The “Junckernaut” is driving Britain to inevitable separation | Telegraph

Jeremy Warner on the drive for Britain to separate from the EU:

…Yet getting out entirely doesn’t strike me as either a wise or necessary approach to the developing standoff in relations…..Jacques Delors, who whatever you might think of him remains one of the few leaders of any authority and vision to have emerged from the European quagmire, has suggested a possible way out for Britain – a sort of amicable divorce, but with extensive child visiting rights. He’s called it “privileged partnership”, with apparent access to the single market and some say in its operation. For some eurosceptics, this will not be sufficient, for it would require agreement to the four freedoms: free movement of goods, services, labour and capital…..Yet from a purely economic perspective, this looks like a good and workable solution. For the rest of Europe, the single currency is driving a process of integration which must ultimately require some form of fiscal and political union. It’s still a long way off, but it is coming, and inevitably, it places Britain in a completely different, non participant role…..

Read more at The "Junckernaut" is driving Britain to inevitable separation – Telegraph Blogs.

Market bullish despite Europe bank worries

  • S&P 500 advance to 2000 likely.
  • Europe warns of correction.
  • China further consolidation expected.
  • ASX 200 hesitant.

US market sentiment remains bullish, while Europe hesitates on Portuguese banking worries. As Shane Oliver observed: “Could there be a correction? Yes. Is it start of new bear mkt? Unlikely. Bull mkts end with euphoria, not lots of caution like there is now…”

The S&P 500 found support between 1950 and 1960, as evidenced by long tails on the last two candles, and is likely to advance to the psychological barrier of 2000. 21-Day Twiggs Money Flow recovery above the descending trendline would confirm that short-term selling pressure has ended. Expect retracement at the 2000 level, but short duration or narrow consolidation would suggest another advance. Reversal below 1950 is unlikely, but would warn of a correction to 1900 and the rising trendline.

S&P 500

* Target calculation: 1900 + ( 1900 – 1800 ) = 2000

CBOE Volatility Index (VIX) remains at low levels indicative of a bull market.

S&P 500 VIX

Dow Jones Euro Stoxx 50 broke support at 3200/3230, warning of a correction to the primary trendline at 3000. Solvency doubts over struggling Portuguese Banco Espirito Santo have roiled European markets. Descent of 21-Day Twiggs Money Flow below zero indicates medium-term selling pressure. Recovery above 3230 is unlikely at present.

Dow Jones Euro Stoxx 50

* Target calculation: 3150 + ( 3150 – 3000 ) = 3300

China’s Shanghai Composite Index displays strong medium-term buying pressure, with 21-day Twiggs Money Flow troughs above zero. Follow-through above 2060 would indicate another test of 2090. Breach of primary support is unlikely at present, but would signal a decline to 1850*. Further ranging between 2000 and 2150 is expected — in line with a managed “soft landing”.

Shanghai Composite

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

The ASX 200 found support at 5450 and appears headed for another test of resistance at 5550. 21-Day Twiggs Money Flow oscillating around zero, however, continues to indicate hesitancy. Reversal below 5450 would signal another test of 5350, while breakout above 5550 would suggest a long-term advance to 5800*.

ASX 200

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

Coppola Comment: Creeping nationalisation

From Frances Coppola:

…the super-safe backstop offered to money funds by the Fed is only the latest in a long line of implicit government guarantees propping up the financial system. Far from ending government support of the financial system, the developments of recent years have actually made it MORE dependent on the state.

Markets, too, have become government-dependent. Markets watch central banks all the time, anticipating their actions and responding to their announcements. And exceptional monetary policy by central banks has impacted market functioning. QE reduced the supply of safe assets, raising their price, while the additional money flowing into markets as a result of QE blew up bubbles in various other classes of asset, both safe assets gold, commodities, fine art and above all real estate and high-yield assets. It is hard to say what market prices would be like now if no central bank were doing QE, and we are unlikely to find out any time soon: the US is withdrawing QE, but Japan is currently doing the largest QE programme it has ever done and the ECB may also soon be forced reluctantly to do some form of asset purchase programme. China has been doing yuan QE for a while, but if dollar liquidity becomes an issue it may be forced to repo out its USTs, which would reinforce the Fed’s ONRRPs and make control of dollar liquidity more difficult. And of course the Swiss have been quietly controlling the Swiss franc market for ages. To prevent the Swiss franc rising, they’ve done the largest QE programme in the world relative to the size of their economy….

Read more at Coppola Comment: Creeping nationalisation.

Aussie Dollar: Should RBA ‘lean against the wind’?

The Euro rallied to resistance at $1.37 after testing primary support at $1.35 and the rising long-term trendline. Recovery above $1.37 would suggest a rally to $1.39/$1.40, but descending 13-week Twiggs Momentum remains below zero, warning of weakness. Breach of $1.35 is equally likely and would signal a decline to $1.31*.

Euro/USD

* Target calculation: 1.35 – ( 1.39 – 1.35 ) = 1.31

The Aussie Dollar is again testing resistance at $0.94. 13-Week Twiggs Momentum holding above zero suggests continuation of the up-trend. Follow-through above $0.95 would suggest a target of $0.97. Reversal below $0.92 is unlikely at present, but would warn of a decline to the band of support between $0.87 and $0.89.

Aussie Dollar

A monthly chart of the Euro against the Swiss Franc shows how the Swiss central bank intervened in 2011 to prevent further appreciation against the Euro and protect local industry. The Australian central bank faced a similar challenge in 2011, but from a different cause, with the Aussie Dollar rising strongly against the greenback on the back of a mining investment boom. The RBA sat on its hands and failed to “lean against the wind” as called for by Prof Warwick McKibbin. Local industry has suffered irreparable damage in the ensuing period.

Aussie Dollar

Commodities weak except for crude

  • Chinese stocks test long-term support
  • Commodities weaken
  • Crude oil remains high

China’s Shanghai Composite Index continues to test long-term support. 13-Week Twiggs Momentum holding below zero suggests continuation of the primary down-trend.

Shanghai Composite Index

Commodity prices are weakening, with Dow Jones-UBS Commodity Index breaking support at 133 to warn of another test of long-term support at 122/124. Reversal of 13-week Twiggs Momentum below zero would strengthen the signal.

Dow Jones UBS Commodities Index

Crude oil remains strong. The chart below plots WTI Light Crude over the consumer price index. The ratio is well above the historical average and is acting as a significant hand-brake on the post-GFC recovery.

Nymex WTI Crude

Considering the holes made in GDP (the green line) by crude oil spikes over the last 40 years, you can understand why Janet Yellen is reluctant to raise interest rates despite falling unemployment.

Nymex WTI Crude

ASX 200: Tall blue candles and short red ones

The ASX 200 is once again testing resistance at 5540/5560. Oscillation of 21-day Twiggs Money Flow around zero indicates hesitancy, but tall blue candles followed by short red candles suggests continuation of the rally. Breakout above 5560 would offer a target of 5700*. Reversal below 5450 is unlikely but would mean all bets are off and another test of support at 5370 is on the cards.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX close to 10 indicates low risk typical of a bull market.

ASX 200

Asia: India leads but China & Japan improving

China’s Shanghai Composite Index retraced to test the new support level at 2050. A 21-day Twiggs Money Flow trough above zero signals strong medium-term buying pressure. Respect of support is likely and would signal a rally to 2090/2100. Failure is unlikely, but would test primary support at 1990/2000.

Shanghai Composite Index

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

Divergence on Japan’s Nikkei 225 (21-day Twiggs Money Flow) warns of medium-term selling pressure and another test of support at 15000. Respect of 15000 would confirm a rally to 16000*. Failure is unlikely, but would warn of another test of primary support at 14000.

Nikkei 225

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

India’s Sensex reached its target of 26000. Expect retracement to test the new support level at 25700/26000, but a 21-day Twiggs Money Flow trough above zero signals strong buying pressure. Breach of support is unlikely, but would warn of a correction to 25000. Further advances are likely, with a medium-term target of 27000.

Sensex

* Target calculation: 21000 + ( 21000 – 16000 ) = 26000

Canada: TSX 60 rally continues

Canada’s TSX 60 is also performing strongly, with 21-day Twiggs Money Flow indicating medium-term buying pressure. Expect a test of the 2008 high at 900. Reversal below support at 855 is unlikely, but would warn of a correction.

TSX 60

Dow breaks 17000

Dow Jones Industrial Average broke medium-term resistance at 17000 — after reaching 16000 in November last year. Expect retracement to test the new support level at 16950/17000. Mild divergence on 21-day Twiggs Money Flow warns of weak selling pressure. Reversal below 16750 is unlikely, but would indicate a correction.

Dow Jones Industrial Average

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

The Nasdaq 100 is on a bit of a tear, with rising 21-day Twiggs Money Flow indicating medium-term buying pressure. Respect of the rising trendline would suggest a rally to 4000*. Penetration of the trendline is unlikely, but would warn of a correction.

Nasdaq 100

* Target calculation: 3700 + ( 3700 – 3400 ) = 4000