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The ASX 200 rallied on Monday, but 21-day Twiggs Money Flow at zero indicates (medium-term) buying pressure is weak. Follow-through above 5470 would signal a test of resistance at 5540/5560, but China continues to weigh on the index and reversal below 5380 would warn of a test of 5300.
* Target calculation: 5550 + ( 5550 – 5400 ) = 5700
ASX 200 VIX making new lows is indicative of a bull market.
Completion of a 13-week Twiggs Money Flow trough above zero indicates long-term buying pressure for Japan’s Nikkei 225 index. Breakout above medium-term resistance at 15200 suggests a rally to 16000. Reversal below 14800 is unlikely, but would warn of another test of primary support at 14000.
* Target calculation: 16000 + ( 16000 – 14000 ) = 18000
India’s Sensex is testing its new support level at 25000. The primary trend is up, but bearish divergence on 13-week Twiggs Money Flow warns of medium-term selling pressure. Breach of support would warn of a correction to 24000, but respect would confirm an advance to 26000*.
* Target calculation: 21000 + ( 21000 – 16000 ) = 26000
DAX is testing the psychological barrier of 10000. Recovery of 13-week Twiggs Money Flow above the descending trendline indicates medium-term buying pressure. Breakout above 10000 would signal an advance to 10500*. Reversal below 9750 is unlikely, but would warn of a correction.
* Target calculation: 9750 + ( 9750 – 9000 ) = 10500
The Footsie is gathering strength for another attempt at resistance around 6850/6880. Rising 13-week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Breakout would signal an advance to 7200*. Reversal below 6740 is less likely, but would warn of a correction to primary support at 6400/6500.
* Target calculation: 6800 + ( 6800 – 6400 ) = 7200
Summary:
Bellwether transport stock Fedex completed a strong cup and handle continuation pattern, offering a target of 160*. Recovery of 13-week Twiggs Money Flow above zero and the descending trendline indicates medium-term buying pressure. Breakout brings a warm glow as I find Fedex one of the most reliable indicators of overall market direction — as in November 2007.
* Target calculation: 145 + ( 145 – 130 ) = 160
Dow Jones Industrial Average is testing medium-term resistance at 17000. Breakout is likely and would signal an advance to 17500*. Recovery of 13-week Twiggs Money Flow above the descending trendline would indicate medium-term buying pressure. Reversal below 16750 is unlikely, but would warn of a correction.
* Target calculation: 16500 + ( 16500 – 15500 ) = 17500
Canada’s TSX 60 marches on towards its target of the 2008 high at 900. Rising troughs on 13-week Twiggs Money Flow signal strong buying pressure. Reversal below support at 845 is unlikely.
Outstanding. Military historian Andrew Bacevich sums up the stupidity of US foreign policy and how repeated failures could be rectified. He exposes the “duplicity of ideologues” on calls for intervention in Iraq and discusses the moral responsibility to the people of Iraq. What can be done to alleviate the suffering of the people in Iraq? “There is remarkably little discussion as to cost if you want to bomb someone, but we suddenly become acutely cost-conscious if there is a proposal to assist them.”
Dick Cheney [at 06:00] in 1993, answering a question on the first Gulf war, predicted what would happen if Iraq was invaded: “…Once you take down Saddam Hussein’s government in Iraq, then what are you going to put in its place? If you take down the central government in Iraq, you could easily see pieces of Iraq fly off…..it’s a quagmire.”
Projection of hard power by the US has not solved global problems over the last 50 years. In fact it has exacerbated problems in the Middle East. Soft power is far more effective. But it needs a change of mind-set on the part of the US. Don’t get me wrong. You still need Teddy Roosevelt’s “big stick” as a deterrent, but soft power — engineers, doctors and school teachers — are far more effective at winning people over to your world-view than B52s and unmanned drones.
Margaret Thatcher’s biographer Charles Moore discusses the former Prime Minister’s legacy. Moore provides insights as to how Margaret Thatcher’s stance on the market economy developed and how she popularised it. He seeks to outline her approach to foreign affairs, in relation to the EU, the US, and her broad approach to the Cold War.
http://vimeo.com/85613703
The inequality debate: Thomas Piketty and Ryan Bourne, of the Institute of Economic Affairs.
http://vimeo.com/98715433
One mistake Piketty makes: he uses a marginal tax rate of 80% in the US in the 1920s and 1930s on incomes over $1 million to justify higher taxes on incomes over $1 million today. This fails to consider inflation. Adjusted for the CPI, an income of $1m in 1920 equates to an income of $12m today.
High marginal tax rates in the 1920s in the US were introduced to pay back war debt from WWI. They had the opposite effect of that intended and reduced tax collections. Treasury secretary Andrew Mellon subsequently increased tax collections by reducing maximum tax rates, with the famous quip: “73% of nothing is nothing.”
Professor Richard Epstein on the inequality debate and related issues in the US.
http://vimeo.com/98678656
Andrew Starke welcomes the latest proposed changes to Future of Financial Advice (FoFA) legislation in FINSIA News:
Changes… outlined by the government on Friday have generally been well received, with many in the industry now hoping for final clarity on a process that has been running since the Labor Government revealed the proposed reform package in April 2011…..First and foremost, the changes outlined by the government on Friday ensure a clear ban on commissions after it had previously left the door open via the so-called ‘Wolf of Wall Street’ clause within general advice. Any possibility of a return to commissions on investments or superannuation products has now been ended.“This response removes all doubt that commissions will be introduced in the provision of general advice. The government will define and ban commissions in black letter law” said John Brogden, CEO of the Financial Services Council FSC. “The changes outlined by the government also maintain a detailed and comprehensive best interest duty requiring a financial adviser to act in the best interests of their client.”
Best interest clarified
While the perceived watering down of the best interest duty has attracted a great deal of attention in the mainstream press, Brogden said this should be put in perspective. Prior to FoFA, financial advisers simply had to offer ‘appropriate advice’ while they now need to comply with a raft of regulation. “There are six separate duties in the Corporations Act that require a financial adviser to act in the best interests of their client. In addition, there are six specific steps that must be met by an adviser when providing advice that codifies the best interest duty,” Brogden said. “The government has made one minor change to the best interest duty by removing an unnecessary ‘catch all’ provision. This change will actually clarify the best interest duty and remove any ambiguity for a financial adviser to always act in a client’s best interests.” The FSC has legal advice from leading commercial counsels Ian Jackman SC and Gregory Drew which it said confirms that the removal of ambiguous ‘catch-all’ phrase will not dilute the obligation of an adviser to act in the best interest of their client……The Australian Bankers’ Association ABA also welcomed the announcement and said the amendments would preserve the original intent of the law while correcting the current overreach and broader uncertainties.
What puzzles me is:
Major banks have spent billions of dollars buying up financial planning firms in order to secure distribution of their investment products. Christopher Joye at AFR puts it in a nutshell:
The big vertically integrated institutions (mainly the four majors and AMP), which now control 70 per cent of planners, want these tied distributors to have the freedom to recommend in-house platforms, super funds and investments without being hampered by a catch-all best interests duty.
An overriding provision would certainly not be in the banks’ best interests.
Read more at "Highly unlikely to ever see a Storm again".