Countries & Regions Archives - Page 141 of 373

September 12, 2014

Europe uneasy

Weekly highlights:

The Dollar is strengthening
Treasury yields (long-term) are rising
Gold and crude oil are falling
European stocks are bearish
US stocks remain bullish

The tenuous ceasefire in Eastern Ukraine appears to be holding, but Europe faces another challenge this week, with a Scottish referendum on independence. Predictions of financial mayhem in the event of a “Yes” vote are, I feel, exaggerated in an attempt to influence the outcome. The official position of the UK government is:

“If a majority of those who vote want Scotland to be independent then Scotland would become an independent country after a process of negotiations.”

The “process of negotiations” is likely to be comprehensive and would resolve most outstanding uncertainties in an orderly fashion. There has been much debate over economic issues, but it is no coincidence that the referendum is being held in the same year as the 700th anniversary of the Battle of Bannockburn, when Scots under Robert the Bruce defeated an English army led by Edward II to regain their independence.

Stock markets

Dow Jones Euro Stoxx 50 remains hesitant, retreating from resistance at 3300. Consolidation above 3200 would be a bullish sign, while breach of 3100 would threaten primary support at 3000. Another 13-week Twiggs Money Flow trough above zero would indicate buying pressure, but reversal below zero would warn of a down-trend.

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

The S&P 500 is edging lower and follow-through below 1980 would indicate another correction. Respect of support at 1950, however, would suggest that the up-trend is intact. Sideways movement on 21-day Twiggs Money Flow, reflects further consolidation.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) below 20 is typical of a bull market.

S&P 500 VIX

China’s Shanghai Composite Index breakout above 2250 signals a primary up-trend. The monthly chart, however, reflects further resistance at 2450/2500*. Rising 13-week Twiggs Money Flow indicates accelerating buying pressure. Reversal below 2250 is most unlikely, but would suggest further consolidation between 2000 and 2250.

Shanghai Composite Index

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

The ASX 200 broke support at 5540/5560, warning of a correction. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure. Respect of support at 5440/5460 would indicate that the primary up-trend is intact, while a fall below 5360 would warn of a down-trend.

ASX 200

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

September 11, 2014

European resistance

Germany’s DAX found resistance at 9700/9800. Recovery of 13-week Twiggs Money Flow above zero indicates short-term buying pressure, but the long-term signal remains bearish. Reversal below 9300 would warn of another test of primary support at 9000.

DAX

Dow Jones Euro Stoxx 50 is testing resistance at the recent high of 3300. But declining 13-week Twiggs Money Flow again warns of long-term selling pressure. Breakout above 3300 is unlikely but would suggest another advance, while reversal below 3200 — or Twiggs Money Flow below zero — would warn of another correction.

Dow Jones Euro Stoxx 50

The Footsie appears unfazed by threats of Scottish independence, testing long-term resistance at 6850/6900. 13-Week Twiggs Money Flow troughs above zero indicate healthy buying pressure, but there is a major psychological barrier at the 1999 high of 6900/7000. Narrow consolidation below this level would be a bullish sign, while a correction to test primary support at 6500 would suggest further hesitancy.

FTSE 100

* Target calculation: 7000 + ( 7000 – 6000 ) = 8000

September 11, 2014

Asian stocks pause

Hong Kong’s Hang Seng Index continues to encounter resistance at 25000, but respect of support at 24000 and rising 13-week Twiggs Money Flow indicate sustained buying pressure. Breakout would offer a target of 27000*.

Hang Seng Index

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

China’s Shanghai Composite Index is consolidating after breaking resistance at 2250. Rising 13-week Twiggs Money Flow reflects medium-term buying pressure. The primary trend is up, but expect retracement to test the new support level at 2250.

Shanghai Composite Index

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

India’s Sensex has reached its long-term target of 27000*, shown here on a quarterly chart. Bearish divergence on 13-week Twiggs Money Flow continues to warn of long-term selling pressure. Respect of the zero line appears likely and would suggest a further advance, but a fall below zero would warn of a decline to test the rising trendline.

Sensex

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

Japan’s Nikkei 225 index continues its advance towards 16300. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 15500 is unlikely, but would warn of a test of 14800.

Nikkei 225

September 10, 2014

Big banks may need $41b more capital, UBS says

From Chris Joye at AFR:

UBS’s more likely scenario of a 3 per cent TBTF capital buffer combined with an increase in the average mortgage risk weight to 25 per cent gives a total capital shortfall of $41.1 billion for the majors.

Risk-weightings, especially for residential mortgages are coming under increased scrutiny. The big four banks have a major advantage in this area, employing risk-weightings as low as 15% to 20% based on their historical record of low defaults. But that history includes a credit boom lasting more than 2 decades which fueled an unprecedented rise in housing prices and is unlikely to be repeated in the future.

APRA alluded to this problem in its second FSI submission:

..APRA also highlighted the problem with the major banks’ predicting their own probabilities of defaults on home loans in the absence of a recession in 23 years and the much lower levels of housing leverage in 1991.“The Basel Committee is currently reviewing the validity and reliability of risk weights generated under the IRB approach [used by the majors] in response to studies showing that the variability … is much greater than could be explained by differences in underlying risks,” APRA said.

Only when the tide goes out do you discover who’s been swimming naked. ~ Warren Buffett

September 10, 2014

Aussie Dollar & Yen break support

Dollar strength is affecting not only gold and commodities, but even the strongest of the currency crosses.

The Aussie Dollar broke support at $0.92 against the greenback, warning of a correction. Expect support at $0.89. Reversal of 13-week Twiggs Momentum below zero, however, suggests a primary down-trend — confirmed if primary support at $0.87 is penetrated. Recovery above $0.925 is unlikely, but would indicate a false break.

Aussie Dollar

The greenback similarly broke through resistance at ¥105.50 against the Japanese Yen. Rising 13-week Twiggs Momentum above zero signals a primary up-trend. Reversal below ¥105 is unlikely, but would warn of another test of ¥104.

USD/JPY

* Target calculation: 105.5 + ( 105.5 – 101 ) = 110

The Euro is already in a primary down-trend against the Dollar. Declining 13-week Twiggs Momentum, below zero, confirms a strong down-trend. Expect support at $1.2750/$1.2800, but a rally is unlikely to break the descending trendline and resistance at $1.31.

Euro/USD

* Target calculation: 1.35 – ( 1.40 – 1.35 ) = 1.30

September 10, 2014

How Russia Is Revolutionizing Information Warfare | Defense One

From Peter Pomerantsev:

In today’s Russia, by contrast, the idea of truth is irrelevant. On Russian ‘news’ broadcasts, the borders between fact and fiction have become utterly blurred. Russian current-affairs programs feature apparent actors posing as refugees from eastern Ukraine, crying for the cameras about invented threats from imagined fascist gangs. During one Russian news broadcast, a woman related how Ukrainian nationalists had crucified a child in the eastern Ukrainian city of Sloviansk. When Alexei Volin, Russia’s deputy minister of communications, was confronted with the fact that the crucifixion story was a fabrication, he showed no embarrassment, instead suggesting that all that mattered were ratings. “The public likes how our main TV channels present material, the tone of our programs,” he said. “The share of viewers for news programs on Russian TV has doubled over the last two months.”

…..The point of this new propaganda is not to persuade anyone, but to keep the viewer hooked and distracted—to disrupt Western narratives rather than provide a counternarrative. It is the perfect genre for conspiracy theories, which are all over Russian TV. When the Kremlin and its affiliated media outlets spat out outlandish stories about the downing of Malaysia Airlines Flight 17 over eastern Ukraine in July—reports that characterized the crash as everything from an assault by Ukrainian fighter jets following U.S. instructions, to an attempted NATO attack on Putin’s private jet—they were trying not so much to convince viewers of any one version of events, but rather to leave them confused, paranoid, and passive—living in a Kremlin-controlled virtual reality that can no longer be mediated or debated by any appeal to ‘truth.’

September 9, 2014

Richard Koo: Revitalizing the Eurozone without Fiscal Union, April 2012

Richard Koo in a 2012 paper identifies 3 challenges facing the eurozone:

The current crisis in the eurozone consists essentially of two macroeconomic problems and one capital flow problem. The first macro problem is profligate government spending, as exemplified by Greece. In such cases austerity is required: the government must cut spending and raise taxes to regain its financial health and credibility.The second macro problem is massive private sector deleveraging in spite of record low interest rates observed in countries such as Spain, Ireland and Portugal following the bursting of their real estate bubbles.

The problem with capital flows is specific to sharing a common currency in the eurozone:

When presented with a deleveraging private sector, fund managers in non-eurozone countries can place their money only in their own government’s bonds if constraints prevent them from taking on more currency risk or principle risk. Consequently, a large portion of excess private savings must be invested in JGBs in Japan, Gilts in the UK, and Treasuries in the US. In contrast, eurozone fund managers who are not allowed to take on more principle risk or currency risk are not required to buy their own country’s bonds: they can also buy bonds issued by other eurozone governments because they all share the same currency. Thus, fund managers at French and German banks were busily moving funds into Spanish and Greek bonds a number of years ago in search of higher yields, and Spanish and Portuguese fund managers are now buying German and Dutch government bonds for added safety, all without incurring foreign exchange risk. The former capital flow aggravated real estate bubbles in many peripheral countries prior to 2008, while the latter flow triggered a sovereign debt crisis in the same countries after 2008.

His solution:

There is a simple and straightforward solution to the two macro problems and one capital flow problem described above: eurozone governments should limit the sale of their government bonds to their own citizens. In other words, only German citizens should be allowed to purchase Bunds, and only Spanish citizens should be able to buy Spanish government bonds. If this rule had been in place from the outset of the euro, none of the problems affecting the single currency today would have happened.

September 9, 2014

ASX 200 finds support

The ASX 200 found support above 5560 and is likely to re-test resistance between 5640 and 5680. Breakout would signal an advance with a target of 5850*. Completion of another 21-day Twiggs Money Flow trough above zero would indicate renewed buying pressure. Reversal below 5540, however, would warn of a test of support between 5440 and 5500 (the rising trendline).

ASX 200

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

Readings for the ASX 200 VIX remain low, typical of a bull market.

ASX 200

September 9, 2014

US stocks find support

Dow Jones Industrial Average is consolidating in a narrow band above 17000. Sideways drift on 21-day Twiggs Money Flow reflects hesitancy. Breakout above 17150 remains likely, however, and would offer a target of 17500*. Reversal below 16950, while unlikely, would test the rising trendline around 16700.

Dow Jones Industrial Average

* Target calculation: 16500 + ( 16500 – 15500 ) = 17500

I still expect the Nasdaq 100 to retrace to test its new support level at 4000. A 13-week Twiggs Money Flow trough above zero indicates buying pressure. Respect of support is likely and would offer a target of 4250. Reversal below 4000 is unlikely but would warn of a correction.

Nasdaq 100

* Target calculation: 4000 + ( 4000 – 3750 ) = 4250

Russell 2000 small caps is once again headed for a test of resistance at 12.00 on the monthly chart. Completion of a second 13-week Twiggs Momentum trough at the zero line would suggest a healthy up-trend. Breakout above 12.00 would signal an advance to 13.00*. Breach of support at 11.00 is unlikely, but would warn of a down-trend.

Russell 2000

* Target calculation: 12 + ( 12 – 11 ) = 13

September 8, 2014

David Cameron can’t help the No campaign…. | The Guardian

Charle Brooker on David Cameron and Scotland’s independence referendum:

Cameron can’t help here, of course. In Scotland, David Cameron is less popular than Windows 8. He’s the physical embodiment of everything a fair percentage of Scottish people hate: a ruddy-faced old Etonian walking around like he just inherited the place, sporting a permanently shiny chin as though he’s just enjoyed a buttery crumpet in front of the cricket….