Abbott’s federation reform push is sound | | MacroBusiness http://t.co/S8pMt7U7vm
— Colin Twiggs (@Colin_Twiggs) October 27, 2014
October correction nearing end
- DAX and FTSE in a down-trend
- China and Hong Kong retreat
- US stocks remain in a bull market
- ASX ends correction
The new reporting season is under way and fund managers are now looking for opportunities rather than selling off under-performers.
The S&P 500 broke resistance at 1900 and 1925. Penetration of the descending trendline suggests that the October correction is over. Recovery of 21-Day Twiggs Money Flow above zero indicates medium-term buying pressure. Expect a test of resistance at 2000 followed by consolidation or retracement to confirm support at 1925. Narrow consolidation below 2000 would be a bullish sign.
* Target calculation: 2000 + ( 2000 – 1850 ) = 2150
CBOE Volatility Index (VIX) at 16 again indicates low risk typical of a bull market.
The Nasdaq 100 recovered above resistance at 4000, indicating a fresh advance. Penetration of the descending trendline signals that the correction is over. Completion of a 13-week Twiggs Money Flow trough high above zero would indicate long-term buying pressure. Reversal below 4000 is unlikely, but would warn of another test of support.
* Target calculation: 4100 + ( 4100 – 3800 ) = 4400
Dow Jones Euro Stoxx 50 recovered above its former primary support level at 3000, suggesting a bear trap. The primary trend remains downward, but recovery of 13-week Twiggs Money Flow above zero would suggest another test of 3300.
* Target calculation: 9000 – ( 10000 – 9000 ) = 8000
China’s Shanghai Composite Index retreated below support at 2340/2350 and the rising trendline, warning of a correction. A 13-week Twiggs Money Flow trough above zero would confirm the primary up-trend, while reversal below zero would warn of a bear market.
The ASX 200 recovered above resistance at 5250 and 5350 and the descending trendline, indicating that the correction is over. Breach of resistance at 5450 would signal another test of 5650. Bullish divergence and rising 21-day Twiggs Money Flow (above zero) indicate medium-term buying pressure. Reversal below 5350 is unlikely, but would indicate another test of 5120.
Russia’s Ruble in a world of pain
Russia’s ruble is in a world of pain, having lost one-third of its value against the Dollar over the last 40 months. The down-trend is accelerating, emphasized by two large 13-week Twiggs Momentum peaks below the zero line.
Vladimir Putin has backed himself into a corner and has no way out but to escalate. His current strategy in Eastern Europe of one-step-back-two-steps-forward is becoming predictable and the European Union is likely to run out of patience, responding with further sanctions. Increasingly threatening behavior in the Baltic is also unlikely to intimidate, merely strengthening alliances and resolve.
George Soros on the Ukraine crisis:
https://twitter.com/andersostlund/status/525183504066560000
Former Swedish PM Carl Bildt seems to agree:
"Ukraine’s Vote, Russia’s Fate" by @carlbildt http://t.co/HfENdCm0Uh
— Project Syndicate (@ProSyn) October 22, 2014
Ambrose Evans-Pritchard weighs in on Russia’s economic woes:
Ambrose Evans-Pritchard: Russia is weaker now than decaying Soviet Union before collapse | via @Telegraph http://t.co/qmnrX5ffHT
— Colin Twiggs (@Colin_Twiggs) October 23, 2014
Treasury yields fall and the Dollar finds support
The yield on ten-year Treasury Notes is in a primary down-trend (since breaking support at 2.50%). Expect retracement to test resistance at 2.30%. Respect is likely and would indicate another test of primary support at 2.00%*. A 13-week Twiggs Momentum peak below zero signals bear strength. Recovery above 2.30 is unlikely, but would test the descending trendline and resistance at 2.50%.
* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00
Inflation expectations are falling, with the 5-year inflation breakeven rate (5-year treasury yields minus the 5-year TIPS rate) now close to 1.4%.
The Dollar Index respected its new support level at 84.50. Recovery above 86.5 would confirm a primary advance and a target of 89*. Rising 13-week Twiggs Momentum suggests a healthy (primary) up-trend. Failure of support at 84.50 is unlikely, but would warn of a correction to the primary trendline.
* Target calculation: 84 + ( 84 – 79 ) = 89.00
Shots fired in parliament building, Ottawa [video]
The suspect had apparently already shot and killed a reservist soldier standing guard at the National War Memorial.
More #breaking: @CNN confirms name of soldier who was killed in #OttawaShooting as Nathan Cirillo. @paulanewtonCNN pic.twitter.com/3e8cFKOUnT
— The Situation Room (@CNNSitRoom) October 22, 2014
Condolences to family of the soldier killed, & prayers for the Parliamentary guard wounded. Canada will not be terrorized or intimidated.
— Jason Kenney (@jkenney) October 22, 2014
RBA targets mortgage lending
Barclays: RBA considers macroprudential by end of 2014 and double risk-weight for investor home loans | MacroBusiness http://t.co/Go0jLA0Xgg
— Colin Twiggs (@Colin_Twiggs) October 22, 2014
ASX 200 breaks resistance
The ASX 200 broke resistance at 5340/5350 in the first hour of trading this morning. Expect retracement to test the new support level on the hourly chart. Respect would confirm that the correction is over.
Get Ready for Iraq War IV
Retired army officer John A. Nagl writes:
The United States is now at war in Iraq for the third time in my lifetime, and after being in the middle of the first two I’m planning to sit this one out.
The first Iraq war was necessary and conducted well, as wars go; the second was unnecessary and conducted poorly at first, but ended up in a reasonable place given what a fiasco it had been at the start. This third war was entirely preventable, caused by a premature departure of U.S. troops after the second. Although it’s too soon to say how it will turn out, it is not too early to say that unless we get the endgame right, the United States will fight yet another war in Iraq before too long.
Read more at Get Ready for Iraq War IV.
In Milan, Germany’s leader strikes the right note on Russian sanctions | Washington Post
Opinion from the Washington Post:
To her credit, Ms. Merkel is staking out a firm position, perhaps because she has spent more time than any other Western leader talking to Mr. Putin about Ukraine. On Monday she said, “There’s a long way to a cease-fire, unfortunately,” and added that Russia would have to respect Ukraine’s territorial integrity “not just on paper” before sanctions could be lifted. That added weight to comments last week by Secretary of State John F. Kerry, who — even as he tried to promote U.S.-Russian cooperation on other issues — said Russia would have to withdraw “heavy equipment” and allow its border with Ukraine “to be properly monitored and secured” to win sanctions relief.
Mr. Putin is unlikely ever to meet those terms. To do so would doom Novorossiya, which can’t survive without military and material support from Russia. As the sanctions bite, he is as liable to escalate his aggression as to offer concessions….
Further escalation is not likely — it’s inevitable. Decisive action now will save much pain later. Read Putin’s Coup, Ben Judah’s piece on how Vladimir Putin has consolidated his hold on power. The parallels with Germany’s NSDAP in the 1930s are chilling — using fear to quell dissent.
Read more at In Milan, Germany’s leader strikes the right note on Russian sanctions | The Washington Post.
Hang Seng falters
Hong Kong’s Hang Seng Index is testing support at 23000. Reversal of 13-week Twiggs Money Flow below zero warns of a primary down-trend. Breach of support at 21000 would confirm.
China’s Shanghai Composite Index continues to test its new support level at 2340. Respect would suggest an advance to 2500*. Breach would warn of a correction. I remain wary because of weakness in Hong Kong.
* Target calculation: 2250 + ( 2250 – 2000 ) = 2500