China & HK Archives - Page 27 of 61

August 22, 2014

Putin antics fail to impress markets

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%.

Inflation breakeven rate

The ECB’s more austere approach, on the other hand, has caused a world of pain.

Market update

S&P 500 tests 2000.
VIX continues to indicate a bull market.
DAX hesitant rally.
China bullish.
ASX 200 faces strong resistance.

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.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

Declining CBOE Volatility Index (VIX) indicates low risk, typical of a bull market.

S&P 500 VIX

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.

DAX

* 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.

Shanghai Composite Index

* 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.

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

August 19, 2014

China leads Asian recovery

Hong Kong’s Hang Seng Index is testing its 2010 high at 25000. Breakout would confirm a primary advance, with a target of 27000*. A 13-week Twiggs Money Flow trough at zero indicates long-term buying pressure. Reversal below 24000 is unlikely, but would warn of a correction to the rising trendline.

Hang Seng Index

* Long-term target calculation: 24000 + ( 24000 – 21000 ) = 27000

China’s Shanghai Composite Index is testing resistance at 2250. Breakout would confirm a primary up-trend. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 2150 is unlikely, but would warn of another test of primary support at 1990/2000.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

India’s Sensex recovered above 26000, offering a target of 27000*. Declining 13-week Twiggs Money Flow continues to warn of selling pressure, but respect of the zero line and recovery above 10% would indicate that buyers have taken control. Reversal below the secondary trendline is unlikely, but would indicate a correction to the primary trendline.

Sensex

* Target calculation: 21000 + ( 21000 – 15000 ) = 27000

Dow Jones Japan Index is testing resistance at 86/87 on the weekly chart. Breakout would suggest a primary advance. Reversal below 82 is unlikely, but would warn of a test of primary support at 74.

Dow Jones Japan Index

August 17, 2014

The Joseph Cycle: 7 Fat years and 7 lean years

George Dorgan writes:

Since both the positive and the negative phases of a financial cycles take around seven years, financial cycles are sometimes called “Joseph cycle“, from the biblical prophet Joseph that speaks of seven good and seven bad years. The financial cycle connected to expectations about real estate prices, is also called credit cycle…..After the bust of dot com bubble in 2001, the Fed lowered interest rates. Credit was easily available and private debt strongly increased. Government debt remained relatively stable.

Only in few countries like Germany, Japan or Switzerland people were far more cautious, because they had seen a real estate bubble bust in the 1990s. The leveraging phase finally ended in 2011, in China and in some other emerging markets…..

We think that the reduction of debt will continue to be the main driver of global economies during the next Joseph cycle, in the next seven years. After the US lowered debt levels until 2011/2012 it is now time for Europe except Germany and Switzerland and Emerging Markets….

August 15, 2014

S&P 500 recovers but Europe remains weak

Europe continues to test support.
S&P 500 recovers.
VIX continues to indicate a bull market.
China bullish.
ASX 200 recovers.

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.

Dow Jones Europe Index

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.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

CBOE Volatility Index (VIX) remains low, suggesting a bull market.

S&P 500 VIX

Dow Jones Shanghai Index is testing resistance at 295. Breakout would confirm a primary up-trend. Respect of resistance, however, would indicate further consolidation.

Dow Jones Shanghai Index

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.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

August 12, 2014

China strengthens but India, Japan face selling pressure

China’s Shanghai Composite Index overcame resistance at 2150/2200 and is headed for a test of 2250. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout above 2250 would confirm a primary up-trend. Reversal below 2150 is unlikely at present, but would warn of another test of primary support at 1990/2000. Stimulatory measures by the PBOC may lift China’s economy in the medium-term, but are likely to prove unsustainable in the long-term.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

Declining 13-week Twiggs Money Flow on India’s Sensex continues to warn of selling pressure. Breach of support at 25000 would indicate a correction to the primary trendline. A 13-week Twiggs Money Flow trough above zero, however, would suggest another advance. Breakout above 26000 would confirm.

Sensex

* Target calculation: 21000 + ( 21000 – 15000 ) = 27000

Japan’s Nikkei 225 broke support at 15000, but Monday’s recovery warns of a bear trap. Recovery above 15500 would suggest a rally to 16000*. Reversal below 15000, however, would warn of a test of primary support at 14000. Decline of 13-week Twiggs Money Flow below zero would strengthen the signal.

Nikkei 225

* Target calculation: 15000 + ( 15000 – 14000 ) = 16000

August 8, 2014

Europe tests primary support

Summary:

Europe threatens reversal to a down-trend.
S&P 500 finds support.
VIX continues to indicate a bull market.
China’s Shanghai Composite encounters selling pressure.
ASX 200 experiences a secondary correction.

Dow Jones Europe Index is testing the primary trendline and support at 315. 13-Week Twiggs Momentum below zero already warns of a primary down-trend. Breach of primary support at 315 would confirm. Respect of primary support and recovery above 330, however, would suggest that the primary trend is intact.

Dow Jones Europe Index

Germany’s DAX continues to test primary support at 9000. A long tail on Friday suggests short-term support. Failure of support would warn of a decline to 8000*, while respect would suggest another test of 10000.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The S&P 500 found support at 1900 and recovery above 1950 would indicate another advance. The latest decline on 13-week Twiggs Money Flow is relatively small and recovery above its July high would suggest that buyers have taken control. Failure of 1900, however, would warn that the primary trend is slowing.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

CBOE Volatility Index (VIX) spiked upwards, to between 16 and 17, but remains low by historical standards and continues to suggest a bull market.

S&P 500 VIX

China’s Shanghai Composite Index encountered selling pressure below resistance at 2250, with tall wicks/shadows on the last two weekly candles and a sharp fall in 13-week Twiggs Money Flow. Reversal below 2150 would warn of another test of primary support at 1990/2000. Follow-through above 2250, however, would confirm a primary up-trend.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 is heading for a test of support at 5350/5400 and the primary trendline. Direction will largely be influenced by the US and Chinese markets, but reversal of 13-week Twiggs Money Flow below zero — after long-term bearish divergence — would warn of strong selling pressure. Recovery above 5550 is unlikely at present, but would suggest another advance. Reversal below 5050 is also unlikely, but would signal a trend change.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

August 7, 2014

Vladimir Putin’s pointless conflict with Europe leaves it a vassal of China – Telegraph

From Ambrose Evans-Pritchard:

European officials calculate that Mr Putin will not dare to cut off energy supplies, since to do so would bring the Russian state to its knees within months. But even if he tried – as a shock tactic – it would not achieve much. Oil can be obtained anywhere.

Europe’s gas inventories have risen to 81pc of capacity, up from 46pc in March. Britain is at 94pc……Japan has just given the go-ahead for two nuclear reactors to restart in October, with seven likely by the end of the year. Koreans are also firing up closed nuclear reactors. All this frees up LNG.

Whether this is fruit of a co-ordinated strategy, the net effect is that inventories and spare LNG could cover a Russian cut-off for a long time, probably through the winter with rationing. Areas of eastern Europe have no pipeline supply from the West, but “regas” ships could plug some gaps in an emergency. The gas weapon is not what it seems.

The Kremlin is counting on acquiescence from the BRICS quintet as it confronts the West, and counting on capital from China to offset the loss of Western money. This is a pipedream. China’s Xi Jinping drove a brutal bargain in May on a future Gazprom pipeline, securing a price near $350 per 1,000 cubic metres that is barely above Russia’s production costs….

August 6, 2014

Asian tigers and the PBOC

Asian stock markets are lifting on the prospect of increased trade with mainland China. Hong Kong’s Hang Seng Index broke long-term resistance at 24000, signaling a primary advance. But first expect retracement to test the new support level. Respect of 24000 would confirm the target of 27000*. A 13-week Twiggs Money Flow trough at zero indicates long-term buying pressure. Reversal below 24000 is unlikely, but would warn of a correction to the rising trendline.

Hang Seng Index

* Long-term target calculation: 24000 + ( 24000 – 21000 ) = 27000

Singapore’s Straits Times Index is also retracing after breaking resistance at 3300. Follow-through above 3400 would confirm the target of 3600*. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend. Reversal below 3200 is unlikely, but would warn of another test of primary support at 3000.

Straits Times Index

* Target calculation: 3300 + ( 3300 – 3000 ) = 3600

China’s Shanghai Composite Index signals a primary up-trend after breaking resistance at 2150/2180, but I would wait for confirmation from a follow-through above resistance at 2250. The PBOC is aggressively injecting liquidity to revive a flagging economy. It may succeed in lifting the economy in the medium-term, but is not sustainable in the long-term and could well aggravate the situation. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout above 2250 would confirm a primary up-trend. Reversal below 2150 is unlikely at present, but would warn of another test of primary support at 1990/2000.

Shanghai Composite Index

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

India’s Sensex retraced to support at 25500, but is again testing resistance at 26000. Breakout would signal an advance to 27000*. Bearish divergence on 13-week Twiggs Money Flow indicates long-term selling pressure, but respect of the zero line (recovery above 10%) would suggest that buyers have taken control. Breach of 25000 is unlikely, but would warn of a correction to the primary trendline.

Sensex

* Target calculation: 21000 + ( 21000 – 15000 ) = 27000

Japan’s Nikkei 225 is retreating after a false break of resistance at 15500. Expect a test of support at 15000. Narrow consolidation normally ends in continuation of the trend; upward breakout would indicate a rally to 16000*. Declining 13-week Twiggs Money Flow, however, indicates medium-term selling pressure. Reversal below 15000 would warn of a test of primary support at 14000.

Nikkei 225

* Target calculation: 15000 + ( 15000 – 14000 ) = 16000

August 4, 2014

Russian Oligarchs Shift Cash To Hong Kong Dollars On Sanctions Concerns | Zero Hedge

From Tyler Durden:

Last week we noted the very significant activity by the Hong Kong Monetary Authority as it bought USDollars in size to support its peg. It appears we have found at least one smoking gun for why they were forced to do this. In what appears to be another sanctions-blowback, Russian oligarchs are de-dollarizing their cash holdings and shifting to Hong Kong Dollars.

August 4, 2014

For Chinese Power Game, a Changing Equation

From Sebastian Veg, Research Professor at the School of Advanced Studies in Social Science in Paris:

By shaking up the unwritten rules that have prevailed since Deng Xiaoping consolidated power, Xi is taking a political risk. In exchange for the immunity that PBSC members were granted, they were expected to retire at the end of their term, and to remain loyal to collective decisions. If immunity is denied, both of these tenets may begin to be questioned. Why should powerful leaders retire if they can then be targeted? Why should they accept decision by consensus if they can later be made to pay the consequences as is alleged in Zhou’s case with the vote on Bo? They may be better off spending their terms gathering compromising material on other colleagues. Xi no doubt understands the risk, and believes it must be taken because the Party’s legitimacy is in danger. However, by disturbing the carefully crafted institutional balance, he runs the risk of overplaying his hand.