The ASX 200 broke resistance at 5650, but is now retracing to test the new support level. Reversal below 5620 would warn of another test of 5450, but respect of support is more likely and follow-through above 5680 would confirm an advance, offering a target of 5850*. Completion of another 21-day Twiggs Money Flow trough above zero would strengthen the signal.
* Target calculation: 5650 + ( 5650 – 5450 ) = 5850
Low readings for the ASX 200 VIX are typical of a bull market.
Vladimir Putin has escalated the conflict in Eastern Ukraine with new incursions of tanks backed with artillery, anti-aircraft missile systems and up to 15,000 Russian troops. Intent on seizing as much territory as possible, he is banking on the US/European coalition responding with another slap on the wrist. Each weak response has only made Putin bolder. But where he may miscalculate is that the coalition is aware that its “stick-and-carrot” policy has failed and will be looking for a new approach.
Willingness of the Europeans to endure immediate economic pain in the belief that this will avert a long-term calamity is yet to be tested. Success will depend on France, Spain and Italy’s support for their Northern and Central European neighbours, who face a more immediate threat.
A significant step-up in sanctions is likely and the initial response from European markets will be negative. Sanctions are a two-edged sword and likely to hurt Europe almost as much as they do Russia. But NATO rearmament in the medium-term would somewhat offset the initial cost. Never underestimate the stimulus effect of war on local industry — provided the war is fought outside one’s borders
Germany’s DAX is running into stiff resistance as it approaches 9750. And 13-week Twiggs Money Flow below zero warns of selling pressure, threatening a reversal. Retreat below 9250 would strengthen the signal and failure of support at 8900/9000 would confirm a primary down-trend.
* Target calculation: 9000 – ( 10000 – 9000 ) = 8000
Dow Jones Euro Stoxx 50 reversal below 3100 and 13-week Twiggs Money Flow below zero would add further weight to the (bear) signal.
* Target calculation: 3000 – ( 3300 – 3000 ) = 2700
The S&P 500, unfazed by recent developments in Europe, broke resistance at 2000 to signal an advance to 2100*. A 21-Day Twiggs Money Flow trough above zero indicates rising (medium-term) buying pressure. Reversal below 1990 is unlikely, but would warn of another correction.
* Target calculation: 2000 + ( 2000 – 1900 ) = 2100
CBOE Volatility Index (VIX), shown here on a ten-year chart, indicates low risk typical of a bull market.
Shanghai Composite Index, responding to PBOC stimulus, is testing resistance at 2250. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout would confirm a primary up-trend, signaling an advance to 2500*. Respect of resistance is less likely, but would suggest further consolidation.
* Target calculation: 2250 + ( 2250 – 2000 ) = 2500
The ASX 200 is testing resistance at 5650. Continued strength in US and Chinese stocks would improve the chance of an ASX 200 breakout, suggesting an advance to 5850*. Bearish divergence on 13-week Twiggs Money Flow — shown here on a monthly chart — continues to warn of long-term selling pressure. But failure to cross below zero would negate this and completion of another trough above zero would indicate that buyers are back in control. Reversal below 5450 is unlikely, but would warn of a test of primary support.
* Target calculation: 5650 + ( 5650 – 5450 ) = 5850
Chris Joye explains why risk-weighted capital ratios used by Australia’s major banks are misleading and why true leverage is more than 20 times tier 1 capital.
It was only after 2008 when regulators allowed the majors to slash risk-weightings on home loans from 50 per cent to 15 per cent today that we have seen their reported and purely academic tier one capital measured against these newly “risk-weighted” loan assets which shrunk in value spike from 6.7 per cent in December 2007 to 10.5 per cent in June 2014.
By arbitrarily boosting the risk-free share of major bank home loans from 50 per cent to 85 per cent via the regulatory artifice that is a risk-weighting, one gets the fictional jump in their tier one capital that everyone believes is real.
Read more at Banks hold more risk than before GFC.
The ASX 200 found short-term support at 5630 and continuation of the US rally would see a breakout above resistance at 5650. Follow-through above 5680 would confirm the advance, offering a target of 5850*. Completion of another 21-day Twiggs Money Flow trough above zero would strengthen the signal. Reversal below 5550 is unlikely, but would warn of a test of primary support at 5360/5380.
* Target calculation: 5650 + ( 5650 – 5450 ) = 5850
Retreat of the ASX 200 VIX below 12 indicates low risk typical of a bull market.
The Euro broke support at $1.33, signaling a further decline against the Dollar with a target of $1.30*. Falling 13-week Twiggs Momentum, below zero, warns of a strong down-trend. Recovery above $1.35 is most unlikely, but would suggest that the down-trend is slowing.
* Target calculation: 1.35 – ( 1.40 – 1.35 ) = 1.30
The recent rally of the Euro against the Russian ruble has faltered. An economic contraction and rising tensions over Eastern Ukraine both contributed. The Euro remains in an up-trend and recovery above RUB 49 would suggest another attempt at the previous high of RUB 51. But failure of support at RUB 46 would signal a primary down-trend. 13-Week Twiggs Momentum oscillating close to zero reflects current uncertainty.
Vladimir Putin is attempting to exploit fault lines in the US/European alliance, targeting the powerful European farming and motor industry lobbies. Unauthorized incursions into Ukrainian territory by his white-painted “aid convoy” are another example, where the infringement is so apparently inoffensive that Angela Merkel will find it difficult to convince her European allies to escalate sanctions further. Failure to react will merely embolden Putin to conduct further minor infringements in defiance of the EU, confident in their response, until the Ukraine suffers “death by a thousand cuts”.
Only if the US/EU adopt an aggressive escalation, as suggested here on Defence & Freedom, are they likely to contain Russian aggression.
“…a defensive and reactionary game plan makes one predictable. The very existence of a crisis should be understood as a hint that someone used this predictability to predict the outcome of a produced crisis — and arrived at the conclusion that it’s a good idea. Aka failure of deterrence.”
As with the Euro, the Japanese Yen is also weakening against the Dollar. The Greenback broke resistance at ¥103.50, signaling a rally to test the 2013 high. Follow-through above ¥104 would confirm. Rising 13-week Twiggs Momentum above zero strengthens the signal. Reversal below ¥103 is unlikely, but would warn of another test of primary support at ¥101.
The Aussie Dollar, however, is holding its own — ranging between $0.92 and $0.95 against the US Dollar. The narrow band and 13-week Twiggs Momentum holding above zero both suggest continuation of the up-trend. Breakout above $0.95 would suggest a target of $0.97. Reversal below $0.92 is unlikely at present, but would warn of a decline to the band of support between $0.87 and $0.89.
The ASX 200, retracing slightly from resistance at 5650, is also influenced by strong foreign investment flows. Indications are predominantly bullish, including 21-day Twiggs Money Flow forming troughs above zero. Follow-through above 5660 would signal another advance, with a medium-term target of 5850. Reversal above 5550 is unlikely, but would warn of another test of primary support.
* Target calculation: 5650 + ( 5650 – 5450 ) = 5850
From Christopher Joye:
One of Australia’s top economic experts, Jeremy Lawson, says the housing market is 20 per cent to 30 per cent overvalued and has left Australia vulnerable to a big international economic shock.
Mr Lawson is the global chief economist of Standard Life, a massive British fund manager with $460 billion in assets under management. He was previously a senior economist at the Reserve Bank of Australia and the OECD, and in 2007 advised then opposition leader Kevin Rudd…
Read more at Houses overvalued by up to 30 per cent, says ex-RBA official.
For all his macho posturing, Vladimir Putin has demonstrated an inability to move financial markets with his antics in Eastern Ukraine. His latest incursion towards Luhansk, with white-painted military trucks bearing aid to the rebel-held city, unchecked by the Red Cross, passed barely noticed. Instead markets are intently focused on nuances from a 68-year old Jewish mum at Jackson Hole, who also happens to chair the Federal Reserve.
I would have loved to call Janet Yellen a “grandmother”, but son Robert Akerlof — himself a PhD in Economics — does not claim any offspring on his CV. The apple doesn’t fall far from the tree. Husband, George Akerlof, is a Nobel prize-winning economist and professor emeritus at University of California, Berkeley.
The image below highlights the differences between the Fed and the ECB:
European unemployment is nearly twice the rate in the U.S.: http://t.co/ELXH1YcCcw pic.twitter.com/i5FQ1YvXBk
— Bloomberg News (@BloombergNews) August 22, 2014
The Fed’s more stimulatory approach has paid dividends in terms of economic growth and employment while inflation expectations remain muted. The inflation breakeven rate — 10-year Treasury yield minus the yield on equivalent inflation-indexed securities — continues to range between 2.0% and 2.50%.
The ECB’s more austere approach, on the other hand, has caused a world of pain.
The S&P 500 hesitated after making a new high on Thursday, but there was no dramatic fall in response to news from Eastern Ukraine. Expect retracement towards 1950, followed by another test of 2000. 21-Day Twiggs Money Flow is likely to re-test the zero line, but respect would indicate strong buying pressure. Breach of support at 1900, warning of a reversal, remains unlikely.
* Target calculation: 1500 + ( 1500 – 750 ) = 2250
Declining CBOE Volatility Index (VIX) indicates low risk, typical of a bull market.
Germany’s DAX rallied above 9300 on the weekly chart, but 13-week Twiggs Money Flow warns of continued selling pressure. Reversal below support at 8900/9000 would warn of a primary down-trend.
* Target calculation: 9000 – ( 10000 – 9000 ) = 8000
Shanghai Composite Index is testing resistance at 2250. Breakout would confirm a primary up-trend, signaling an advance to 2500*. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Respect of resistance, however, would suggest further consolidation.
* Target calculation: 2250 + ( 2250 – 2000 ) = 2500
Tall wicks on ASX 200 daily candles indicate strong resistance at 5650. Respect would suggest retracement to 5550, while follow-through would be a strong bull signal, suggesting an advance to 5850*. Another 21-day Twiggs Money Flow trough above zero would indicate long-term buying pressure. Reversal below 5450 is unlikely, but would warn of a test of primary support.
* Target calculation: 5650 + ( 5650 – 5450 ) = 5850
From Richard Gluyas at The Australian:
THE four major-bank chief executives have each made an eleventh-hour appeal to members of the Murray financial system inquiry ahead of Tuesday’s closing date for final submissions, as concerns mount that the sector could be forced to hold even higher levels of bank capital due to the inquiry’s emphasis on resilience. The closed-door meetings with the inquiry panel members come as Steven Munchenberg, chief executive of peak lobby group the Australian Bankers’ Association, said the industry was “jittery” about the inquiry’s focus on balance-sheet resilience because more onerous capital requirements would affect the banks’ ability to lend and serve the economy.
I disagree. Banks with strong balance sheets are better able to serve the needs of the economy. Highly leveraged banks leave the economy vulnerable to a financial crisis and are more likely to contract lending during periods of economic stress.
The shrill outcry may have something to do with the impact on bankers bonuses. Incentives based on capital employed would shrink if shareholder’s capital is increased.
Bank shareholders on the other hand are likely to benefit from stronger balance sheets. Reduced default risk is likely to enhance market valuation metrics like price-earnings multiples. Reduced risk premiums will also lower cost of funding and enhance lending margins. And shareholders are also likely to benefit from enhanced growth prospects. Analysis by the Bank for International Settlements in the post crisis period shows banks with higher capital ratios experience higher asset and loan growth.
The ASX 200 is rallying strongly, led by US and Chinese markets. Breakout above 5650 would indicate an advance to 5750. Completion of another 13-week Twiggs Money Flow trough above zero would strengthen the signal. Reversal below the rising trendline is unlikely, but would warn of a test of primary support at 5050.
* Target calculation: 5550 + ( 5550 – 5350 ) = 5750
Retreat of the ASX 200 VIX below 12 indicates low risk typical of a bull market.
Dow Jones Europe Index continues to test its primary trendline and support at 315/325. 13-Week Twiggs Momentum below zero warns of a primary down-trend. Breach of primary support at 315 would confirm.
The S&P 500 recovered above 1950, suggesting another test of resistance at 2000. Recovery of 13-week Twiggs Money Flow above its July high would suggest that buyers have taken control. Reversal below 1900 is unlikely, but would warn that the primary trend is slowing.
* Target calculation: 1500 + ( 1500 – 750 ) = 2250
CBOE Volatility Index (VIX) remains low, suggesting a bull market.
Dow Jones Shanghai Index is testing resistance at 295. Breakout would confirm a primary up-trend. Respect of resistance, however, would indicate further consolidation.
ASX 200 recovery above 5550 also suggests another advance. Respect of zero by 13-week Twiggs Money Flow would strengthen the signal. Reversal below 5450 is unlikely, but would warn of another test of primary support.
* Target calculation: 5400 + ( 5400 – 5000 ) = 5800