Colin Twiggs, Author at the patient investor

December 6, 2012

Aussie Dollar bullish consolidation

The Aussie Dollar is consolidating in a narrow range below resistance at $1.05 — a bullish sign. Breakout would indicate a test of long-term resistance at $1.06. Rising 63-day Twiggs Momentum, above zero, indicates a primary up-trend. In the long-term, breakout above $1.06 would offer a target of $1.10* but the RBA may take measures to prevent further appreciation. Reversal below $1.04 and the rising trendline is unlikely, but would warn of a correction to test primary support at $1.015.

Aussie Dollar/USD

* Target calculation: 1.06 + ( 1.06 – 1.02 ) = 1.10

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.

December 5, 2012

How cancelling central banks’ holdings of government debt could be a useful thing | FT Alphaville

FT’s Kate Mackenzie writes: Morgan Stanley cross-asset strategist Gerard Minack says the remarkable thing about developed economy deleveraging is how little of it has happened:

The credit super-cycle ended four years ago, but leverage has hardly fallen in major economies: debt-to-GDP ratios remain historically high.

Minack says the problem is some of that deleveraging (particularly for households) is being tackled by saving more, but that won’t solve the problem, or at least not very quickly. This is because of what the borrowings were used to finance: mostly pre-existing assets (that were forecast to rise in value) rather than expenditure.

There is a simple reason why deleveraging is taking so long: governments are borrowing money (deficit-spending) to offset private sector deleveraging and avert a deflationary spiral. So overall (non-financial) debt to GDP ratios, which include government debt, are almost unchanged.

That is not necessarily a bad thing — unless you would prefer a 1930s-style 50% drop in GDP after a deflationary spiral. What can be destructive is funding government deficits from offshore because you eventually have to pay the money back. Far better to borrow from yourself — in other words your “independent” central bank. That way you never have to pay it back.

As for canceling central bank holdings of government debt. Why bother? Interest payments made on the debt go right back to the Treasury as central bank profit distributions. And why set a precedent? I doubt many would believe government promises that this was a once-off and would never be repeated…….until next time.

via How cancelling central banks’ holdings of government debt could be a useful thing | FT Alphaville.

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.

December 5, 2012

Weaker commodities threaten down-turn

Commodities remain weak despite the softer dollar, with the DJ-UBS Commodity Index hovering above support at 140 on the weekly chart. Breach of support would test the primary level at 125/126, warning of a global economic down-turn. Reversal of 63-day Twiggs Momentum below zero would also suggest a down-trend.

DJ-UBS Commodity Index

The gap between Nymex WTI Light Crude and ICE Brent Crude Middle East widened to $24/barrel as a result of tensions in the Middle East. 63-Day Twiggs Momentum holding below zero suggests a primary down-trend despite the weaker dollar.

Nymex WTI Light Crude

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.

December 5, 2012

Gold breaks $1700

Gold broke support at $1700 per ounce, indicating a test of primary support at $1675. Breakout would offer an initial target of $1600*, with a long-term target of the May 2012 low at $1525. Declining 63-day Twiggs Momentum indicates weakness but values above zero still reflect a primary up-trend and the weakening dollar suggests strong support.

Spot Gold

* Target calculation: 1675 – ( 1750 – 1675 ) = 1600

The Dollar Index broke medium-term support at 80 on the weekly chart while the dollar is approaching its September low against the euro. The 63-day Twiggs Momentum peak below zero indicates a primary down-trend — confirmed if primary support at 78.50 is broken. Recovery above 81.50 is most unlikely but would indicate an advance to 84.

US Dollar Index

* Target calculation: 78.5 – ( 81.5 – 78.5 ) = 75.5

The daily chart shows retracement to confirm resistance at 80.

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.

December 5, 2012

PSY Gangnam Style

Some kids in US 2nd Infantry Division stationed in South Korea have fun with Gangnam style

With thanks to Ryan.

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.

December 5, 2012

S&P 500 hesitant

Two doji candles on the S&P 500 daily chart indicate indecision. Fiscal cliff negotiations are unlikely to be resolved quickly and another test of primary support at 1350 seems inevitable. Failure of short-term support at 1400 is likely and would signal a test of primary support. While breakout above 1425 is unlikely it would test resistance at 1475. Reversal of 21-day Twiggs Money Flow below zero would indicate selling pressure, but a higher trough (above/below zero) would suggest continuation of the advance to 1475.

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.

December 4, 2012

High-Speed Traders Profit at Expense of Ordinary Investors, a Study Says | NYTimes.com

NATHANIEL POPPER and CHRISTOPHER LEONARD write:

The chief economist at the Commodity Futures Trading Commission, Andrei Kirilenko, reports in a coming study that high-frequency traders make an average profit of as much as $5.05 each time they go up against small traders buying and selling one of the most widely used financial contracts [E-mini S&P 500 Futures].

via High-Speed Traders Profit at Expense of Ordinary Investors, a Study Says – NYTimes.com.

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.

December 4, 2012

How Regulations Led to High-Frequency Trading

John Carney writes that high frequency trading is an unintended consequence of regulatory action to remove market specialists:

High frequency trading grew up in the aftermath of a decades-long struggle by Congress, the SEC, and the stock exchanges to stamp out the specialists, who were accused of front-running customers, favoritism and interfering with the smooth operations of markets…….. Things really came to a head after the dot-com crash, when everyone was looking for someone to blame for all that money lost. By 2005, the government passed a series of market reforms that were aimed directly at eliminating the specialists. In the wake of those reforms, commissions fell, pricing improved, exchanges became more competitive—and high-frequency trading arose.

Seems they have swapped one set of problems for another.

The safest way for retail investors or traders to minimize the cost of HFT market interference may be to participate in opening or closing auctions where bids are matched by algorithm.

via How Regulations Led to High-Frequency Trading.

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.

December 4, 2012

Muslim, Zionist and proud | Ynetnews

British Muslim Kasim Hafeez writes about his visit to Israel:

I did not encounter an apartheid racist state, but rather, quite the opposite. I was confronted by synagogues, mosques and churches, by Jews and Arabs living together, by minorities playing huge parts in all areas of Israeli life, from the military to the judiciary. It was shocking and eye-opening. This wasn’t the evil Zionist Israel that I had been told about.

Perhaps there is a future for Israel/Palestine after all.

via Muslim, Zionist and proud – Israel Opinion, Ynetnews.

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.

December 4, 2012

Fed set to unveil extra asset purchases – FT.com

Robin Harding at FT writes:

The other issue on the agenda is replacing the FOMC’s current forecast that rates will stay low until mid-2015 with a set of preconditions for the economy to reach before it considers raising rates. “I now think a threshold of 6.5 per cent for the unemployment rate and an inflation safeguard of 2.5 per cent . . . would be appropriate,” said Charles Evans, president of the Chicago Fed…..

The problem is that both of these thresholds are moving targets:

Unemployment is based on surveys and only includes those who have actively sought a job in recent weeks. It fluctuates with the participation rate.
Inflation is also subjective, dependent on the basket of goods measured and estimates of housing inflation that are subject to manipulation.

Targeting nominal GDP growth would be far more accurate.

via Fed set to unveil extra asset purchases – FT.com.

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.