Countries & Regions Archives - Page 118 of 383

May 13, 2016

Greenback finds support

The US Dollar Index rallied off long-term support at 93 but this looks more a pause in the primary down-trend, signaled by decline of 13-week Momentum below zero, than a reversal.

US Dollar Index

Explanation for the Dollar rally is evident on the chart of China’s foreign reserves: a pause in the sharp decline of the last 2 years. China has embarked on another massive stimulus program in an attempt to shock their economy out of its present slump.

China: Foreign Reserves

But this hair of the dog remedy is unlikely to solve their problems, merely postpone the inevitable reckoning. The Yuan is once again weakening against the Dollar and decline in China’s reserves, and the US Dollar as a consequence, is likely to continue.

USD: Chinese Yuan

May 13, 2016

Don’t Blame Sykes-Picot for the Middle East’s Mess | Foreign Policy

By Steven A. Cook, Amr T. Leheta:

The weaknesses and contradictions of authoritarian regimes are at the heart of the Middle East’s ongoing tribulations. Even the rampant ethnic and religious sectarianism is a result of this authoritarianism, which has come to define the Middle East’s state system far more than the Sykes-Picot agreement ever did.

The region’s “unnatural” borders did not lead to the Middle East’s ethnic and religious divisions. The ones to blame are the cynical political leaders who foster those divisions in hopes of maintaining their rule. In Iraq, for instance, Saddam Hussein built a patronage system through his ruling Baath Party that empowered a state governed largely by Sunnis at the expense of Shiites and Kurds. Bashar al-Assad in Syria, and his father before him, also ruled by building a network of supporters and affiliates whereby members of his Alawite sect enjoyed a privileged space in the inner circle. The Wahhabi worldview of Saudi Arabia’s leaders strongly encourages a sectarian interpretation of the country’s struggle with Iran for regional hegemony. The same is true for the ideologies of the various Salafi-jihadi groups battling for supremacy in Syria, Iraq, and Yemen…..

Source: Don’t Blame Sykes-Picot for the Middle East’s Mess | Foreign Policy

May 12, 2016

ASX confidence growing

The ASX 200 is growing in confidence. Having penetrated its descending trendline, to suggest a bottom, the index rallied to test resistance at 3400. Rising troughs on 13-week Money Flow suggest buying pressure. Retracement that respects support at 5200 would strengthen the signal, while breakout above 5400 would confirm a primary up-trend.

ASX 200

May 12, 2016

Aussie gold stocks shine

Australian gold stocks have had a good run since the index (XGD) broke resistance at 2800. At some stage there is bound to be a correction but the up-trend now looks pretty robust, rising 13-week Money Flow confirming buying pressure.

XGD

May 12, 2016

Europe fizzles

The Dow Jones Euro Stoxx 50 rally of the last few weeks fizzled without making much headway over the previous peak before retreating below 3000. Failure of support at 2850 would warn of another test of primary support. Reversal of 13-week Money Flow below zero would warn of another decline.

DAX

May 12, 2016

Asia: Shanghai weakens

The Shanghai Composite Index broke medium-term support at 2900, warning of another test of primary support at 2700. Reversal of Money Flow below zero would warn of a decline to 2400*.

Shanghai Composite Index

* Target calculation: 3000 – ( 3600 – 3000 ) = 2400

Japan’s Nikkei 225 Index is edging higher but trend strength is weak. Breakout above resistance at 17000 was followed by a retreat to 16000. Support is weak and breach of 16000 would signal another test of primary support at 15000.

Nikkei 225 Index

* Target calculation: 17000 – ( 20000 – 17500 ) = 15000

India’s Sensex is more bullish, testing its upper trend channel at 26000. Short retracement is a bullish sign and breakout above 26000 would signal that the down-trend is ending. Recovery of 13-week Twiggs Momentum above zero would strengthen the signal.

SENSEX

* Target calculation: 23000 – ( 25000 – 23000 ) = 21000

May 12, 2016

TSX60 meets resistance

Canada’s TSX 60 found resistance at 820. Reversal below 800 warns of a correction but short retracement would be a bullish sign. And breakout above 820 would signal another advance. Rising 13-week Twiggs Momentum suggests a primary up-trend.

TSX 60 Index

May 12, 2016

S&P 500 hesitates at the last hurdle

Several weeks ago I wrote that the S&P 500 would struggle to break the band of resistance at 2100 to 2130. Tuesday’s strong blue candle made me hesitate but sellers showed up on Wednesday and restored my faith. Money Flow is declining and reversal below 2040 would confirm another correction. But breakout above the descending trendline on 21-day Twiggs Money Flow would still warn that all bets are off.

S&P 500 Index

A CBOE Volatility Index (VIX) at 15 indicates that (short-term) market risk is low.

S&P 500 VIX

We have reduced cash levels in our S&P 500 momentum portfolio as long-term risk measures have improved but there are still only 4 stocks (out of 500) that meet our selection criteria!

May 9, 2016

Stan Druckenmiller: This Is The Endgame | Zero Hedge

Hedge fund legend Stan Druckenmiller, founder of Duquesne, addressing the Sohn Conference:

….The Fed has no end game. The Fed’s objective seems to be getting by another 6 months without a 20% decline in the S&P and avoiding a recession over the near term. In doing so, they are enabling the opposite of needed reform and increasing, not lowering, the odds of the economic tail risk they are trying to avoid. At the government level, the impeding of market signals has allowed politicians to continue to ignore badly needed entitlement and tax reform.

Look at the slide behind me. The doves keep asking where is the evidence of mal-investment? As you can see, the growth in operating cash flow peaked 5 years ago and turned negative year over year recently even as net debt continues to grow at an incredibly high pace. Never in the post-World War II period has this happened. Until the cycle preceding the great recession, the peaks had been pretty much coincident. Even during that cycle, they only diverged for 2 years, and by the time EBITDA turned negative year over year, as it has today, growth in net debt had been declining for over 2 years. Again, the current 5-year divergence is unprecedented in financial history!

And if this wasn’t disturbing enough, take a look at the use of that debt in this cycle. While the debt in the 1990’s financed the construction of the internet, most of the debt today has been used for financial engineering, not productive investments….

Source: For Stan Druckenmiller This Is “The Endgame” – His Full ‘Apocalyptic’ Presentation | Zero Hedge

Hat tip to Houses & Holes at Macrobusiness.

May 8, 2016

The real reason for low savings rates

Also from Michael Pettis:

This is the great irony of the global financial crisis. China, Russia, and France want to lead the charge to strip the US of its exorbitant privilege, and the US resists. And yet if the US were to take steps to prevent foreigners from accumulating US assets, the result would be a sharp contraction in international trade. Surplus countries, like Europe and China, would be devastated, but the US current account deficit would fall with the reduction in net capital inflows. As it did, by definition the excess of US investment over US savings would have to contract. Because US investment wouldn’t fall, and in fact would most likely rise, US savings would automatically rise as lower US unemployment caused GDP to grow faster than the rise in consumption.

But what about the extremely low savings rates in the US. Don’t they prove, as Yale University’s Stephen Roach has often pointed out, that the US is savings-deficient and relies on Chinese and European savings to fund US investment, or at least the US fiscal deficit, because the US consumes beyond its means?

“What the candidates won’t tell the American people is that the trade deficit and the pressures it places on hard-pressed middle-class workers stem from problems made at home. In fact, the real reason the US has such a massive multilateral trade deficit is that Americans don’t save.”

This is one of the most fundamental errors that arise from a failure to understand the balance of payments mechanisms. As I explained four years ago in an article for Foreign Policy, “it may be correct to say that the role of the dollar allows Americans to consume beyond their means, but it is just as correct, and probably more so, to say that foreign accumulations of dollars force Americans to consume beyond their means.” As counter-intuitive as it may seem at first, the US does not need foreign capital because the US savings rate is low. The US savings rate is low because it must counterbalance foreign capital inflows, and this is true out of arithmetical necessity……

Source: The titillating and terrifying collapse of the dollar. Again. | Michael Pettis’ CHINA FINANCIAL MARKETS