japan’s Nikkei 225 retreated below the new support level at 9200. Reversal of 13-week Twiggs Money Flow below zero warns of a bull trap. Follow-through below 9000 would confirm.
* Target calculation: 9200 + ( 9200 – 8200 ) = 10200
By John Kemp
ANATOMY OF A FLASH CRASH
In their report on the 2010 equity market crash, the SEC and CFTC staff found that “against a backdrop of unusually high volatility and thinning liquidity, a large fundamental trader (a mutual fund complex) initiated a sell program to sell a total of 75,000 E-mini contracts (valued at approximately $4.1 billion) as a hedge to an existing equity position”.
“This large fundamental trader chose to execute this sell program via an automated execution algorithm (“Sell Algorithm”) that was programmed to feed orders into the June 2010 E-Mini market to target an execution rate set to 9% of the trading volume calculated over the previous minute, but without regard to price or time,” the report noted. “On May 6, when markets were already under stress, the Sell Algorithm chosen by the large trader to only target trading volume, and neither price nor time, executed the sell program extremely rapidly in just 20 minutes”…………..
By John Kemp
The CFTC is looking into Monday’s oil price drop and is collaborating with Britain’s Financial Services Authority FSA which regulates the London-based Brent market. CME Group, which operates one of the two principal oil markets, has described the drop as a “coordinated selloff” not caused by any technical failures. Intercontinental Exchange ICE, which runs the main Brent contract, has declined to comment on whether it saw any unusually big orders placed during the period. It did, however, say: “Following rumors regarding the Strategic Petroleum Reserve SPR, volume was widely distributed and oil prices declined over a period of time. Circuit breakers were not triggered and markets were orderly.”
Interesting charts from The Heritage Foundation: The 2012 Index of Dependence on Government
By William Beach and Patrick Tyrrell – February 8, 2012
The percentage of US citizens who do not pay federal income taxes, and who are not claimed as dependents by someone who does pay them, has climbed more than four-fold from a low of 12 percent in the late 1960s to 49.5 percent in 2009.
More than 70 percent of federal spending goes to programs that encourage dependence.
The Index of Dependence on Government multiplies each program’s yearly expenditure by its weight. The total of the weighted values is the Index score for that year. The Index is calculated using the following weights:
More than 67 million Americans receive assistance through the programs included in the Index.
If we add government employees, the number dependent on government increases to more than 91 million.
Reproduced with permission from The Heritage Foundation
Read the full report at The 2012 Index of Dependence on Government
By Floyd Norris
Estimates by the Treasury Department released this week indicated that over the 12 months through July, China reduced its position in Treasury securities by $165 billion, cutting them to $1.15 trillion despite making a small amount of purchases in July. And the Federal Reserve reported that, as of Wednesday, it owned $1.65 trillion in Treasury securities, $17 billion less than it had owned a year earlier.
…..China’s selling of Treasuries over the 12-month period was offset by the actions of Japan, another country whose trade surplus with the United States remains large. The Japanese are estimated to have increased their holdings by $232 billion over the 12 months, to $1.12 trillion. Those figures include both government and private holders of Treasuries.
Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund, discusses his biggest worry — social disruption due to mismanagement of the de-leveraging by governments — and other market insights.
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Also PIMCO’s Mohammed El-Erian on the benefits and risks of ECB intervention in the eurozone debt crisis.
By Houses and Holes on September 20, 2012
The grey-beards of Australian economics today unite to deliver one enormous wake-up call to the nation, its government, its interests, its media and its people.
Don’t get me wrong, the bucket of cold water is not deserved in equal measures. For mine, the Australian people have been awake to the dangers facing the country since the GFC, hence the community embrace of saving. But the nation’s media and government have existed in a bubble of hubris, forging ahead with yesterday’s policies and arguments as if Australia is immune to global and historic forces.
I am talking about the end of the mining boom, which is nothing more than the march of the GFC to those that have escaped until now, and the persistence of policy settings that assume that the private sector is immune to deleveraging, as well as the failure to plan beyond the next hole in the ground.
Ross Garnaut and Bob Gregory deliver the bad news today via a string of speeches and articles in the [Australian Financial Review]. For those that don’t know, Garnaut is the architect of the open economy policy settings that have delivered 30 years of prosperity and Gregory is the local pioneer of arguments about the effects of Dutch disease. Both are eminent economists.
So what do they have to say? Nothing good.
Garnaut warns of falling living standards:
“I think we’re going to have a very difficult time adapting to the decline in living standards that’s going to be a necessary part of the adjustment to the end of phase one and two of the boom,” he told a conference on the rise of Asia. Professor Garnaut’s warning that the looming economic adjustment would be more painful because governments had not saved enough of the resources boom in budget surpluses came as international ratings agency Standard & Poor’s reaffirmed Australia’s AAA sovereign rating assuming budget cuts continue.
…Professor Garnaut said Australians would not be so anxious about potential risks if governments had saved more of the resources boom since 2003.
…“The time for careful management of a difficult adjustment is the time that lies ahead,” he said.
Meanwhile, Bob Gregory with Peter Sheehan write an opinion piece that endorses the Garnaut position but goes further with proposed solutions:
As the resources boom unwinds over the next few years, Australia will experience a large deflationary impact, primarily driven by the fall in the terms of trade and in resource investment. The production and export of resource commodities will rise as projects are completed, but this will generate few jobs and limited domestic income to offset the terms of trade decline and the falls in mining investment.
Many have argued productivity growth or labour market reform are central issues to be addressed as the resources boom passes. Productivity growth in the long run is particularly important but the key challenge over the next few years lies in addressing the change in the impact of the resources boom from expansionary to deflationary.
Until recently, theory and practice around the world has given primacy to monetary policy in responding to macroeconomic shocks. But, with many economies in the zero interest rate trap, the limits of monetary policy are being realised. Monetary policy cannot be expected to play the central role in addressing the long-term demand shocks Australia faces. The current de facto policy settings – that monetary policy will support the economy in the short-run while fiscal policy is restrictive – contain risks for the longer term.
They go on to argue that the Federal government will need to spend big on infrastructure to support growth and propose a new fund to finance the spending, in part through guaranteeing state debt.
I agree with every word. But there is little hope that those in power do. Treasury Secretary Martin Parkinson responded:
“Because boom implies there’s a bust,” he said. “Where we will end up at the end of this is with mining being a much larger share of a reshaped economy.”
Ironically, this is the very thinking that all but guarantees a bust.
Reproduced with thanks to Houses and Holes at Macrobusiness.com.au
By Ambrose Evans-Pritchard
The US has an impossible task maintaining “neutrality”, and Beijing knows it.
Washington guarantees Japan’s defence under its US nuclear umbrella. It uses military bases on Japanese soil as an unsinkable aircraft carrier. It works hand in glove with Tokyo in a tight military alliance.
The question is whether Washington is really willing to uphold the Japanese alliance as the going gets tougher. Will it let America to be led by the nose by Japanese nationalists into a clash that is not obviously – or immediately – in US national interest?
President Barack Obama faces the toughest diplomatic choice of any US leader since John Kennedy…….
via China, Japan and the world’s Agadir Crisis (1911) – Telegraph Blogs.
