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.
Posted on

Inactivity | Warren Buffett

“Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.”

~ Warren Buffett

Posted on

S&P 500 rallies while inflation subdued

Average hourly earnings growth came in at 2.7% (All Employees) for the 12 months ended July 2018. Growth in average hourly earnings is an excellent gauge of underlying inflationary pressures in the economy, which remain subdued.

Average Hourly Wages Growth

Consumer price index (CPI) growth is slightly higher, at 2.8% for June 2018, but lower core CPI (2.2%) suggests that food and energy prices are partly to blame.

Consumer Price Index and Core CPI

The S&P 500 respected support at 2800, signaling an advance to 3000. Declining 21-day Volatility suggests that market risk is declining and the market is returning to business as usual.

S&P 500

The Nasdaq 100 shook off recent Facebook (FB) and Netflix (NFLX) tremors and is testing resistance at 7400. Breakout is likely and would offer a target of 7800.

Nasdaq 100

Posted on

ASX 200 retreats

The two largest sectors in the ASX 200 are both retreating from recent highs.

The ASX 300 Metals & Mining index is testing support at 3750. Breach of support and the rising trendline would warn of a test of primary support at 3400.

ASX 300 Metals & Mining

The ASX 300 Banks index reversed below its short-term support level at 8000, warning of a test of primary support at 7300.

ASX 300 Banks Index

The banking sector faces the prospect of higher funding costs, falling credit growth and rising default risk and I remain cautious despite penetration of the descending trendline which suggests that a bottom is forming.

The ASX 200 retreated from resistance at 6300. Breach of short-term support at 6200 would warn of a correction.

ASX 200

The primary trend is upward but economic indicators warn of rising headwinds and a potential bear market. I remain cautious, with more than 30% cash in the Australian Growth portfolio.

Posted on

Yields rise but will stocks fall?

Yields on 10-year US Treasuries are again testing resistance at 3.0 percent. Breakout seems inevitable.

10-Year Treasury Yield

The long-term chart shows how breakout would complete a double bottom reversal, after a 3-decade-long secular bull market in bonds/down-trend in yields.

10-Year Treasury Yield - Quarterly

While most major stock market down-turns are caused by falling earnings expectations rather than revised earnings multiples, I do agree with Hamish Douglass that rising yields are likely to soften stock valuations.

Posted on

Dollar strength hurts Aussie gold stocks

China’s Yuan continues its steep descent against the US Dollar.

CNY/USD

The weakening Yuan strengthened demand for Dollars, with the Dollar Index breaking through strong resistance at 95. Expect retracement to test the new support level. Respect would confirm the long-term target at the 2016/2017 highs of 103.

Dollar Index

The strong Dollar weakened demand for Gold, with the spot price heading for $1200/ounce after breaching short-term support at $1220.

Spot Gold in USD

A long-term gold chart shows likely support levels at $1150 and $1050/ounce.

Spot Gold in USD - Quarterly

The Australian Dollar continues to range between 73.50 and 75.00 US cents, leaving local gold miners exposed to the falling Dollar price.

Australian Dollar/USD

The All Ordinaries Gold Index (XGD) is testing support at 4900. Breach is likely and penetration of the rising trendline warns of a strong decline, with a LT target of 4100.

All Ordinaries Gold Index

A sharp fall in the Aussie Dollar would soften the blow. But hope isn’t a strategy.

Posted on

Bullish US GDP numbers

The Bureau of Economic Analysis (BEA) reports that real gross domestic product (real GDP) increased at an annual rate of 4.1 percent in the second quarter of 2018. This is an advance estimate, based on incomplete data and is subject to further revision.

Real GDP for Q2 2018 Annualized

While the spurt in quarterly growth is encouraging, I find annualized quarterly figures misleading and prefer to stick to the annual rate of change from the same quarter in the preceding year. Annual growth still reflects an improving economy but came in at 2.8 percent, more in line with the estimate of actual hours worked on the chart below.

Real GDP for Q2 2018 YoY

Personal consumption figures tend to decline ahead of a recession, so an up-tick in all three consumption measures is a positive sign for the US economy. Expenditures on durable goods is especially robust, suggesting growing consumer confidence. Non-durable expenditures are holding up, while services, which had been declining since a large spike in 2015, are maintaining at still strong levels.

US Personal Consumption

There is no sign of the US economy slowing. Continued growth and positive earnings results should encourage investors.

Posted on

Bears in the East, Bulls in the West

Market fears of a trade war appear to be easing but investors in China and South Korea remain cautious.

The Shanghai Composite Index is retracing to test resistance at the former primary support level at 3000.

Shanghai Composite Index

Dow Jones – UBS Commodity Index shows a similar retracement in commodity prices.

DJ-UBS Commodity Index

While crude oil prices have found support at the LT rising trendline.

Nymex Light Crude

South Korea’s Seoul Composite Index is in a primary down-trend but retracement to test the former primary support level at 2350 is likely.

Seoul Composite Index

Japan is more isolated and the Nikkei 225 is testing resistance at 23,000. A rising Trend Index suggests that breakout is likely, which would test the January high at 24,000.

Nikkei 225 Index

India is stronger, with the Nifty breaking resistance at its January high of 11,100 to signal a primary advance with a target of 12,000. But first, expect retracement to test the new support level.

Nifty Index

Europe

Dow Jones Euro Stoxx 600 was boosted by news that the EU-US trade dispute is settled. A Trend Index trough above zero signals strong buying pressure. and another test of 400 is likely.

DJ Euro Stoxx 600 Index

A bullish saucer pattern on the Footsie suggest further gains. The Trend Index trough above zero indicates buying pressure. Breakout of the index above 7800 would signal another advance, with a target of 8200.

FTSE 100 Index

North America

The Nasdaq 100 retreated when Facebook (FB) and Twitter (TWTR) reported disappointing growth for the quarter. Bearish divergence on the Trend Index warns of selling pressure but this appears secondary and support at 7000 is likely to hold. Respect would confirm another advance.

Nasdaq 100

Friday’s retreat is also evident on the S&P 500 daily chart. Expect retracement to test new support at 2800. A strong GDP result should strengthen support.

S&P 500

Canada’s TSX 60 retraced to test the new support level at 970. Respect would signal a test of 1000 but breach is as likely, testing support at 940.

TSX 60 Index

Posted on

Iron ore bounce lifts the ASX

Iron ore spot prices bounced off support at $63/tonne. Follow-through above $68 would suggest another rally to test resistance at $80 but that seems unlikely given the current threat of a trade war.

Iron Ore Spot Price

The ASX 300 Metals & Mining index found support at 3750. Breakout above 4000 would signal another advance but reversal below 3750 and a correction to test primary support at 3400 are more likely if iron ore retreats.

ASX 300 Metals & Mining

The ASX 300 Banks index continues to consolidate in a bullish narrow band above its new support level at 8000. Follow-through above 8100 would suggest another advance, with a target of 8700. The index is still in a primary down-trend but it is evident that a bottom is forming. A higher low on the next correction, followed by a new high, would signal the start of a primary up-trend.

ASX 300 Banks Index

The banking sector faces the prospect of higher funding costs, falling credit growth and rising default risk and I remain wary.

The ASX 200 is again testing resistance at 6300. Breakout would signal a primary advance with a target of the October 2007 high at 6750.

ASX 200

Technical signals suggest a primary advance while economic indicators warn of rising headwinds and a potential bear market. I remain cautious, with more than 30% cash in the Australian Growth portfolio.

Posted on

Falling Yuan strengthens the Dollar but weakens Gold

China failed to intervene in the past few weeks, allowing the Yuan to fall to offset the impact of tariffs instead of selling foreign reserves to support the currency. Their actions risk further retaliation by the Trump administration and could spark a full-blown trade war.

CNY/USD

A weakening Yuan is likely to increase demand for US Dollars, both as investors in the Middle Kingdom seek to withdraw and as borrowers with USD-denominated loans seek to hedge or repay.

The Dollar Index continues to test strong resistance at 95. Breakout is likely and would offer a target of 2016/2017 highs at 103.

Dollar Index

Spot Gold is in a primary down-trend, consolidating in a narrow band above short-term support at $1220/ounce. Breach of support is likely and would offer a short-term target of $1200.

Spot Gold in USD

The Australian Dollar is also in a primary down-trend, consolidating above 73.50 US cents. So far, the weaker currency has cushioned local gold miners from the impact of falling spot prices.

Australian Dollar/USD

The All Ordinaries Gold Index (XGD) recovered above support at 4950. Follow-through above 5100 would indicate another test of 5400.

All Ordinaries Gold Index

But downside risk to Australian gold stocks is rising as the USD spot price falls. Gold is more volatile than the Aussie Dollar.

Posted on

Strong earnings results are from revenue gains | Bob Doll

“Strong earnings results are coming more from revenue gains than bottom-line margins. Since 2010, 90% of positive earnings surprises have come from margins. This quarter, 75% of surprises are from better revenues. This is a healthy sign for future earnings results, and hence for stock prices.”

From Bob Doll at Nuveen Asset Management
July 23, 2018

Powered by WordPress / WordPress Maintenance Service By Website Helper