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.
Posted on

Three Converging Factors May Slash Economic Growth By 71% | Daniel Amerman | Safehaven.com

An excellent historical analysis of this issue can be found in the working paper, “Debt Overhangs: Past and Present”, which was published by the National Bureau of Economic Research in April, 2012. Authored by Carmen Reinhart, Vincent Reinhart and Kenneth Rogoff, it examines 26 different “debt overhangs” that have occurred around the world since 1800, with “debt overhang” being defined as public debt exceeding 90% of GDP for at least five years…..What Reinhart, Reinhart and Rogoff found was that the average duration of a debt overhang was 23 years, and that the end result was a 24% reduction in the size of national economies, compared to what they would have been if they had grown at their average growth rates when not crippled by large government debts.

via Three Converging Factors May Slash Economic Growth By 71% | Daniel Amerman | Safehaven.com.

Posted on

Dems Play Hardball, Threaten a New Recession

Josh Boak: Republican control of the House has left Democrats with the choice of either agreeing to continue the lower rates for wealthier Americans, or watching as they all expire and the country plunges back into a downturn. The Democrats would now prefer to hazard the hard landing. Their gambit depends entirely on the danger of a financial shock severe enough to force GOP lawmakers to back down, yet not so overpowering that it triggers a vicious slump…..

via Dems Play Hardball, Threaten a New Recession.

Posted on

Forex: Euro, Pound Sterling, Canadian Loonie, Australian Dollar, South African Rand and Japanese Yen

The Euro retraced to test its new resistance level at $1.23. Respect would confirm a decline  to test the 2010 low at $1.19*. Declining 63-day Twiggs Momentum continues to signal a strong down-trend. Breach of the 2010 low would become likely if the ECB indicated an intention to directly or indirectly purchase government bonds — and would suggest long-term weakness.

Euro/USD

* Target calculation: 1.23 – ( 1.27 – 1.23 ) = 1.19

Pound Sterling’s up-trend against the Euro is accelerating, with steep advances followed by short corrections. Rising 63-day Twiggs Momentum confirms. Target for the current advance is €1.295*.

Pound Sterling/Euro

* Target calculation: 1.255 + ( 1.255 – 1.215 ) = 1.295

Canada’s Loonie continues to weaken against the Aussie Dollar but long-term bullish divergence on 63-day Twiggs Momentum (and breach of the descending trendline) warns of reversal to an up-trend. Breakout above parity would confirm.

Canadian Loonie/Aussie Dollar

The Aussie Dollar broke resistance at $1.03 USD and is headed for a test of $1.05*. Recovery of 63-day Twiggs Momentum above zero would suggest a primary up-trend, but we first need a correction to form a higher low (trough).

Aussie Dollar/USD

* Target calculation: 1.03 + ( 1.03 – 1.01 ) = 1.05

The Aussie Dollar is testing resistance at R8.50 South African Rand after respecting support at R8.30. Breakout would offer a target of R8.70*.

Aussie Dollar/South African Rand

* Target calculation: 8.50 + ( 8.50 – 8.30 ) = 8.70

The Australian Dollar/Japanese Yen is a good reflection of global risk tolerance. Euphoric highs of 2007  were followed by blind panic in 2008/2009 before settling into a mid-range oscillation between ¥72 and ¥90 — suitable for range traders. The higher low in 2012 reflects a more bullish stance but we are a long way from breakout above ¥90. 63-Day Twiggs Momentum oscillating around zero mirrors the uncertainty.

Aussie Dollar/Japanese Yen

Posted on

Numbers Tell of Failure in the War on Drugs – NYTimes.com

If there is one number that embodies the seemingly intractable challenge imposed by the illegal drug trade on the relationship between the United States and Mexico, it is $177.26. That is the retail price, according to Drug Enforcement Administration data, of one gram of pure cocaine from your typical local pusher. That is 74 percent cheaper than it was 30 years ago.

via Numbers Tell of Failure in the War on Drugs – NYTimes.com.

Posted on

Rising dollar but commodities strengthen

The rising dollar suggests weaker gold and commodity prices. The US Dollar Index continues to test resistance at 83.50. Breakout would target the 2010 high at 88.50, with an interim target of 86*, while respect would test support at 81.50. 63-Day Twiggs Momentum oscillating above zero indicates a strong up-trend.

US Dollar Index

* Target calculation: 82 + ( 82 – 78 ) = 86

Spot Gold continues to test primary support at $1530 per ounce, while 63-day Twiggs Momentum below zero warns of a primary down-trend. Breakout would offer a target of $1300*. QE3, however, would start a new up-trend.

Spot Gold

* Target calculation: 1550 – ( 1800 – 1550 ) = 1300

Spot Silver is similarly testing primary support at $26 per ounce. Failure would offer a target of $16*.

Spot Silver

* Target calculation: 26 – ( 36 – 26 ) = 16

Commodities, and not just crude oil, however, have rallied strongly. 63-Day Twiggs Momentum oscillating below zero indicates a strong down-trend and CRB Commodities Index respect of its descending trendline would warn of a decline to 240*. Penetration above the trendline is unlikely, but would suggest that a bottom is forming.

CRB Commodities Index

* Target calculation: 270 – ( 300 – 270 ) = 240

Brent Crude has already penetrated its descending trendline, suggesting that a bottom is forming, but 63-day Twiggs Momentum continues to indicate a primary down-trend. Recovery of the indicator above zero would strengthen the bull signal, while a peak below zero would signal a primary decline to $75 per barrel*.

Brent Crude and Nymex WTI Light Crude

* Target calculation: 100 – ( 125 – 100 ) = 75

Posted on

Compromises Are Needed to Boost Growth – WSJ.com

Gerald Seib: Most sensible people in Washington know exactly what kinds of compromises on the deficit, taxes, trade and entitlement programs are within reach to change the economic trajectory.

What’s needed is simply for both parties to accept that neither is likely to be in full command of the government after the fall election and perhaps for some time to come, and to move on to the compromises needed to end a policy paralysis that is exacting a real economic price….

This imperative is well embodied in a new study, titled “The Bargain,” soon to be released by Third Way, a centrist think tank. It lays out a series of seven big policy bargains the two parties could strike to address economic malaise….

via Compromises Are Needed to Boost Growth – WSJ.com.

Posted on

ASX 200 tests ceiling

The ASX 200 index is headed for a test of resistance at 4170 after forming a higher trough. Breakout would indicate a rally to test 4450. Recovery of 63-day Twiggs Momentum above zero would strengthen the signal. In the long term, breakout above 4450 would signal a primary up-trend, but that may be some way off. Reversal below 3990 seems just as remote but would signal another primary decline.

ASX 200 Index

Posted on

Asia: India bullish while China, Japan bearish

Japan’s Nikkei 225 index formed a peak below zero on 13-week Twiggs Money Flow, indicating strong selling pressure. Failure of primary support at 8200 would signal another test of the 2008/2009 lows at 7000.

Nikkei 225 Index

China’s Shanghai Composite Index is testing its 2011 low of 2150 after breaking  primary support at 2250. Breach of the new support level would indicate a decline to 1800*. Reversal of 13-week Twiggs Money Flow below zero would strengthen the bear signal. Recovery above 2250 is unlikely, but would suggest another rally to 2500.

Shanghai Composite Index

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

India’s Sensex: Bullish divergence on 13-week Twiggs Money Flow indicates reversal to a primary up-trend; a trough above the zero line would signal strong buying pressure. Respect of support at 17000 by the latest retracement would indicate a rally to 18500, while breakout above 18500 would confirm the primary up-trend.

Sensex Index

* Target calculation: 18500 + ( 18500 – 16000 ) = 21000

Singapore’s Straits Times Index is testing resistance at 3030. Recovery of 63-day Twiggs Momentum above zero suggests that the primary up-trend is intact. Breakout above 3030 would signal a primary advance to 3300*.

Singapore Straits Times Index

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

Posted on

UK & Europe momentum rising

Dow Jones Europe Index is headed for a test of the long-term descending trendline at 240. Upward breakout would support the bullish divergence on 63-day Twiggs Momentum, indicating a primary up-trend. Breakout above 265 would confirm. Respect of resistance at 240, however, would warn of another test of primary support at 210.

Dow Jones Europe Index

The FTSE 100 penetrated its descending trendline, suggesting that a bottom is forming. Retracement that respects support at 5250 would confirm. Recovery of 63-Day Twiggs Momentum above zero would also favor an up-trend.

FTSE 100 Index

Posted on

Canada: TSX 60 tests primary support

Canada’s TSX 60 index is headed for another test of primary support at 640. Failure of support would signal a primary decline to 560*. 63-Day Twiggs Momentum is rising but respect of the zero line would warn of a strong down-trend.

TSX 60 Index

* Target calculation: 640 – ( 720 – 640 ) = 560

Powered by WordPress / WordPress Maintenance Service By Website Helper