Author: Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients. Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter. Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit. 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.
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Canada: TSX Composite rallies

The TSX Composite is headed for another test of resistance at 12500. Breakout would signal an advance, offering a target of 13250*. Rising 63-day Twiggs Momentum suggests a primary up-trend. Reversal below 11750 is unlikely but would test primary support at 11200.

TSX Composite Index

* Target calculation: 12500 + ( 12500 – 11750 ) = 13250

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US rally but signs of a top

The S&P 500 broke resistance at 1400 and the descending trendline on the daily chart, indicating that the correction is ending. Expect retracement to test support. A higher trough would be a bullish sign.

S&P 500 Index

The weekly chart still shows bearish divergence on 63-day Twiggs Momentum and reversal below zero would warn of a primary down-trend. Breach of resistance at 1425 would signal another advance but expect resistance at 1475.

S&P 500 Index

The Nasdaq 100 is similarly headed for a test of 2800. Bearish divergence on 63-day Twiggs Momentum warns that a top is forming. Respect of 2800 would strengthen the signal, indicating reversal to a primary down-trend.

Nasdaq 100 Index

* Target calculation: 2400 – ( 2800 – 2400 ) = 2000

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The “Export Price Norm” saved Australia from the Great Recession « The Market Monetarist

The Market Monetarist writes how a combination of luck and good policy saved Australia from recession.

Milton Friedman once said never to underestimate the importance of luck of nations. I believe that is very true and I think the same goes for central banks. Some nations came through the shock in 2008-9 much better than other nations and obviously better policy and particularly better monetary policy played a key role. However, luck certainly also played a role…..

via The “Export Price Norm” saved Australia from the Great Recession « The Market Monetarist.

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Australia: Housing affordability still poor

Interesting article by Leith van Onselen on Australian housing affordability.

Today it takes “380 weeks on the average wage (just over seven year’s income) to buy a typical house. This is down from around 430 weeks average wages (just over eight year’s income) required to buy a home in 2008 and 2010.”

Good news. But compare that to less than 250 weeks in 1995 — and less than 200 weeks in 1987.

In 1960, it took homebuyers just 7500 hours [188 weeks on the average wage] to pay off the average mortgage.

via Housing affordability improves but still poor | | MacroBusiness.

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Sterling threatens euro support

Pound Sterling is headed for another test of support at €1.225/€1.230 on the weekly chart against the euro. Reversal of 63-day Twiggs Momentum below zero warns of a primary down-trend. Breach of support and the rising trendline would confirm the signal. Respect of support is unlikely, but would test €1.260 in the medium-term.

Pound Sterling

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South African Rand weakens on mining unrest

Continued clashes between rival mining unions fueled further weakening of the South African Rand against the greenback.

South African Rand

Rising 63-day Twiggs Momentum reflects a strong primary up-trend. Breakout above R9.00 would offer a medium-term target of R9.50. In the long-term, the next major resistance level is the 2008 high of R11.00.

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Nomura: China recovery unsustainable | | MacroBusiness

Interesting take by Nomura, reported by FT Alphaville.

Nomura thinks that after this year, China’s days of 8 per cent-plus growth are finished, and that stimulus efforts will run into problems with CPI inflation, not to mention its own credit system…..

via Nomura: China recovery unsustainable | | MacroBusiness.

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Health Costs: How the U.S. Compares With Other Countries | PBS NewsHour

US health care costs are high relative to other OECD countries but average US life expectancy (78.7 years) in 2010 is below the OECD average of 79.8 years. These two OECD charts sum up the problem:

OECD health spending by country

Cost of medical procedures

Germany (DEU) is lowest for most procedures — in many cases less than half — and the quality of the treatment is excellent.

via Health Costs: How the U.S. Compares With Other Countries | PBS NewsHour.

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Euro and Aussie Dollar long tails

The Euro reversed direction in response to the weakening dollar, breaking resistance at $1.28 to indicate another test of $1.31/$1.32. Respect of the new support level would confirm.

Euro/USD

The Aussie Dollar likewise displays evidence of buying pressure, with long tails below resistance at $1.04. Breakout would offer a target of $1.06*. Reversal of of 63-day Twiggs Momentum below zero, however, would warn of a primary down-trend.

Aussie Dollar/USD

* Target calculation: 1.04 + ( 1.04 – 1.02 ) = 1.06

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Gold strengthens as dollar retreats

Long tails on the last two days of the spot gold daily chart indicate strong support at $1700 per ounce. Breakout above $1740 would indicate another test of $1800. 63-Day Twiggs Momentum well above zero suggests a healthy up-trend. A weakening dollar would strengthen the signal.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1700 ) = 1900

The Dollar Index (weekly chart) retreated below resistance at 81. Follow-through below 80 would test primary support at 78.50, while failure of primary support would complete a head-and-shoulders reversal with a target of 74*. 63-Day Twiggs Momentum holding below zero already suggests a primary down-trend. Breakout above 81.50 is unlikely but would indicate an advance to 84.

US Dollar Index

* Target calculation: 79 – ( 84 – 79 ) = 74

The DJ-UBS Commodity Index (weekly chart) respected support at 140. The 63-day Twiggs Momentum trough above zero suggests a primary up-trend. A weakening dollar would strengthen the signal, while breakout above 152 would confirm. Breach of 140 is unlikely but would test primary support at 126.

DJ-UBS Commodity Index

Nymex WTI Light Crude and ICE Brent Crude are both trending downward. The 63-day Twiggs Momentum peak at zero warns of a primary down-trend. Breach of primary support would confirm: WTI at $78 per barrel and Brent Crude at $90.

Nymex WTI Light Crude

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