Colin Twiggs, Author at the patient investor

October 23, 2012

Asian market update

China’s Shanghai Composite Index is testing medium-term resistance at 2150. Breach of the descending trendline would suggest that a bottom is forming. Bullish divergence on 63-day Twiggs Momentum also indicates that the down-trend is weakening.

Shanghai Composite Index

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

India’s Sensex continues to test its new support level at 18500. Follow-through above 19000 would confirm the primary up-trend. Rising 13-week Twiggs Money Flow (above zero) indicates buying pressure.

Sensex Index

* Target calculation: 18.5 + ( 18.5 – 16.0 ) = 21.0

Japan’s Nikkei 225 is headed for another test of resistance at 9200. Breakout would indicate a rally to 10200. Oscillation of 13-week Twiggs Money Flow below zero, however, continues to warn of selling pressure. Respect of 9200 would indicate another test of primary support at 8500.

Nikkei 225 Index

* Target calculation: 9200 + ( 9200 – 8200 ) = 10200

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

October 23, 2012

Europe and FTSE testing resistance

Dow Jones Europe Index continues to consolidate between 250 and 265, testing primary resistance. Upward breakout would signal a primary advance to the 2011 high at 310. A 63-day Twiggs Momentum trough above zero would strengthen the signal. Reversal below 250, however, would warn of another correction.

Dow Jones Europe Index

* Target calculation: 260 + ( 260 – 210 ) = 310

The FTSE 100 is similarly consolidating below 6000. Rising 13-week Twiggs Money Flow (above zero) indicates buying pressure. Expect strong resistance at 6000/6100. Breakout would offer a long-term target of 6750*.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 23, 2012

Canada: TSX60 edging lower

The TSX 60 is edging lower and likely to test its medium-term trendline around 680. Another 13-week Twiggs Money Flow trough above zero would signal a primary up-trend. Breakout above 725 would confirm.

TSX 60 Index

* Target calculation: 725 + ( 725 – 640 ) = 810

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 23, 2012

US: S&P 500 correction

The S&P 500 broke support at 1420, following a trend channel breakout, both signaling a correction. Reversal of 21-day Twiggs Money Flow below zero warns of renewed (medium-term) selling pressure — a peak below zero would strengthen the signal. Breach of 1400 would further strengthen the signal.

S&P 500 Index
The Dow Jones Industrial Average similarly broke support at 13300 on the weekly chart. Bearish divergence on 63-day Twiggs Momentum indicates a weakening up-trend; reversal below zero would warn of a primary down-trend. Breach of support at 13000 — and the primary trendline — would warn that a top is forming. Recovery above 13650 is unlikely at present but would indicate an advance.

Dow Jones Industrial Average

* Target calculation: 13000 + ( 13000 – 12000 ) = 14000

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 23, 2012

Politics Makes Us Worse | Aaron Ross Powell, Trevor Burrus | Libertarianism.org

Excerpt from an opinion by Aaron Ross Powell and Trevor Burrus:

Oddly, many believe that political decisionmaking is an egalitarian way of allowing all voices to be heard. Nearly everyone can vote, after all, and because no one has more than one vote, the outcome seems fair.

But outcomes in politics are hardly ever fair. Once decisions are given over to the political process, the only citizens who can affect the outcome are those with sufficient political power……

The black-and-white aspect of politics also encourages people to think in black-and-white terms……. Nuances of differences in opinions are traded for stark dichotomies that are largely fabrications. Thus, we get the “no regulation, hate the environment, hate poor people” party and the “socialist, nanny-state, hate the rich” party—and the discussions rarely go deeper than this…….

via Politics Makes Us Worse | Aaron Ross Powell, Trevor Burrus | Libertarianism.org.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 23, 2012

Australia: Submarine folly

The Australian government is poised to commit to building 12 new diesel submarines at a cost of $40 billion without even considering the option of more efficient, more powerful, nuclear-powered alternatives.

Simon Cowan, author of Future Submarine Project Should Raise Periscope for Another Look, released today by The Centre for Independent Studies, says the government risks repeating the mistakes of the current Collins Class submarines, with high running costs and reliability issues.

“Australia needs world-class submarines and the US Virginia Class looks like the best option.”

“Nuclear-powered submarines are superior in almost every way to diesel-powered submarines – they can travel further, faster and stay deployed for longer, and they have more powerful weapons, systems and sensors.”

“However, the government has refused to consider nuclear-powered submarines for reasons that don’t stack up.”

“Safety considerations are important when talking about nuclear power,” Cowan notes, “but the safety record of the US Virginia Class is flawless. These subs don’t carry nuclear weapons and never need refuelling – and if Australia leases them from the United States, the US could dispose of spent nuclear material.”

“Australia could also save more than $10 billion by leasing eight Virginia Class submarines and up to $750 million a year on operational and maintenance costs as well.”

via Axe dud subs and look to nuclear option, says new CIS report.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 23, 2012

Financial ecosystems can be vulnerable too – FT.com

By Robert May

[Andy Haldane, Financial Stability Director of the Bank of England] argues that complexity may obscure more than it illuminates. He illustrates this by comparing predictions about the chances of failure for a sample of 100 global banks in 2006, based on simple leverage ratios (assets/equity) with the corresponding complex, Basel III-style risk-weighted one. The simple metric wins decisively.

via Financial ecosystems can be vulnerable too – FT.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 23, 2012

The Myth That Screwed Up 50 Years of U.S. Foreign Policy – By Leslie H. Gelb | Foreign Policy

By Leslie H. Gelb

What people came to understand about the Cuban missile crisis — that JFK succeeded without giving an inch — implanted itself in policy deliberations and political debate, spoken or unspoken. It’s there now, all these decades later, in worries over making any concessions to Iran over nuclear weapons or to the Taliban over their role in Afghanistan. American leaders don’t like to compromise, and a lingering misunderstanding of those 13 days in October 1962 has a lot to do with it.

In fact, the crisis concluded not with Moscow’s unconditional diplomatic whimper, but with mutual concessions. The Soviets withdrew their missiles from Cuba in return for U.S. pledges not to invade Fidel Castro’s island and to remove Jupiter missiles from Turkey……

via The Myth That Screwed Up 50 Years of U.S. Foreign Policy – By Leslie H. Gelb | Foreign Policy.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 23, 2012

Australia: Becoming a welfare-dependent state

Extract from an opinion by Robert Carling:

In democratic welfare states, the proportion of the electorate that attracts more in social benefits from government than it pays in tax has become so large that candidates who promise to curb the welfare state have a hard time winning elections.

The same issue has been raised in the United Kingdom, where a recent study by the Centre for Policy Studies revealed that 53.4% of households receive more in benefits than they pay in taxes……

The Australian Bureau of Statistics (ABS) has compiled data on total taxes paid [including GST] and total social benefits (cash and in kind) received by households in 2009–10 classified into five slices (quintiles) from bottom to top according to their private income. The first three quintiles (that is, 60% of households) each received more in direct social benefits than they paid in taxes……

via Centre for Independent Studies: Self-sustaining leviathan.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 22, 2012

The Chicago Plan (1939)

The 1939 proposal — A PROGRAM FOR MONETARY REFORM — by a group of eminent economists, including Irving Fisher, became known as the “Chicago Plan” after its chief proponent, professor Henry Simons from the University of Chicago. The core proposal is to require banks to hold 100% reserves against demand deposits¹, ending the fractional reserve banking system and making the monetary authority (the Fed) solely responsible for creation of new money. This extract describes major features of the plan:

Lending Under the 100% Reserve System
The 100% reserve requirement would, in effect, completely separate from banking the power to issue money. The two are now disastrously interdependent. Banking would become wholly a business of lending and investing pre-existing money. The banks would no longer be concerned with creating the money they lend or invest, though they would still continue to be the chief agencies for handling and clearing checking accounts.

Under the present fractional reserve system, if any actual money is deposited in a checking account, the bank has the right to lend it out as belonging to the bank and not to the depositor. The legal title to the money rests, indeed, in the bank. Under the 100% system, on the other hand, the depositor who had a checking account (i.e., a demand deposit) would own the money which he had on deposit in the bank; the bank would simply hold the money in trust for the depositor who had title to it. As regards time or savings deposits, on the other hand, the situation would, under the 100% system, remain essentially as it is today. Once a depositor had brought his money to the bank to be added to his time deposit or savings account, he could no longer use it as money. It would now belong to the bank, which could lend it out as its own money, while the depositor would hold a claim against the bank. The amount, in fact, ought no longer to be called a “deposit”. Actually it would be a loan to the bank.

Now let us see how, under the 100% system, the banks would be able to make loans, even though they could no longer use their customers’ demand deposits for that purpose.

There would be three sources of loanable funds. The first would be in the repayments to the banks of existing loans of circulating medium largely created by the banks in the past. Such repayments would release to the banks more cash than they would need to maintain 100% reserve behind demand deposits; and this “free” cash they would be able to lend out again. The banks would, therefore, suffer no contraction in their present volume of loans…..

The second sources of loans would be the banks own funds, capital, surplus, and undivided profits which might be increased from time to time by the sale of new bank stock.

The third source of loans would be new savings “deposited” in savings accounts or otherwise borrowed by the banks. That is, the banks would accept as time or savings deposits the savings of the community and lend such funds out again to those who could put them to advantageous use. In this manner, the banks might add without restraint to their savings, or time, deposits, but not to the total of their demand deposits and cash.

However, there would, of course, be a continuous moving of demand deposits from one bank to another, from one depositor to another and from demand deposits into cash and vice versa. To increase the total circulating medium would, nevertheless be the function of the Monetary Authority exclusively.

via A Program For Monetary Reform (pdf)

Demand deposits are bank deposits, such as checking accounts, payable on demand. Savings or time deposits are payable on maturity. An easy way to separate demand from savings/time deposits is to class any deposit that matures within 30 days as a demand deposit.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.