Author: 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.
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Asia: India and Japan rise but China remains bearish

India’s Sensex followed through after breaking resistance at 17500, confirming a primary advance to 18500*. A 13-week Twiggs Money Flow trough above zero would indicate strong buying pressure.

Sensex Index

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

Singapore’s Straits Times Index, also in a primary up-trend, is consolidating above former resistance at 3040. Reversal below 3000 would signal a test of the lower trend channel. It is still unclear whether 63-day Twiggs Momentum will oscillate around zero, indicating a ranging market, or above zero, indicating a healthy up-trend. A trough above zero would resolve this.

Singapore Straits Times Index

Japan’s Nikkei 225 index broke through resistance at 9100, signaling a primary advance to 10000. 13-Week Twiggs Money Flow below zero continues to warn of selling pressure; recovery would confirm the advance.

Nikkei 225 Index

* Target calculation: 9100 + ( 9100 – 8200 ) = 10000

The daily chart shows China’s Shanghai Composite Index testing support at 2100. Failure would indicate a test of the lower trend channel, while respect would test medium-term resistance at 2180. Breakout above the trend channel  would warn of another bear rally. Follow-through above 2180 would confirm. Bullish divergence on 21-day Twiggs Money Flow indicates medium-term buying pressure.

Shanghai Composite Index

* Target calculation: 2100 – ( 2180 – 2100 ) = 2020

The Hang Seng continues to consolidate above resistance at 20000. Follow-through would indicate an advance to 22000*.  Rising 13-week Twiggs Money Flow suggests buying pressure.

Hang Seng Index

* Target calculation: 20 + ( 20 – 18 ) = 22

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European revival

Madrid General Index broke above 720 to complete a double-bottom reversal with a target of 840*. Bullish divergence on 13-week Twiggs Money Flow indicates buying pressure. Penetration of the descending trendline would strengthen the reversal signal.

Madrid General Index

* Target calculation: 720 + ( 720 – 600 ) = 840

Italian FTSE MIB Index also completed a double bottom reversal, offering a target of 16500*. Bullish divergence on 13-week Twiggs Money Flow again indicates buying pressure.

FTSE Italian MIB Index

* Target calculation: 14500 + ( 14500 – 12500 ) = 16500

The FTSE 100 is headed for a test of major resistance at 6000. Expect strong resistance between 6000 and 6100 because of the number of previous peaks at this level. Breakout would offer a long-term target of 6750*. 13-Week Twiggs Money Flow oscillating above zero suggests a primary up-trend.

FTSE 100 Index

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

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Canada: TSX60 rising

The TSX 60 broke resistance at 685 on the weekly chart, penetrating the descending trendline to signal that a bottom is forming. Bullish divergence on 63-day Twiggs Momentum suggests reversal to an up-trend. Breakout above the 2012 high of 730 would confirm.

TSX 60 Index

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S&P 500 and Nasdaq test key resistance

On the monthly chart, the S&P 500 Index is testing resistance at 1420. A trough above zero on 13-week Twiggs Money Flow indicates buying pressure. Breakout above 1420 would signal an advance to the 2007 high at 1560*.

S&P 500 Index

* Target calculation: 1420 + ( 1420 – 1280 ) = 1560

The Nasdaq 100 is similarly testing resistance at 2800 on the weekly chart. Breakout would offer a target of 3150*. A 63-day Twiggs Momentum trough above zero indicates continuation of the primary up-trend.

Nasdaq 100 Index

* Target calculation: 2800 + ( 2800 – 2450 ) = 3150

10-Year Treasury Yields recovered above initial resistance at 1.70 percent. Expect an attempt at the primary level of 2.40 percent. The Fed purchased $5 billion of Treasury notes/bonds (nominal) and MBS last week; so they are not the cause of the rise. Investors appear to be flowing out of Treasuries and driving stocks higher.

10-Year Treasury Yields

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Correlation Breakdown as Proxies for Risk Boost Aussie, Kiwi – Bloomberg

By Allison Bennett and Lucy Meakin – Aug 14, 2012

The strength of the Aussie is increasingly driven by reasons other than raw materials as growth slows for exports to China, its largest trading partner. Prices for iron ore delivered to the port of Tianjin have dropped to the lowest level since December 2009, according to Steel Index Ltd., and contracts for coal used to make steel may fall 11 percent to the lowest price in two years, according to a Bloomberg survey of seven analysts and industry officials.

via Correlation Breakdown as Proxies for Risk Boost Aussie, Kiwi – Bloomberg.

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"François Hollande’s Wrong Idea of France" by Brigitte Granville | Project Syndicate

Since the euro’s introduction, unit labor costs have risen dramatically faster in France than they have in Germany. According to Eurostat data published in April 2011, the hourly labor cost in France was €34.2, compared to €30.1 in Germany – and nearly 20% higher than the eurozone average of €27.6. France’s current-account deficit has risen to more than 2% of GDP, even as its economic growth has ground to a halt.

The high cost of employing workers in France is due not so much to wages and benefits as it is to payroll taxes levied on employers. The entire French political class has long delighted in taxing labor to finance the country’s generous welfare provisions, thus avoiding excessively high taxation of individuals’ income and consumption – though that is about to come to an end as Hollande intends to slap a 75% tax on incomes above €1 million. This is a version of the fallacy that taxing companies (“capital”) spares ordinary people (“workers”).

via “François Hollande’s Wrong Idea of France” by Brigitte Granville | Project Syndicate.

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The Oil Drum | America’s Deficit Attention Disorder

According to the World Wildlife Federation’s 2012 Living Planet Report, at the current rate of consumption, “it is taking 1.5 years for the Earth to fully regenerate the renewable resources that people are using in a single year. Instead of living off the interest, we are eating into our natural capital.” This is a path to never-never land. Unlike with financial deficits, simple debt forgiveness is not an option.

When we deplete Earth’s bio-capacity—its capacity to support life in its many varied forms—we are not borrowing from the future; we are stealing from the future. Even though it is the most serious of all human-caused deficits, it rarely receives mention in current political debates.

via The Oil Drum | Drumbeat: August 18, 2012.

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See which presidential candidate you side with

Answer the following questions to see which presidential candidates you side on most issues with.
Click the image below to complete the quiz.

Click this image to complete the quiz

via See which presidential candidate you side with.

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French Industrial Policies Are Aiding Rapid Decline of Peugeot – SPIEGEL ONLINE

By Dietmar Hawranek and Isabell Hülsen:

When Helping Is Hurting
Ironically, the victims of these two developments — focusing on production in France and high wage increases — are those whose cause is being championed by governments and labor representatives: the autoworkers themselves. Workers at the [Peugeot] Aulnay plant had to look on as their company went into gradual decline. Aulnay was once one of the most modern plants in the country, annually producing more than 400,000 cars. Today, fewer than 140,000 vehicles roll off its assembly lines each year. An auto plant that produces so few vehicles can hardly be profitable. If President Hollande and the unions compel Peugeot to keep the plant in operation, they will only accelerate the company’s demise.

via French Industrial Policies Are Aiding Rapid Decline of Peugeot – SPIEGEL ONLINE.

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In the classroom | Abstruse Goose

In the Classroom

In the Classroom

via Abstruse Goose.

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