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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Forex: Euro, Pound & Yen

The Euro is headed for another test of resistance at $1.35. Breakout would signal an initial advance to $1.40. Recovery of 63-day Twiggs Momentum above zero would signal a primary up-trend.

EUR/USD

* Target calculation: 1.35 + ( 1.35 – 1.30 ) = 1.40

Pound Sterling displays a similar pattern, testing resistance at $1.60. Recovery of 63-day Twiggs Momentum above zero signals a primary up-trend. Initial target for the breakout would be $1.64.

GBP/USD

* Target calculation: 1.60 + ( 1.60 – 1.56 ) = 1.64

The Greenback  is retracing against the Japanese Yen, testing medium-term support at ¥82. A short retracement is likely and respect of support at ¥82 would signal another strong advance.

USD/JPY

* Target calculation: 84 + ( 84 – 82 ) = 86

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Forex: CAD, AUD, ZAR

Canada’s Loonie continues a narrow consolidation below $1.01, suggesting an upward breakout in response to higher oil prices. Recovery of 63-day Twiggs Momentum above zero indicates a primary advance. Target for the advance would be the 2011 high of $1.06. Breach of the rising trendline is unlikely, but would warn of reversal.

CAD/USD

* Target calculation: 1.01 + ( 1.01 – 0.96 ) = 1.06

The Aussie Dollar reflects broader weakness in commodities. Breach of the rising trendline would warn of a decline to test primary support at $0.96, while respect would indicate another test of $1.08 — and suggest an upward breakout.

AUD/USD

Against the South African Rand, the Aussie Dollar continues to test support at R8.00. Narrow consolidation suggests a downward breakout and test of the long-term trendline at R7.50. Reversal of 63-day Twiggs Momentum below zero would warn of a primary down-trend.

AUD/ZAR

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

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Crude oil finds resistance while commodities weaken

Brent crude is consolidating in a narrow range below $125/$126 per barrel. Upward breakout is likely and would offer a long-term target of $150.

ICE Brent Afternoon Markers

* Target calculation: 125 + ( 125 – 100 ) = 150

Despite the weakening dollar, CRB Commodities Index is testing medium-term support at 310. Failure would indicate another test of primary support at 295. Breach of the long-term rising trendline would warn that the 4-year up-trend (similar to that of gold) is coming to an end. Recovery above 330 is as likely, however, and would signal the start of a primary advance, with a long-term target of 350.

CRB Commodities Index

* Target calculation: 325 + ( 325 – 295 ) = 355

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Gold and the Dollar both weaken

The Dollar Index is retracing to test primary support at 78.00 on the weekly chart. Respect of the rising trendline would signal continuation of the primary up-trend, while failure of support would warn of a down-trend to test support at 73.00. Reversal of 63-day Twiggs Momentum below zero would strengthen the bear warning.

US Dollar Index Weekly Chart

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

Despite the weakening dollar, spot gold is headed for the long-term rising trendline on the weekly chart. Failure of support at $1600/ounce would warn that the primary trend is weakening, while failure of $1500 would signal that the trend has reversed. Reversal of 63-day Twiggs Momentum into negative territory — for the second time recently after several years above zero — already warns of a primary down-trend.

Spot Gold Weekly Chart

* Target calculation: 1500 – ( 1800 – 1500 ) = 1200

The 4-hour chart shows gold respecting resistance at $1700 before retreating below medium-term support at $1670. Failure of short-term support at $1655 (the 0.618 Fibonacci retracement level) would test $1630 and signal continuation of the down-trend. Recovery above $1700 is unlikely but would signal respect of the long-term rising trendline (on the weekly chart above) and resumption of the primary up-trend.

Spot Gold 4-Hour Chart

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Budget 2012: George Osborne averts a slow national rot – Telegraph Blogs

Ambrose Evans-Pritchard: The underlying ghastliness of the British predicament remains. [Government] Spending as a share of GDP has ratcheted up from 35pc at the end of the 1990s to the Brownian peak of 51.7pc in 2009 (Eurostat), an all-time high in peace-time. It came back slightly to 50.4pc in 2010.

This debacle happened over a decade when a string of countries were slimming down the Leviathan state. Germany and Holland are now leaner than Britain.

Eurostat’s total government spending as a share of GDP for 2010 (the latest available) shows:

France 56.6
Sweden 52.7
UK 50.4
Italy 50.3
Germany 47.9
Norway 45.8
Switzerland 34.2

The US, Japan, Canada, and Korea are all much lower, and China is much lower yet.

This state burden is the macro-economic killer. It is a far more relevant than the tax take as a share of the economy, since it includes borrowing (ie deferred taxation).

via Budget 2012: George Osborne averts a slow national rot – Telegraph Blogs.

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ASX 200 response

Australia’s ASX 200 opened with a strong blue candle on the hourly chart but is now retracing to find support. Respect of short-term support at 4290 would suggest follow-through to 4320, while failure would test medium-term support at 4240/4250.

ASX 200 Index

Breakout above 4320 would indicate another test of 4400. Though we are unlikely to see a primary up-trend until China signals that it has formed a bottom.

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S&P 500 early rally

The S&P 500 surprised with an early rally, before the end of the quarter. Breach of resistance at 1415 on the hourly chart signals a new primary advance. Short retracement indicates a healthy up-trend — as does a trough above the zero line on 24-hour (4 day) Twiggs Momentum.

S&P 500 Index Hourly Chart

Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure, but recovery above 30% would negate this. Immediate target for the advance is 1450, while the long-term target is 1600*.

S&P 500 Index

* Target calculation: 1300 + ( 1300 – 1150 ) = 1450; 1350 + (1350 – 1100) =1600

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The Customer Is Too Often Wrong at FXCM – WSJ.com

In each of the last four quarters, more than 70% of FXCM’s U.S. accounts were unprofitable for those trading them. As a broker, FXCM earns money each time customers trade, so there is no upside in seeing them end up in the red. Why so many losing hands? The answer may lie in the large amount of leverage that FXCM customers can employ. Limits vary by country, but FXCM offers leverage of up to 50 to 1. That means a customer with only $20,000 could take $1 million in exposure. In such a trade, a modest market move could quickly wipe out all of an account’s equity.

via Heard on the Street: The Customer Is Too Often Wrong at FXCM – WSJ.com.

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ASX 200 hesitant

Australia’s ASX 200 index displays stubborn resistance at 4300, but rising 13-week Twiggs Money Flow indicates buying pressure. Upward breakout would signal a primary up-trend, with an initial target of 4650 and a long-term target of 4950*. The right-angled broadening pattern reflects weak support and downward breakout would test primary support at 4000.

ASX 200 Index

* Target calculation: 4400 + ( 4400 – 3850 ) = 4950

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Japan & South Korea

Japan’s Nikkei 225 index also shows a bearish divergence on 21-day Twiggs Money Flow, warning of a correction. The next medium-term support level below 10000 is the former resistance level at 9000, so there could be a fairly sharp fall. But the primary trend is up and recovery above 10200 would signal an advance to 11000*.

Nikkei 225 Index

* Target calculation: 10 + ( 10 – 9 ) = 11

Despite global weakness, South Korea’s Seoul Composite Index continues to test resistance at 2050. Bearish divergence on 21-day Twiggs Money Flow, however, warns of medium-term selling pressure. Expect another test of 1950, but recovery above 2050 would signal an advance to 2250*.

Seoul Composite Index

* Target calculation: 1950 + ( 1950 – 1650 ) = 2250

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