Colin Twiggs, Author at the patient investor

February 28, 2013

ECB Says Private Lending Contracted for Ninth Month in January – Bloomberg

Jana Randow at Reuters writes:

Lending to households and companies in the euro area shrank for a ninth month in January as the recession damped demand for credit.

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.

February 27, 2013

Forex: Euro and Sterling retreat while Aussie Dollar rebounds

The euro broke medium-term support at $1.32 and the rising trendline against the greenback. While this indicates trend weakness it does not necessarily mean reversal to a primary down-trend. Completion of a 63-day Twiggs Momentum trough above zero would suggest that the trend is intact — and an advance to $1.42* is on the cards.
Aussie Dollar/USD

* Target calculation: 1.36 + ( 1.36 – 1.30 ) = 1.42

Pound sterling broke long-term support at $1.53 against the greenback, offering a long-term target of $1.43*. Fall of 63-day Twiggs Momentum below -5% (its 2011 low) would strengthen the signal.
Aussie Dollar/USD

* Target calculation: 1.53 – ( 1.63 – 1.53 ) = 1.43

Against the euro, the pound is testing support at €1.15. 63-day Twiggs Momentum well below zero suggests a strong down-trend. Failure of support would offer a target of the 2011 low at €1.10.
Aussie Dollar/USD

The Aussie Dollar respected primary support at $1.015. Recovery above $1.03 and the declining trendline would suggest another rally to test $1.06. Reversal below $1.02 would warn that primary support is under threat.

Aussie Dollar/USD
Failure of primary support would offer a target of $0.96*. Oscillation of 63-day Twiggs Momentum close to zero, however, suggests a ranging market.

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

The Canadian Loonie by contrast is in a strong primary down-trend against the greenback, headed for a test of $0.96. Falling 63-day Twiggs Momentum suggests that medium-term support at $0.97/$0.98 is unlikely to hold.
Aussie Dollar/USD
The US dollar has broken its long-term declining trendline against the Japanese Yen, suggesting that the 30-year decline is over and the greenback likely to appreciate for the foreseeable future. Follow-through above ¥100 would confirm, offering a target of ¥120*.

* Target calculation: 100 – ( 100 – 80 ) = 120

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.

February 27, 2013

Falling commodities: Bearish for stocks

Dow Jones-UBS Commodity Index is testing primary support at 136. Breach would signal a decline to the 2012 low at 126. The peak below zero on 63-day Twiggs Momentum already warns of a primary down-trend. Recovery above 140 is unlikely but would suggest that a bottom is forming.

US Dollar Index

A fall in commodities would warn of slack global demand and a bearish outlook for stocks.

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.

February 27, 2013

Gold retreats

Spot gold is consolidating after retreating below $1600/ounce on the hourly chart. Breach of short-term support at $1590 would warn of a down-swing to test medium-term support at $1550 — and primary support at $1500.

Spot Gold On the monthly chart we can see that breach of $1500 would signal a primary down-trend. A 63-day Twiggs Momentum fall below -10% would also suggest a primary down-trend, while reversal above zero would suggest further ranging between $1500 and $1800.

Silver is also headed for a test of primary support — at $26/ounce — but 63-day Twiggs Momentum respect of -10% would continue the long-term bullish divergence, suggesting a new up-trend.
Spot Gold

I am not yet convinced that gold is headed for a primary down-trend. We may be in a low-inflation/deflationary environment right now but how long will it take for central bank expansionary policies to overcome this? Watch out for bear traps. Respect of primary support around $1500 could present a buying opportunity.

Crude Oil

Jeremy Grantham (GMO) reminds us, in a recent BBC interview, not to underestimate the importance of crude oil. Crude represents roughly half of the cost (extraction, shipping, etc.) of other major commodities traded, but crude oil itself also represents half of the value of all commodities traded. When crude prices rise they do serious harm to the global economy.

Brent Crude retreated below support at $117/barrel, on concerns over the global economy. Expect medium-term support at $90/barrel for Nymex and $112/barrel for Brent crude (the green line) but only failure of primary support at $84 and $106 would signal a primary down-trend. Falling crude would be a bearish sign for gold: demand for gold increases when crude rises.

US Dollar Index

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.

February 25, 2013

S&P 500 breaks support at 1500

The S&P 500 broke support at 1500 and is headed for support at 1475.

S&P 500 Index

On the weekly chart we can see that a correction below 1475 would target support at 1425 (the secondary trendline). Only primary support at 1350, however, would signal a reversal. A 63-day Twiggs Momentum trough above zero would indicate continuation of the up-trend, while retreat below zero would suggest a primary reversal.

S&P 500 Index

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.

February 25, 2013

ASX 200: Small caps warning

The ASX 200 is headed for another test of resistance at 5100 on the hourly chart. Breakout would signal continuation of the primary advance. Reversal below 5050, however, would indicate another test of 5000.
ASX 200 Index
The monthly chart shows strong momentum but retracement to test the new support level of 5000 is likely in the weekly (if not monthly) time frame. Respect of support on the weekly chart would confirm a primary advance with a long-term target of 6000*.

* Target calculation: 5000 + ( 5000 – 4000 ) = 6000

ASX small-caps are still doing badly, with the ASX 50 [$XFL] out-performing the $XSO by a substantial margin. That is the opposite of what one would expect in a bull market and should be treated as a warning to exercise caution.

ASX 200 Index

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.

February 25, 2013

Asia: India retreats while Japan and Singapore advance

India’s Sensex is headed for a test of support at 19000. Breach of the secondary trendline already warns of a correction to the primary trendline around 18000. Bearish divergence on 13-week Twiggs Money Flow, followed by reversal below zero, indicates strong selling pressure.

Sensex Index

* Target calculation: 19 + ( 19 – 18 ) = 20

Singapore’s Straits Times Index is consolidating in a narrow range below 3300 — a bullish sign — and 21-day Twiggs Money Flow oscillating above zero indicates buying pressure. Breakout above 3300 would signal an advance to the 2007 high at 3900*. Reversal below 3250 is unlikely but would warn of a correction.

Straits Times Index

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

Japan’s Nikkei 225 Index is again testing its 2010 high of 11500. Reversal below 11000 would suggest a correction to 10000, while breakout would offer an initial target of 12000*.

Nikkei 225 Index

* Target calculation: 10000 + ( 10000 – 8000 ) = 12000

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.

February 25, 2013

Europe: Italian stalemate

Reuters reports that support for Mario Monti’s centrist coalition is fading.

Opinion polls give the centre-left coalition led by the veteran former industry minister Pier Luigi Bersani a narrow lead but the race has been thrown open by the prospect of a huge protest vote against austerity policies imposed by Monti and rage at a wave of corporate and political scandals.

Without a strong government, resolution of Italy’s current crisis is unlikely. The Italian MIB Index retreated below new support at 17000 and last week penetrated the rising trendline, warning of a primary reversal. Breach of support at 16000 would strengthen the signal — as would reversal of 63-day Twiggs Momentum below zero. Confirmation, however would only come from a lower peak followed by failure of primary support at 15000.
FTSE MIB Index

The FTSE 100 continues its advance toward long-term resistance at 6750. Failed down-swings within the recent reverse pennant (broadening wedge) suggest continuation of the advance. Upward breakout would offer a target of 6750, strengthened if 21-day Twiggs Money Flow recovers above 20% to form another trough above zero.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

Germany’s DAX continues to test support at 7500. Bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Failure of 7500 would indicate a correction to test the rising trendline — and support at 7000.

DAX Index

* Target calculation: 7500 + ( 7500 – 7000 ) = 8000

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.

February 25, 2013

Canada: TSX edges lower

The TSX Composite found support at 12600/12650 on the daily chart. Breakout above 12800 would signal a fresh advance, while reversal below 12600 would warn of a correction. Expect support at 12500 and a 21-day Twiggs Money Flow trough at zero would indicate medium-term buying pressure. Rising troughs on 13-week Twiggs Money Flow (not shown) suggest that a base is forming. The long-term target for a breakout above 13000 would be 15000*.

TSX Composite Index

* Target calculation: 13000 + ( 13000 – 11000 ) = 15000

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.

February 24, 2013

S&P 500 finds support but Nasdaq warns caution

The S&P 500 found support at 1500 and is headed for a re-test of resistance at 1525/1530. Bearish divergence on 21-day Twiggs Money Flow warns of mild selling pressure. Breakout above resistance would negate this, while reversal below 1500 and the rising trendline would warn of a correction.

S&P 500 Index

Breach of the secondary trendline (above) would indicate a correction to test primary support at 1350. Recovery of 63-day Twiggs Momentum above 10% would increase likelihood of an upward breakout — with a target of 1750* — while retreat below zero would suggest a primary reversal.
S&P 500 Index

* Target calculation: 1550 + ( 1550 – 1350 ) = 1750

The Nasdaq 100 is weaker, with bearish divergence on 13-week Twiggs Money Flow warning of a primary trend reversal. Breakout below primary support at 2500 would confirm, offering a target of 2100*.
Nasdaq 100 Index

* Target calculation: 2500 + ( 2900 – 2500 ) = 2100

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.