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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Crude and commodities

Brent Crude is drifting lower but so far has not seriously tested medium-term support at $115/barrel. Respect would confirm the primary up-trend, offering a target of $135*. Respect of the zero line by 63-day Twiggs Momentum would also strengthen the signal.

ICE Brent Afternoon Markers

* Target calculation: 125 + ( 125 – 115 ) = 135

The broader CRB Commodities Index is headed for a test of primary support at 295. Respect of zero (from below) by 63-Day Twiggs Momentum indicates continuation of the primary down-trend. Breach of primary support would confirm the signal.

CRB Commodities Index

* Target calculation: 295 – ( 325 – 295 ) = 265

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Dollar and gold test key support levels

The Dollar Index continues to struggle with resistance at 80. Reversal below 78 would signal the end of the primary up-trend and a re-test of the 2011 low. Reversal of 63-day Twiggs Momentum below zero would strengthen the warning, while respect would indicate another primary advance.

US Dollar Index

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

Spot Gold failed to respond to the listless dollar, testing the long-term trendline and support at $1600/ounce. 63-Day Twiggs Momentum oscillating around the zero line indicates indecision. Recovery above $1700 would indicate a fresh primary advance, while failure of $1600 would warn of a primary down-trend — with a long-term target of $1200*.

Spot Gold

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

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An earnings season only a pessimist could love – The Globe and Mail

With more than 25 per cent of S&P 500 companies having reported their first-quarter results, 80 per cent have exceeded analysts’ consensus profit estimates – a record pace, and well above the historical average of 62 per cent.

….The record “beat rate,” as earnings trackers call it, can’t gloss over the fact that earnings forecasts have been in decline for months – leaving expectations so low that topping them is a dubious achievement……..Major earnings-tracking services such as Factset, Thomson Reuters Research and S&P Capital IQ expect S&P 500 year-over-year earnings growth of between 4 and 4.5 per cent for the quarter ended March 31. That would be the weakest profit growth in more than two years.

via An earnings season only a pessimist could love – The Globe and Mail.

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Durable-Goods Orders Fall – WSJ.com

March orders for nondefense capital goods excluding aircraft, which economists consider a proxy for business investment, fell 0.8%. The weakness extended to a host of categories, including machinery, computers and primary metals. Economists cautioned that special factors likely made the report appear somewhat worse than the underlying trend. First, the December expiration of a government tax credit for business investment caused many companies to move ahead new orders, which translated into artificial weakness in the early-year figures.

via Durable-Goods Orders Fall – WSJ.com.

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Basel takes aim at Mega Bank – MacroBusiness

Deep T: On the one side we have an Australian housing market which is close to the most unaffordable in the world with mortgage debt at 100% of GDP also close to the highest of any country, yet Mega Bank [the Big Four banks] calculates its minimum capital requirements at 1.6% on residential mortgages which undoubtedly would be close to the lowest of any bank in the world….. Surely, the result the Basel Committee assessment is a foregone conclusion?

Sadly, no. On the other side, however, we have an equally formidable opponent. Do not underestimate the politico-housing complex. The smoke screens will be built and a whitewash is on the cards. Australia has a history of painting a very rosy picture of our financial system and housing market in the face of significant known risk factors.

via Basel takes aim at Mega Bank – MacroBusiness.

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Apple AAPL correction

Apple with its massive market capitalization holds significant sway over the Nasdaq 100. Its monthly chart reflects a strong bull trend, with 63-day Twiggs Momentum holding above zero since early 2009, before a massive 50%+ gain over the last 3 months. Bearish divergence on 13-week Twiggs Money Flow warned of strong resistance and the stock is now signaling a correction.
Apple Monthly Chart

Are we going to see a short correction followed by another surge, or is this a full-blown correction back to the long-term rising trendline?  The daily chart already shows a bullish hammer candlestick, hinting at reversal.

Apple Daily Chart

When we break the day down into 30 minute candles, however, we can see retracement encountered a new resistance level at $575. Breakout would indicate a rally to $600, but not necessarily the end of the correction, while reversal below support at $568/$570 would signal another decline and test the lower trend channel around $550.

Apple 30 Minute Candlesticks

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EconoMonitor » Distributional Impacts of Monetary Policy

…Higher than expected inflation will indeed create some winners and losers:

However, the biggest losers are creditors who are almost by definition wealthy, since people owe them money. If a creditor has lent out $100 million at 2 percent interest (e.g. buying a 10-year U.S. or German government bond) and the inflation rate rises from 2 percent to 4 percent, this creditor has lost an amount equal to 100 percent of his expected income or 2 percent of his wealth. This is a far larger loss than any worker could experience as a result of this increase in the inflation rate.

Who would be the winners?

Also, most workers are debtors to some extent. They are likely to have mortgage debt, credit care debt, student loan debt and or car debt. A higher rate of inflation means that they can repay this debt in money that is worth less than the money they borrowed.

via EconoMonitor : EconoMonitor » Distributional Impacts of Monetary Policy.

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Watch out! Is the Fed pushing us into another bubble? – Fortune's deals blog Term Sheet

The Fed’s actions have kept Treasury bond prices high (while keeping the government’s interest costs low), but the fundamentals do not support the high valuations, given the fiscal mess we are in. Sooner or later, the bond bubble will burst. History has shown that a structurally weak economy combined with a fiscally irresponsible government propped up by accommodative central-bank lending always ends badly.

….The biggest beneficiaries of loose money, are our profligate elected officials who refuse to come to grips with budget deficits and an exemption-laden tax code. As long as Treasury can borrow cheaply to paper over the real problems, politicians can demagogue about overspending (GOP) or undertaxing (Democrats) while dodging their responsibility to work together to fix our problems.

via Watch out! Is the Fed pushing us into another bubble? – The Term Sheet: Fortune’s deals blog Term Sheet.

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Ex-Fed Kohn: 'Huge Risk' US Won't Take Steps On Debt, Deficit By Year End

NEW YORK -(Dow Jones) – There is a real danger U.S. authorities won’t take the necessary steps to fix the country’s debt and deficit problems between the elections and the end of this year, former Federal Reserve Board Vice Chairman Donald Kohn said Monday. “What’s required to put the fiscal deficit on a sustainable path are some difficult decisions having to do with entitlement spending and taxes in the United States,” Kohn said at the Europlace forum……. Kohn added the U.S. political system has become “soap opera-ized” with such a huge gulf between the country’s political parties there is a real risk debt and deficit will continue to grow past the end of this year.

via Ex-Fed Kohn: ‘Huge Risk’ US Won’t Take Steps On Debt, Deficit By Year End.

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Canada: TSX 60

Canada’s TSX 60 index found support at 675. Follow-through above 700 would suggest the correction is over, while 21-day Twiggs Money Flow respecting zero would strengthen the signal. Target for a fresh primary advance would be 775*. Failure of support at 675, however, would warn of another test of primary support at 650.

Index

* Target calculation: 725 + ( 725 – 675 ) = 775

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