Colin Twiggs, Author at the patient investor

March 1, 2013

US & Asia: Contrasting economic activity

While Fedex broke through long-term resistance at $100, signaling rising activity in North America….
Fedex
The Harpex index of container shipping (charter) rates, primarily for movement of finished goods, is close to its 2009 low. There is no indication of a resurgence in exports between Asia and the West.
Harpex Container 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 1, 2013

The Sequester Will Be Good for the Economy | Cato Institute

Jeffrey Miron argues that we should use cost-benefit analysis to evaluate government expenditure:

…even if transfers help stimulate consumer spending, their net effect on the economy is unclear. This implies that whether the sequester will harm or help the economy depends on whether cost-benefit considerations can justify the existing level of government expenditure. And on this question, the answer is clear. Across all categories, federal expenditure is far greater than necessary to achieve the legitimate goals of government intervention.

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 1, 2013

Australia: How much do I need to retire at 60? | MYOB Blog

Liam Shorte writes:

A common rule of thumb is that if you want to retire at 60, you will need about 15 times the amount you have calculated for your annual after-tax retirement expenses. So if you estimate $60,000 per year then you will need $900,000…..According to the latest data for September 2012, in general, a couple looking to achieve a comfortable retirement needs to spend $56,236 a year, while those seeking a ‘modest’ retirement lifestyle need to spend $32,511 a year….. The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household.

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 28, 2013

An Italian voter speaks out on the real reasons Italians voted for Grillo | Credit Writedowns

An Italian reader of Credit Writedowns explains:

With this [Monte Paschi] scandal people started to realize that the right (Berlusconi’s party) and the Left (Bersani’s PD) are equally corrupt and are in politics to do favours for their friends…….People voted for Grillo because they are sending a message to Bersani and Berlusconi: “go home”. They have ruined the country in the last 20 years.

Read more of this entertaining insight into Italian politics An Italian voter speaks out on the real reasons Italians voted for Grillo | Credit Writedowns.

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 28, 2013

Analysis: Bond managers fret junk bond rally is losing steam | Reuters

Jennifer Ablan and Sam Forgione at Reuters explain why Dan Fuss, vice chairman and portfolio manager at Loomis Sayles, which oversees $182 billion in assets, is slashing exposure to high-yield bonds:

Fuss and others worry the Fed’s easy money policy – short-term interest rates held at effectively zero and a bond-buying program known as quantitative easing – will soon foster inflation, a bond manager’s biggest fear. That would drive up interest rates, so bond prices, which move in the opposite direction to rates, would fall.

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 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

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

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.