Colin Twiggs, Author at the patient investor

March 12, 2013

ASX 200 advancing

The ASX 200 broke resistance at 5000 on the strength of strong buying pressure, signaled by rising 13-week Twiggs Money Flow. Retracement that respects the new support level would confirm an advance to 5500*.
ASX 200 Index

* Target calculation: 5000 + ( 5000 – 4500 ) = 5500

On the daily chart, mild bearish divergence on 21-day Twiggs Money Flow warns of retracement to test the new support level at 5000. Reversal below 4980 is unlikely but would warn of a correction.
ASX 200 Index

ASX small-caps ($XSO – ASX Small Ords) continue to under-perform the ASX 50 [$XFL]. The opposite of what one would expect in a bull market: treat it as a caution. The current $XSO down-swing should test the lower channel at 2300, presenting a buy opportunity for swing traders.

ASX 200 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.

March 12, 2013

Asia finds support

Japan’s Nikkei 225 Index broke through its medium-term target of 12000. Selling pressure failed to materialize and the index is headed for its long-term target of 14000*.

Nikkei 225 Index

* Target calculation: 11000 + ( 11000 – 8000 ) = 14000

India’s Sensex found support at 18800. Penetration of the declining trendline indicates a rally to 20200. Breakout would signal a primary advance to 21000*, but bearish divergence continues to warn of selling pressure. Reversal below 19000 would warn of a correction to the primary trendline at 18000.

Sensex Index

* Target calculation: 20 + ( 20 – 19 ) = 21

Singapore’s Straits Times Index continues to consolidate below resistance at 3300. Buying support at 3250 is evident from higher volume at the 3250 level. Breakout above 3300 would signal a fresh primary advance, with a long-term target of the 2007 high at 3900*.

Straits Times Index

* Target calculation: 3300 + ( 3300 – 2700 ) = 3900

Hong Kong’s Hang Seng Index correction found support at 22500. Declining 13-week Twiggs Momentum indicates selling pressure. Expect another test of 22500; failure would signal a test of the primary trendline at 21000.

* Target calculation: 22 + ( 22 – 18 ) = 26

China’s Shanghai Composite also found support, at 2250. Respect would indicate another test of resistance at 2450, while failure would indicate a down-swing to primary support at 1950/2000. Rising 13-week Twiggs Momentum suggests a primary up-trend; a trough above zero would strengthen the signal. Breakout above 2450 would confirm.
Shanghai Composite Index

* Target calculation: 2450 + ( 2450 – 2250 ) = 2650

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.

March 12, 2013

Canada: TSX good to go

Shallow retracement of the TSX Composite below resistance is a bullish sign. Rising troughs on 13-week Twiggs Money Flow indicate strong buying pressure. Breakout above 12900 would confirm a primary advance. Immediate target would be 13500*, with a long-term target of the 2011 high at 14300.

TSX Composite Index

* Target calculation: 13000 + ( 13000 – 12500 ) = 13500

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.

March 12, 2013

Europe: FTSE and European markets rising

The FTSE 100 broke out from its rising flag on the weekly chart and is headed for a test of resistance between 6800* (the high from 2007) and 7000 (from 1999). Rising 13-week Twiggs Momentum indicates strong buying pressure.

FTSE 100 Index

* Target calculation: 6400 + ( 6400 – 6000 ) = 6800

Italy’s MIB Index found support at 15500. Respect of zero by 13-week Twiggs Money Flow would suggest another primary advance. Recovery above 17000 would confirm. Reversal below 15000, however, would warn of a primary down-trend.
FTSE MIB Index
Spain’s Madrid General Index displays buying pressure with rising 13-week Twiggs Money Flow. Breakout above 900 would signal a primary advance to 1000*.

* Target calculation: 900 + ( 900 – 800 ) = 1000

Germany’s DAX rallied to test resistance at the 2007 high of 8000. Bearish divergence on 13-week Twiggs Money Flow still warns of selling pressure but breakout above 8000 would overcome this. Reversal below 7500 would indicate a correction to test the rising trendline — rather than a primary trend reversal.

DAX Index
The quarterly chart shows strong resistance between 8000 and 8200. Breakout would offer a long-term target of 10000*.

* Target calculation: 7500 + ( 7500 – 5000 ) = 10000

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.

March 12, 2013

What is Modern Monetary Theory, or “MMT”? | naked capitalism

Dale Pierce makes this comment when discussing make-work programs in his introduction to Modern Monetary Theory:

Whether the job-guarantee program makes fighter planes or wind turbines makes no economic difference – the workers employed by it will spend their wages on the same things other workers buy.

What he fails to consider is that wind turbines make an on-going contribution to GDP — from the electricity that they generate — while creating jobs at zero cost to the taxpayer to maintain the turbines. Fighter jets when built, on the other hand, make no further contribution to GDP growth and are a continual drain on the taxpayer’s purse for running and maintenance costs. While I support government or public/private infrastructure programs, we have to ensure that the investment is in productive assets that contribute to GDP and enhance future growth. Otherwise we may as well pay people to dig holes in the ground and then pay others to fill them in — at least the on-going maintenance costs would be low.
Read more at What is Modern Monetary Theory, or “MMT”? « naked capitalism.

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.

March 12, 2013

Australia: Net international investment position worse than Italy

Wikipedia provide a ranking of countries net international investment position, as a % of GDP, from highest to lowest.

Top of the list are the usual suspects:

Country	Date	NIIP as % of GDP
Hong Kong	2009	353
Singapore	2010	224
Republic of China	2010	153
Switzerland	2010	136
Norway	2010	96

But Australia and New Zealand are in the wrong sort of company at the bottom of the list.

Country	Date	NIIP as % of GDP
Poland	2010	-63
Australia	2011	-64
Slovakia	2010	-66
Estonia	2010	-71
Spain	2010	-87
New Zealand	2009	-90
Greece	2010	-93
Ireland	2009	-98
Portugal	2009	-108

Interestingly, Italy’s 2010 net international investment position is only -24%.

Source: Wikipedia: Net international investment position

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.

March 11, 2013

S&P 500 tests 2007 high

Dow Jones Industrial Average has broken through its previous high at 14,000. Long-term (13-week) Twiggs Money Flow oscillating above zero indicates strong buying pressure.
S&P 500 Index
Bellwether transport stock Fedex breakout above $100 signals rising economic activity.
Fedex

The S&P 500 is testing its 2007 high at 1550. Rising 13-week Twiggs Money Flow indicates strong buying pressure. Reversal below the latest trendline is unlikely at present but would warn of a correction. Target for the current advance is 1600*.

S&P 500 Index

* Target calculation: 1475 + ( 1475 – 1350 ) = 1600

VIX Volatility Index is headed for its 2005 lows at 0.10. While this coincided with the start of a ($SPX) bull market in 1995, it also occurred just before the peak in 2007; so does not offer much reassurance. Breakout above the quarterly high at 0.20 would be a warning sign.
VIX Index
The Nasdaq 100 broke resistance at 2800 despite bearish divergences on both 13-week Twiggs Momentum and 13-week Twiggs Money Flow. Reversal below the latest rising trendline would warn of a correction, while follow-through above 2900 would signal an advance to 3300*. Only breach of primary support at 2500 would signal a reversal.
Nasdaq 100 Index

* Target calculation: 2900 + ( 2900 – 2500 ) = 3300

Rising debt indicates consumers are once again spending. While there are still structural flaws in the US economy, the market is gaining momentum and the current advance shows no signs of ending.

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.

March 10, 2013

Investing: Growth and the markets | The Economist

Buttonwood of The Economist quotes Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School:

….take the records of 83 countries from 1972 to 2009 (the most comprehensive set available) and rank them by GDP growth over the previous five years. Investing each year in the countries with the highest economic growth over the preceding five years earned an annual return of 18.4%, but investing in the lowest-growth countries returned 25.1%.

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.

March 10, 2013

Philip Maymin, Why Financial Regulation is Doomed to Fail | Library of Economics and Liberty

Philip Maymin highlights a problem with volatility:

…..securities with historically low volatility tended to have almost twice as much subsequent risk, while those with historically high volatility tended to have almost half as much subsequent risk. For both the riskiest and least risky securities, therefore, historical risk is a statistical illusion.

He further points out that regulation encourages banks to act in concert, increasing systemic risk, while deposit insurance reduces the level of self-imposed discipline among banks.

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.

March 10, 2013

Australia: SMSF – a matter of self-interest

Reece Agland, senior policy adviser at the Institute of Public Accountants, compares the performance of self-managed super funds to retail and industry funds:

Let’s look at the facts. For the three most recent years where performance has been measured SMSFs out performed both retail and industry funds. The average operating cost of an SMSF fell from 0.72% of assets in 2007 down to 0.57% in 2009 – less than average costs for either industry or retail funds1. With average assets of over $888,000 in 2009/10 (up from $475,000 in 2003/4) they exceed the average assets per member compared to other types of funds. Their rate of non-compliance at 2% is at around the same for other superannuation funds and the number of funds that fail in any one year is very small.

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.