Colin Twiggs, Author at the patient investor

June 14, 2012

Dollar, gold, crude oil and commodities

The Dollar Index is retracing to test support at 81.50. Respect would confirm the primary up-trend, offering a long-term target of the 2010 high at 89. 63-Day Twiggs Momentum oscillating above zero indicates a healthy up-trend.

Dollar Index

Spot Gold is rallying to test resistance around $1650/ounce — at the descending trendline on the monthly chart. Breakout from the long-term trend channel suggests that a top has formed in response to the stronger dollar. Reversal below $1600 would indicate another test of primary support at $1500, while upward breakout would test $1800. A second dip of 63-day Twiggs Momentum below zero strengthens the warning of a primary down-trend.

Spot Gold

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

CRB Commodities Index is consolidating above support at its target of 265. Expect a rally to test resistance at 295, but failure of support would test the 2010 low at 250. 63-Day Twiggs Momentum oscillating below zero indicates a healthy down-trend. Commodities are falling (and the dollar rising) in anticipation of a global economic down-turn. Expect stocks (as indicated by the S&P 500 index) to follow commodities lower.

CRB Commodities Index

Nymex WTI Light Crude is headed for support at its 2011 low of 76, though we may see medium-term retracement to test resistance. 63-Day Twiggs Momentum below zero signals a primary down-trend.

Nymex WTI Light Crude

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.

June 13, 2012

Stock market is saying ‘Don’t fight the Fed’ – Mark Hulbert – MarketWatch

Mark Hulbert: Investors appear to be betting that the Fed and European central banks now have no choice but to stimulate their economies to a much greater extent than previously planned. Since much of that additional liquidity would find its way into equities, the stock market responded favorably.

To put it crudely: The news is so bad it’s good.

via Stock market is saying ‘Don’t fight the Fed’ – Mark Hulbert – MarketWatch.

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.

June 13, 2012

The China-driven commodities super-cycle debate: Nomura edition

Nomura: We have performed a detailed analysis of metal intensity of GDP for steel, copper and aluminium in the following pages, which we believe clearly outlines our view that China’s economy is not large enough (in GDP terms) to support a continuation of the rapid growth in metal consumption seen in 2000-11.

Our conclusions are based on an analysis of China’s metal intensity of GDP rather than metal consumption per capita, and reflect a simple premise that while a country’s population size may be an important indicator of a country’s potential demand for industrial metals (per capita), the ability to meet potential demand is determined by the quantity of metal consumed in relation to the size of economic output (ie, GDP, not GDP per capita). Hence, in our view, metal intensity of GDP is a more important variable to monitor than per capita metal consumption.

Zarathustra: The reason is that, according to Nomura, the per-capita analysis ignores the composition of China’s GDP growth. China’s investment driven growth is very metal intensive.

via The China-driven commodities super-cycle debate: Nomura edition.

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.

June 13, 2012

Has the Chinese government given up on rebalancing already?

Zarathustra: As more and more evidence suggests that the Chinese economy is slowing rapidly, there is also more and more evidence that the Chinese central government has given up on real estate market curbs even though they say they will continue, and they have given up cleaning local government debts even though they said they were cleaning them up. And by giving these up, they have also unofficially given up on rebalancing the economy away from investment driven to consumption driven once more.

via Has the Chinese government given up on rebalancing already?.

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.

June 12, 2012

Australia: ASX 200

The ASX 200 is consolidating above primary support — between 4000 and 4150 — while the sharp fall of 13-week Twiggs Money Flow below zero warns of strong selling pressure. Failure of primary support would indicate a decline to 3600*. Recovery above 4150 is unlikely but would suggest another test of 4450.

ASX 200 Index

* Target calculation: 4000 – ( 4400 – 4000 ) = 3600

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.

June 12, 2012

China: Double top

Shanghai Composite Index threatens to complete a double top reversal with breakout below the neckline at 2250. Failure of support would offer a target of 2000*. Respect of the zero line by 63-day Twiggs Momentum warns of a continuing primary down-trend. Respect of support is less likely, but would indicate that a bottom is forming.

Shanghai Composite Index

* Target calculation: 2250 – ( 2500 – 2250 ) = 2000

Hong Kong’s Hang Seng Index found medium-term support at 18000. A rally that respects resistance at 20000 would confirm the primary down-trend signaled by 63-day Twiggs Momentum below zero. Breach of primary support at 17500/18000 would offer a target of 16000*.

Hong Kong Hang Seng Index

* Target calculation: 18 – ( 20 – 18 ) = 16

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.

June 12, 2012

India & Singapore

India’s Sensex is testing medium-term resistance at 17000. Breakout would suggest another test of 18000, while reversal below 16000 would test primary support at 15000/15200.
A peak below zero on 63-day Twiggs Momentum would strengthen the bear signal.

BSE Sensex Index

* Target calculation: 16 – ( 17 – 16 ) = 15

Singapore’s Straits Times Index found medium-term support at 2700. 63-Day Twiggs Momentum below zero warns of a primary down-trend. A rally that respects resistance at 2900 would strengthen the signal.

Singapore Straits Times Index

* Target calculation: 2700 – ( 2900 – 2700 ) = 2500

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.

June 12, 2012

UK & Europe

Dow Jones Europe Index is testing long-term support at 210. Failure would signal a decline to the 2009 low of 150*. Declining 63-day Twiggs Momentum (below zero) already warns of a primary down-trend, while 13-week Twiggs Money Flow indicates strong selling pressure.

Dow Jones Europe Index

* Target calculation: 210 – ( 270 – 210 ) = 150

The FTSE 100 index is retracing to test resistance at 5600. Respect would indicate another primary decline — to test 5000 — while breach of medium-term support at 5250 would confirm. 63-Day Twiggs Momentum below zero already warns of a primary down-trend. A peak below the zero line would further strengthen the signal.

FTSE 100 Index

* Target calculation: 5300 – ( 5600 – 5300 ) = 5000

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.

June 12, 2012

Australia: GDP growth is not real

Mark Graph: Table 5 of the national accounts includes the implicit price deflators (IPD) for each term in the expenditure equation for GDP….the big deflationary item was exports….

So we get to the heart of the anomaly: largely because we exported a touch less in volume terms (in Q1 2012 compared with Q4 2011) but at significantly reduced prices, this contributed significantly to an outcome where real GDP grew significantly while nominal GDP stagnated.

via Understanding our price deflationary boom | Mark Graph.

Comment:~ So real GDP growth is not really real. The major difference between nominal GDP growth (1.2% annualized) and real GDP growth (a far more impressive 5.2% annualized) is a fall in the price of exports!

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.

June 11, 2012

Fedex threatens support

Bellwether transport stock Fedex completed a double top reversal, with a break of the neckline at $88, and is now consolidating between $85 and $90. Retreat of 63-day Twiggs Momentum below zero warns of a primary down-trend. Failure of support at $85 would confirm, suggesting that economic activity is slowing.

Fedex

* Target calculation: 85 – ( 95 – 85 ) = 75

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.