Colin Twiggs, Author at the patient investor

May 8, 2012

UK & Europe: France rejects austerity

Election of French Socialist Francois Hollande may lead to a similar rejection of austerity measures by Spain and Italy, creating a clear fault-line between the uncompromising German-led North and a more socialist French-led South. That could eventually lead to fracture of the euro-zone unless the two camps discover a new spirit of compromise. Be prepared for a rough ride.

The CAC-40 index rallied Monday and recovery above 3300 would indicate that the correction is over. Respect of the zero line by 13-week Twiggs Money Flow would signal buying pressure. Failure of support at 3100, however, would indicate another test of primary support at 2800.

France CAC-40 Index

Spain’s Madrid General Index continues in a strong primary down-trend, with 63-Day Twiggs Momentum oscillating below zero. Failure of support at the 2009 low of 700 would signal another primary decline.

Madrid General Index

* Target calculation: 750 – ( 900 – 750 ) = 600

63-Day Twiggs Momentum (below zero) also indicates a primary down-trend on Italy’s MIB Index but this week’s blue candle suggests support at 13500. Recovery above 15000 would signal another test of 17000. Failure of support, however, would offer a long-term target of 10000*.

Italy MIB Index

* Target calculation: 13500 – ( 17000 – 13500 ) = 10000

The German DAX continues to test the rising trendline and support at 6500. Rising 13-week Twiggs Money Flow suggests strong buying pressure. Respect of support would confirm the primary up-trend and test the 2011 high at 7600.

Germany DAX Index

London Stock Exchange was closed Monday. The FTSE 100 is again testing support at 5600 and failure would warn of another test of primary support at 5000/5050. Breach of the rising trendline would also signal that the up-trend is losing momentum. Retreat of 63-Day Twiggs Momentum below zero would warn of a primary down-trend.

FTSE 100 Index

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.

May 8, 2012

Nasdaq 100 and S&P 500 threaten a correction

The Nasdaq 100 is testing medium-term support at 2630. Reversal of 21-day Twiggs Money Flow below zero warns of a correction; follow-through below Friday’s low of 2620 would confirm, offering an initial target of 2400.

Nasdaq 100 Index

The S&P 500 continues to test support at 1350/1370 on the weekly chart after penetrating its rising trendline. Declining 13-week Twiggs Money Flow indicates medium-term selling pressure. Failure of support would signal a correction with an initial target of 1300*, but the primary up-trend is not under immediate threat.

S&P 500 Index Weekly Chart

* Target calculation: 1350 – ( 1400 – 1350 ) = 1300

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.

May 7, 2012

Fedex double top

Bellwether transport stock Fedex is consolidating in a narrow band above the neckline of a double top reversal at $88. Follow-through below $85 would confirm a primary down-trend, warning of a slow-down in the broader economy. Reversal of 63-day Twiggs Momentum below zero would strengthen the signal. Recovery above $90 is less likely, but would suggest continuation of the primary up-trend.

Fedex

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.

May 7, 2012

Canada TSX 60 breaks support

Canada’s TSX 60 index broke medium-term support at 675, signaling continuation of the secondary correction. Reversal of 63-day Twiggs Momentum below zero warns that the primary down-trend will continue, but 13-week Twiggs Money Flow holding above zero continues to indicate healthy buying pressure. Primary support at 650 is expected to hold and be followed by a rally to test resistance at 725.

TSX 60 Index
TSX 60 Index Twiggs Money Flow

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.

May 3, 2012

Forex: US Dollar/Yen

The US dollar is testing long-term support at ¥80. Failure would warn of weakness in the primary up-trend, while respect would indicate a primary advance to ¥90. 63-Day Twiggs Momentum holding above zero suggests continuation of the primary trend.

US Dollar/ Japanese Yen

* Target calculation: 85 + ( 85 – 80 ) = 90

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.

May 3, 2012

Forex: Pound Sterling strengthens against Euro

The euro is headed for another test of support at $1.30. Failure would complete a small bearish descending triangle on the weekly chart. Breach of primary support at $1,26 would offer a long-term target of $1.17*. Respect of the zero line (from below) by 63-day Twiggs Momentum would strengthen the signal.

Euro

* Target calculation: 1.26 – ( 1.35 – 1.26 ) = 1.17

Pound Sterling is in a primary up-trend against the euro, as indicated by 63-day Twiggs Momentum above zero. Target for the current advance is €1.255*.

Pound Sterling

* Target calculation: 1.215 + ( 1.215 – 1.175 ) = 1.255

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.

May 3, 2012

Forex: Australia, Canada and South Africa

The Australian dollar has tracked the CRB Commodities Index fairly closely since 2009. Weakening commodity prices warn that the Aussie is likely to follow.

CRB Commodities Index and Australian Dollar

Against the US dollar, the Aussie is headed for another test of support at $1.02. Reversal of 63-day Twiggs Momentum below zero warns of a primary down-trend. Failure of support at $1.02 would confirm this, offering an initial target of $0.99.

Australian Dollar

* Target calculation: 1.02 – ( 1.05 – 1.02 ) = 0.99

Canada’s Loonie is in a primary up-trend against the Aussie dollar — as signaled by the 63-day Twiggs Momentum cross to above zero. Breakout above $0.982 completes a bullish ascending triangle formation with a target of parity.

Canadian Dollar

* Target calculation: 0.98 + ( 0.98 – 0.96 ) = 1.00

The Aussie is also weakening against the South African Rand. Cross of 63-day Twiggs Momentum below zero warns of a primary down-trend. Failure of support at R7.90 would confirm, offering an initial target of R7.50*.

South African Rand

* Target calculation: 8.00 – ( 8.50 – 8.00 ) = 7.50

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.

May 3, 2012

Commodity and stock prices diverge

We had an interesting discussion last week about the correlation between commodities and stocks. The weekly chart below shows how CRB Commodities Index closely tracks the S&P 500 — except in times of extreme volatility like 2007/2008. We are now witnessing another divergence, with the CRB headed for a test of primary support at 295 while the S&P 500 strengthens. Does weak demand for commodities indicate that stocks are over-priced as in 2007? The Fed has been doing its best to depress bond yields, pumping up stock prices ahead of the November election. It is too early to tell what the outcome will be, but we need to monitor this relationship through the year.

CRB Commodities Index v. S&P 500 Index

The divergence between Brent Crude and Nymex Light Crude, from early 2011, continues. Both are in a primary up-trend, however, and breakout above the 2011 Nymex high would threaten the still fragile US recovery, offering a long-term target of $140/barrel. Brent is currently testing medium-term support at $115, but respect of this would also confirm a primary up-trend.

ICE Brent Afternoon Markers v. Nymex WTI Light Crude Weekly Chart

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.

May 3, 2012

Gold and Dollar indicate uncertainty

Spot Gold continues its consolidation between $1600 and $1700 per ounce, while testing the long-term rising trendline. Recovery above $1700 would suggest another primary advance; confirmed if an inverted head and shoulders formation is completed by a rise above $1800. 63-Day Twiggs Momentum oscillating around zero indicates uncertainty, however, and failure of support at $1600 would warn of a long-term trend change and test the primary level at $1500.

Spot Gold

* Target calculation: 1800 + (1800 – 1600) = 2000; 1500 – (1800 – 1500) = 1200

The US Dollar Index reflects the inverse of gold, with a potential triple bottom threatening to end the long-term down-trend on the Monthly chart. 50-Week Twiggs Momentum is oscillating around the zero line, indicating uncertainty.

US Dollar Index Monthly Chart

On the weekly chart, the dollar has met strong resistance at 80 and reversal below support at 78 would warn of another test of the 2011 low at 73. Reversal of 63-day Twiggs Momentum below zero would strengthen the bear signal.

US Dollar Index Weekly Chart

* Target calculation: 82 + ( 82 – 78 ) = 86; 78 – ( 82 – 78 ) = 74

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.

May 2, 2012

Paul L. Kasriel: Don’t End the Fed, Mend the Fed

Although the return to a gold standard for our monetary system has much appeal, it is unlikely to occur. So, let’s not let the perfect be the enemy of the good. Perhaps there is second-best monetary policy approach to the gold standard that might achieve most of the desirable outcomes of a gold standard but might have a greater probability of actually being adopted……. My suggested approach is very similar to one advocated by Milton Friedman at least 60 years ago. The more things change, the more they stay the same, I guess. I am proposing that the Federal Reserve target and control growth in the sum of credit created by private monetary financial institutions (commercial banks, S&Ls and credit unions) and the credit created by the Fed itself. I believe that this approach to monetary policy would reduce the amplitude of business cycles, would prevent sustained rapid increases in the prices of goods/services and would prevent asset-price bubbles of the magnitude of the recent NASDAQ and housing experiences.

econtrarian_043012.pdf (application/pdf Object).

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.