Author: Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients. Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter. Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit. 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.
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Dollar Index headed for 84.00

The Dollar Index is advancing strongly, headed for a test of the 2012 high at 84*. Recovery of 63-day Twiggs Momentum above zero suggests a primary up-trend. Retracement to test the new support level at 81.50 remains likely.

US Dollar Index

* Target calculation: 81.5 + ( 81.5 – 79 ) = 84

Gold has fallen as a result of dollar strength, testing primary support at $1550. Support between $1500 and $1550 remains strong, however, and we are unlikely to see a breakout below this level.

US Dollar Index

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Far from being a disaster, the results of the Italian election could be a turning point for Italy and the Eurozone. | EUROPP

Jonathan Hopkin argues that austerity has failed to produce results in Southern Europe and calls for European leaders to reconsider their approach:

…..perhaps the most important result of the election is that it will likely prove to be a turning point in the way in which the European Union deals with the debt crisis in the South. As was the case in Greece, the attempt to impose technocratic rule on a debtor nation to implement austerity and reform has been a political and economic disaster…… The Monti experiment produced no clear economic gains and has been decisively rejected at the polls. It would be reckless in the extreme of Europe’s leaders not to reconsider their approach.

via Far from being a disaster, the results of the Italian election could be a turning point for Italy and the Eurozone. | EUROPP.

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Quantitative easing does not address the fundamental problems underpinning struggling western economies. | EUROPP

John Doukas questions the benefits of quantitative easing:

…excessive money supply fails to increase real economic activity because it raises the labour cost while it lowers the cost of capital. Depressing yields at home, as a result of quantitative easing, in an open economy setting, leads yield-seeking investors into higher-risk investments such as emerging markets.

Read more at Quantitative easing does not address the fundamental problems underpinning struggling western economies. | EUROPP.

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Schindler's List Theme – Itzhak Perlman

Written by John Williams, played by Itzhak Perlman

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Australia: Highest cost of living

Purchasing power parities (PPPs), exchange rates, and relative prices, by country, 2011

At 1.61, Australia has higher relative prices than Norway, Denmark, Sweden and Japan (listed in descending order). 61% higher than the US and 48% higher than the UK.

Index

Source: BLS

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Commodities break support

Dow Jones-UBS Commodity Index broke primary support at 136, signaling another down-swing. Target for the breakout is the 2012 low at 126. A peak below zero on 63-day Twiggs Momentum already warns of a primary down-trend.

US Dollar Index

* Target calculation: 136 – ( 144 – 136 ) = 128

A fall in commodities warns of slack global demand and a bearish outlook for stocks. The large divergence between DJ-UBS Commodity Index and the S&P 500 should be treated as a caution.
US Dollar Index

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Gold tests $1550/ounce

Spot gold is consolidating between $1570 and $1585/ounce on the 2-hourly chart. Upward breakout would re-test the February 26 high at $1620. Downward breakout would test support at $1550.

Spot Gold
This can be seen on the weekly chart, where respect of support at $1550 would test the upper trend channel at $1620. Breakout would indicate that the correction is over. Failure of support would warn that the long-term up-trend is over and follow-through below $1500 would confirm a primary down-trend.
Spot Gold
My conclusion is the same as last week:

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

Brent Crude and Nymex Crude continue to weaken but, for the moment, remain in a primary up-trend.retreated below support at $117/barrel, on concerns over the global economy. Failure of primary support at $106 and $84/barrel, respectively, 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

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Non-mining Australia “in recession” last quarter | MacroBusiness

Leith van Onselen considers that Australia’s non-mining economy may be in recession based on two consecutive quarters of negative growth in state final demand:

The blanket statement that Australia grew close to trend in 2012 not only obfuscates the fact that the current growth rate is well below trend and declining even further but also hides the fact that the majority of the population are living in regions which are in recession. That paints a totally different picture than the political spin coming from the Government.

Read more at Non-mining Australia “in recession” last quarter | | MacroBusiness.

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CIC President Warns Japan on Currency Devaluation – WSJ.com

LINGLING WEI writes from Beijing:

The president of China’s giant sovereign-wealth fund warned Japan against using its neighbors as a “garbage bin” by deliberately devaluing the yen, joining a growing number of Chinese officials sounding alarms about a potential currency war.

Read more at CIC President Warns Japan on Currency Devaluation – WSJ.com.

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Volcker: Wall Street Kills Regs By Running Out the Clock

Josh Boak at Fiscal Times writes:

…..So when Volcker declared on Monday that the financial regulation system is broken, it’s time to sound the alarm. The gist of his complaint is that Dodd-Frank was passed in the middle of 2010, yet many of its biggest regulations have not been finalized and there is no end in sight.

“I know it’s a complicated bill. I know the markets are complicated,” Volcker said at a conference for the National Association for Business Economics. “Two-and-a-half years later you can’t have a regulatory apparatus that’s devised by the most important piece of legislation in recent years? That suggests something is rather wrong. Something is dysfunctional.”

Read more at Volcker: Wall Street Kills Regs By Running Out the Clock.

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