Colin Twiggs, Author at the patient investor

February 12, 2013

Fed's 2007 Transcripts Show Shift to Alarm | WSJ.com

2007 Fed transcripts show that tremors in the US financial system were initially treated with complacency before shifting to alarm. Janet Yellen, then president of the Federal Reserve Bank of San Francisco, was one of the few who showed an understanding of the magnitude of the growing crisis. JON HILSENRATH and KRISTINA PETERSON at WSJ report:

“I still feel the presence of a 600-pound gorilla in the room, and that is the housing sector,” [Ms. Yellen] said in June 2007. “The risk for further significant deterioration in the housing market, with house prices falling and mortgage delinquencies rising further, causes me appreciable angst.”

By December, she was pushing the Fed to respond aggressively. She noted that the financial system’s problems were happening in the “shadow banking system”—that is, not in traditional banks but rather in bond markets and derivatives markets where hedge funds, investment banks and others traded mortgages and other financial instruments. “This sector is all but shut for new business,” she warned.

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 12, 2013

A credit vigilante arrives at the Fed | Gavyn Davies

Gavyn Davies at FT writes:

[Fed Governor, Professor Jeremy Stein] argues that the credit markets have recently been “reaching for yield”, much as they did prior to the financial crash. Although not yet as dangerous as in the period from 2004-2007, this behaviour is shown by the rapid expansion of the junk bond market, flows into high-yield mutual funds and real estate investment trusts and the duration of bond portfolios held by banks……. he indicates that the right weapon to deal with this might well be to raise interest rates, rather than relying solely on regulatory and other prudential policy to control the process. This would obviously come as a big surprise to the markets, which have tended to view the Fed’s stated concerns about the “costs of QE” as so much hot air……

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 11, 2013

OECD Leading Indicators Point to Divergence | WSJ.com

PAUL HANNON at WSJ writes:

The world’s largest economies are set to diverge in coming months with few signs that a broad-based recovery in growth is imminent, according to the Organization for Economic Cooperation and Development’s composite leading indicators.

The leading indicators for December, released Monday, point to a pickup in growth in the U.S., Japan, the U.K. and Brazil, but suggest growth will remain weak by historic standards in many other big nations [including China and India]……

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 11, 2013

Revolving door may have hurt SEC money fund reforms | Reuters

Sarah N. Lynch at Reuters reports:

Former U.S. Securities and Exchange Commission staffers who now work in the private sector may have helped derail last year’s effort to reform the $2.6 trillion money market fund industry, a report [by the Project on Government Oversight] said.

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 11, 2013

ASX 200 tests 5000

The ASX 200 continues to test resistance at 5000. Rising troughs on 13-week Twiggs Money Flow indicate strong buying pressure. Breakout is likely and would offer a long-term target of 6000*. Respect of resistance, while unlikely, would suggest a correction to 4500.

ASX 200 Index

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

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 11, 2013

Asia: China near 1 year high

China’s Shanghai Composite Index is testing resistance at its 2012 high of 2460 on the daily chart. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Breakout is likely and would signal a primary up-trend, but the index is overdue for a correction and a higher trough is required to confirm the reversal.

Shanghai Composite Index

Hong Kong’s Hang Seng index already indicates a primary up-trend. Reversal below 23000, however, would warn of a correction.

Shanghai Composite Index

India’s Sensex is testing its secondary rising trendline, while declining 13-week Twiggs Money Flow suggests selling pressure. Breach of the trendline would indicate a correction to test 18000/18200.

Sensex Index

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

Singapore’s Straits Times Index is testing resistance at 3300. Rising 63-day Twiggs Momentum suggests continuation of the primary up-trend. Breakout would signal an advance to 3900*.

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

Japan’s Nikkei 225 Index retreated from its 2010 high of 11500. Reversal below 11000 would suggest a correction to 10000. Respect of support would indicate a breakout above 11500 — and a fresh primary advance.

Nikkei 225 Index

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

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 11, 2013

Europe: DAX selling pressure

The FTSE 100 is retracing to test its (secondary) rising trendline on the daily chart. Respect would signal another advance — as would a 21-day Twiggs Money Flow trough above zero.

FTSE 100 Index

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

Germany’s DAX is retracing to test support at 7500 on the monthly chart. Bullish divergence on 13-week Twiggs Money Flow warns of selling pressure. Breach of support would indicate a correction to test the rising trendline — around 7000.

DAX Index

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

Italy’s MIB index retreated below the new support level of 17000. Breach of the rising trendline — and support at 16000 — would warn of a bull trap. But a 63-day Momentum trough above zero would signal a primary advance to 19000*.

DAX Index

* Target calculation: 17000 + ( 17000 – 15000 ) = 19000

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 11, 2013

Canada: TSX buying pressure

The TSX Composite continues to test resistance at 12800. Rising troughs on 13-week Twiggs Money Flow indicate long-term buying pressure. Breakout above 12800 would signal an advance to the 2011 high at 14300*.

TSX Composite Index

* Target calculation: 12800 + ( 12800 – 11300 ) = 14300

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 11, 2013

S&P 500 reverse pennant

The S&P 500 displays a small broadening wedge (reverse pennant) on the daily chart. Respect of support at 1500 on the last down-swing (within the wedge) suggests an upward breakout. Watch for bearish divergence on 21-day Twiggs Money Flow — which would warn of retracement to the rising trendline.

S&P 500 Index

The quarterly chart warns us to expect strong resistance at the 2000/2007 highs of 1550/1575. 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 Dow is similarly testing long-term resistance, at 14000. Breakout is likely, with 13-week Twiggs Money Flow troughs at zero indicating long-term buying pressure.
S&P 500 Index

I repeat my warning from last week:

These are times for cautious optimism. Central banks are flooding markets with freshly printed money, driving up stock prices, but this could create a bull trap if capital investment, employment and corporate earnings fail to respond.

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 10, 2013

Electric version of Holden Commodore

Barry Park at Drive.com.au takes a ride in a battery-powered version of Holden’s popular family car:

EV Engineering, the Port Melbourne based start-up that has taken nine Commodore family cars, gutted them of their V6 and V8 petrol drivetrains and replaced them with swappable batteries, a recharging cord and a powerful electric motor, is finally ready to trial its technology…..On paper, the EV Engineering Commodore produces 140kW of power and an impressive 400Nm of torque almost as soon as you squeeze the throttle. Engineers wanted to match the regular Commodore’s 8.7-second sprint from rest to 100km/h, but the way the battery-powered car builds speed means it can gather the same speed within 8.5……

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.