Category: Australia & NZ

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ASX 200 advancing

The ASX 200 broke resistance at 5000 on the strength of strong buying pressure, signaled by rising 13-week Twiggs Money Flow. Retracement that respects the new support level would confirm an advance to 5500*.
ASX 200 Index

* Target calculation: 5000 + ( 5000 – 4500 ) = 5500

On the daily chart, mild bearish divergence on 21-day Twiggs Money Flow warns of retracement to test the new support level at 5000. Reversal below 4980 is unlikely but would warn of a correction.
ASX 200 Index

ASX small-caps ($XSO – ASX Small Ords) continue to under-perform the ASX 50 [$XFL]. The opposite of what one would expect in a bull market: treat it as a caution. The current $XSO down-swing should test the lower channel at 2300, presenting a buy opportunity for swing traders.

ASX 200 Index

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Australia: Net international investment position worse than Italy

Wikipedia provide a ranking of countries net international investment position, as a % of GDP, from highest to lowest.

Top of the list are the usual suspects:

Country Date NIIP as % of GDP
Hong Kong 2009 353
Singapore 2010 224
Republic of China 2010 153
Switzerland 2010 136
Norway 2010 96

But Australia and New Zealand are in the wrong sort of company at the bottom of the list.

Country Date NIIP as % of GDP
Poland 2010 -63
Australia 2011 -64
Slovakia 2010 -66
Estonia 2010 -71
Spain 2010 -87
New Zealand 2009 -90
Greece 2010 -93
Ireland 2009 -98
Portugal 2009 -108

Interestingly, Italy’s 2010 net international investment position is only -24%.

Source: Wikipedia: Net international investment position

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Australia: SMSF – a matter of self-interest

Reece Agland, senior policy adviser at the Institute of Public Accountants, compares the performance of self-managed super funds to retail and industry funds:

Let’s look at the facts. For the three most recent years where performance has been measured SMSFs out performed both retail and industry funds. The average operating cost of an SMSF fell from 0.72% of assets in 2007 down to 0.57% in 2009 – less than average costs for either industry or retail funds1. With average assets of over $888,000 in 2009/10 (up from $475,000 in 2003/4) they exceed the average assets per member compared to other types of funds. Their rate of non-compliance at 2% is at around the same for other superannuation funds and the number of funds that fail in any one year is very small.

Read more at Publicaccountant: SMSF – a matter of self-interest

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Forex: Aussie consolidates above primary support while Euro weakens

The euro is testing medium-term support at $1.30. Breach of the rising trendline against the greenback already warns of trend weakness; failure of $1.30 would test primary support at $1.25. Reversal of 63-day Twiggs Momentum below zero would warn of a primary down-trend, while a trough above zero would suggest another advance, with a target of $1.42*.
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 target of $1.43*. Fall of 63-day Twiggs Momentum below 2011 lows strengthens the signal.
Aussie Dollar/USD

* Target calculation: 1.53 – ( 1.63 – 1.53 ) = 1.43

The Aussie Dollar is consolidating between $1.02 and $1.03 after respecting primary support at $1.015. Breakout above $1.03 and the declining trendline would suggest a rally to $1.06. Reversal below $1.02 would warn that primary support is again under threat. Narrow fluctuation of 63-day Twiggs Momentum around zero suggests a ranging market.

Aussie Dollar/USD

The Canadian Loonie is headed for a test of primary support at $0.96. Breach of support would offer a long-term target of $0.90*, but respect is just as likely and would signal a rally to $1.06.
Aussie Dollar/USD

* Target calculation: 0.96 – ( 1.02 – 0.96 ) = 0.90

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 some time. Advance to ¥100 is likely to be followed by a correction to test new support at ¥90 before breakout to test the 2007 high around ¥120*.
Aussie Dollar/USD

* Target calculation: 100 – ( 100 – 80 ) = 120

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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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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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ASX 200: Large caps strong while small caps decline

The ASX 200 continues to test support at 4980/5000 on the weekly chart. Breakout above 5100 would offer a medium-term target of 5500*. Rising 13-week Twiggs Money Flow indicates strong buying pressure. Reversal below 4980 is unlikely but would warn of a correction.
ASX 200 Index

* Target calculation: 5000 + ( 5000 – 4500 ) = 5500

ASX small-caps are still doing badly, with the ASX 50 [$XFL] out-performing the $XSO (ASX Small Ords) by a substantial margin. The opposite of what one would expect in a bull market: treat it as a caution. The current $XSO down-swing should test the lower channel at 2300, presenting a buy opportunity for swing traders.

ASX 200 Index

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Rate cuts: Short-term benefit, long-term pain

Shane Oliver at AMP recently tweeted:

Why rate cuts help household spending: 1/ Aust hholds have approx $750bn in deposits but $1700bn in debt….

…so a 1% rate cuts makes depositors $7.5bn worse off, but borrowers $17bn better off. The net gain for households is $9.5b !

Reason #2 as to why rate cuts help. Depositors r less likely to change spending on rate changes than borrowers (families with mortgage)

He is right that rate cuts stimulate household spending, but that is not the only consideration. Rate cuts also stimulate borrowing and expansion of the money supply — leading to asset bubbles and inflation. They further force savers/investors to take greater risks in the scramble for yield, leaving them exposed if the bubble collapses. If only we could let market forces of credit supply and demand determine the rate — and resist the urge to tinker.

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John Howard interview: Assault weapons are a public safety issue not a left/right issue [video]

http://youtu.be/_CbkKYdWiS0

John Howard, the conservative former prime minister of Australia, says that pro-gun advocates in the United States are wrong to oppose an assault weapons ban like the one he pushed for after a 1996 mass shooting because public safety is not a “liberal/conservative issue.”

Howard told CNN’s Fareed Zakaria that he felt “horror and shock” after a gunman killed 35 people in Tasmania on April 28, 1996.

Many within his own party opposed the newly-elected PM when he proposed a ban on private ownership of assault weapons in Australia. But statistics since then have proved him right. According to CNN, in the 18 years leading up to 1996 there were 13 gun massacres in Australia; since 1996 when the law was passed there has not been a single incident.

Published on 17 Feb 2013

P.S. Gun ownership is an emotive issue in the US. We encourage open considered debate but believe that nothing is gained by people “shouting” at each other. Any emotive posts of that ilk will end up in the trash can.

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