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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US: S&P 500 and Nasdaq 100

The S&P 500 continues to test support at 1350/1370 after penetrating its rising trendline. Recovery above 1400 would indicate another advance, but declining 13-week Twiggs Money Flow warns that support is likely to fail, with a correction to 1300. In the longer term, respect of 1300 would indicate the primary up-trend is intact, while failure would signal trend weakness.

S&P 500 Index Weekly Chart

The Nasdaq 100 breached its (secondary) rising trendline, indicating a correction back to the primary trendline at 2500. Declining 13-week Twiggs Money Flow indicates selling pressure, but respect of the zero line would suggest that the primary up-trend is intact, presenting a possible buying opportunity for the more adventurous.

Nasdaq 100 Index

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Fedex tests double top neckline

Bellwether transport stock Fedex recovered above the neckline at $88, after completing a double top reversal, but continues to test support at that level.  Reversal below $88 would confirm a primary down-trend, warning of slowing activity in the broader economy. Declining 13-week Twiggs Money Flow indicates continued selling pressure.

Fedex

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UK & Europe: Madrid tests major support level

The monthly chart of the Madrid General Index shows the index testing support at its 2009 low of 700. 13-Week Twiggs Money Flow crossing below zero warns of selling pressure. Failure of support would signal a decline to 600*.

Madrid General Index

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

France’s CAC-40 found support at 3150 after a sharp correction on the weekly chart. Declining 13-week Twiggs Money Flow — and last week’s gravestone candlestick — warn of selling pressure. Failure of support is likely and would suggest another test of primary support at 2800.

France CAC-40 Index

Germany’s DAX is also undergoing a correction but found stronger support at 6500. 13-Week Twiggs Money Flow continues to indicate long-term buying pressure. Respect of support, indicated by follow-through above 6800 would signal a primary advance to 7900*. Failure of support at 6500 is unlikely and would warn that the primary up-trend is weakening.

DAX Index

* Target calculation: 7200 + ( 7200 – 6500 ) = 7900

The FTSE 100 remains in a descending broadening wedge pattern. Upward breakout would indicate an advance to the earlier peak of 6000. Recovery of 21-day Twiggs Money Flow above zero would strengthen the signal, while respect of the zero line (from below) would warn of continued selling pressure. Reversal below 5720 would indicate another test of primary support at 5600.

FTSE 100 Index

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Warwick McKibbin on Australian interest rates and the fate of manufacturing

Professor Warwick McKibbin from ANU on the Australian economy, interest rates, the RBA and the fate of manufacturing:

Hat tip to Houses and Holes at Macrobusiness.com.au.

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Multiculturalism, segregation and the road to ruin

I just read an article about the joys of multiculturalism and how all Australians should strive to “show the world what a truly multicultural society could be.”

“Multiculturalism” is such a nice-sounding, inoffensive word that we may be forgiven for picking it up without really examining its implications. A multicultural society is also a fragmented society, divided along ethnic, religious, language or cultural lines and represents a breakdown in cohesion. Taken to its extreme, individual groups will claim the right to self-determination — another nice-sounding word, this time conjured up by spin doctors of South Africa’s apartheid era — a euphemism for promoting the interests of one group without consideration for the impact on others.

I find it ironic that Simon van der Stel, a Dutch governor of the Cape colony had in the early 18th century created a blueprint for a cohesive society. When Dutch settlers were swamped by French Protestants fleeing from persecution in Catholic France, he recognized the dangers of creating a fragmented society. His solution was to allocate farms in a checkerboard fashion, interspersing Huguenots among existing settlers, with the provision that all school lessons and official business be conducted in Dutch. Within a generation the two cultures had successfully integrated. Dutch remained the official language while the culture was enriched by a strong French influence still prevalent today, especially in the wine industry.

We need to similarly recognize the dangers of multiculturalism and strive for a truly integrated society with a unique Australian culture, tolerant of all religions and enriched by the infusion of many different cultures.

Segregation of schools on religious, ethnic or language lines encourages fragmentation of our society. The present state school system in Australia needs to be reformed after a healthy, open debate — in order to discourage segregation.

Australia’s strength in times of adversity has come from its unique culture. While that culture is evolving, and will continue to do so, we should ensure that it remains unified. Unity and openness are our strength.

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En Passant » Slip sliding away: a eulogy for Gillard Labor?

John Passant: There is the rotten stench wafting from the crypt of Parliament of a dying party bereft of principle whose raison d’etre is power for powers’ sake, not the betterment of the working class and the poor.

….The Slipper syndrome – power before principle, rule for the rich – highlights once again the bankruptcy of Labor and may be another heaving gasp on the way to the final death rattle of the ALP’s version of social democracy in Australia.

via En Passant » Slip sliding away: a eulogy for Gillard Labor?.

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Clarke and Dawe – Please Do Not Attempt This at Home

“Mr Constantine Vergence” discusses the carbon tax. Originally aired on ABC TV’s 7.30: 24/03/2011.

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Clarke and Dawe – How To Run a Country

Mr Oliver Gopoly, Australian banking executive. Originally aired on ABC TV’s The 7.30 Report: 4/11/2010:

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Clarke and Dawe – Important new research reveals enterprise doomed from the start

Clark and Dawe draw parallels between the Australian parliamentary system and the Titanic:

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Not Exactly a Miracle, but U.S. Debt Levels Are Falling – Floyd Norris – NYTimes.com

Floyd Norris: To get some idea of what needs to be done now — and what the result will be — the McKinsey institute points to two incidents in the early 1990s that got little attention at the time in the United States. Those were the bursting of real estate bubbles in Sweden and Finland. Details differ, but in each country there were two distinct phases of deleveraging.

“In the first,” the McKinsey institute said in an analysis published early this year, “households, corporations and financial institutions reduce debt significantly over several years, while economic growth is negative or minimal and government debt rises.” That is certainly what has happened in the United States.

The second phase is the good part, the institute said. “Growth rebounds and government debt is reduced gradually over several years.”

In this country, the deleveraging process has some way to go, with many foreclosures still pending, but it is at least possible that economic growth is beginning to accelerate. It is clear that the United States has made a lot more progress in cutting consumer debt than has been made in either Britain or Spain, two other countries that suffered from falling real estate prices.

via Not Exactly a Miracle, but U.S. Debt Levels Are Falling – Floyd Norris – NYTimes.com.

Comment:~ Before we congratulate ourselves on escaping from the clutches of the Great Recession, let’s not forget that government debt is growing at an unsustainable rate of $1.2 trillion/year. That is likely to slow sharply after November elections, causing a “double-dip” contraction. The deleveraging process has only just begun.

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