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Canada’s TSX 60 index is testing long-term resistance at 740, but bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Reversal below 730 would indicate another test of primary support at 710. Failure of support would signal a primary down-trend.
The VIX below 15, however, continues to reflect low market risk.
The September quarter-end often heralds a correction as fund managers re-balance their portfolios and shed under-performing stocks.
The S&P 500 is testing support at the May high of 1675 on the daily chart. The long tail on Monday’s candle indicates short-term buying support, but bearish divergence on 21-day Twiggs Money Flow warns of medium-term selling pressure. Breach of support and the (secondary) rising trendline would signal a test of primary support at 1625.
Selling pressure is also evident on the weekly chart, where a similar divergence warns of a primary reversal. This is a relatively weak signal, with 13-week Twiggs Money Flow elevated well above zero and primary support some way above the long-term rising trendline. Failure of support at 1625 would signal a reversal, but it would be prudent to wait for confirmation from the long-term trendline or other major indexes.
* Target calculation: 1700 + ( 1700 – 1550 ) = 1850
VIX crossed to above 15, but still indicates relatively low market risk.
Dow Jones Industrial Average broke its (secondary) rising trendline, signaling a test of primary support at 14800. Bearish divergence on 13-week Twiggs Money Flow warns of a reversal and breach of 14800 would confirm. Recovery above 15660 is unlikely, but would indicate a fresh advance.
Ian Talley at WSJ reports:
In, “The Curious Case of the Yen: A Safe Haven Currency without Inflows” (see p.142) the IMF studied 11 shocks between the August 1990 U.S. savings and loan crisis and the August 2011 U.S. debt ceiling confrontation that pushed the volatility index 10 percentage points higher than its previous 60-day average. “The yen has tended to appreciate on average during these episodes, against the U.S. dollar, the euro and in nominal and real effective terms,” the IMF found.
Read more at Buy Yen on Debt Debacle? – Real Time Economics – WSJ.
The Euro broke through resistance at $1.34/$1.3450, offering a medium-term target of $1.37* and long-term target of $1.40*. A trough above zero on 13-week Twiggs Momentum indicates a healthy up-trend.
* Target calculation: 1.34 + ( 1.34 – 1.31 ) = 1.37; 1.34 + ( 1.34 – 1.28 ) = 1.40
The greenback is ranging aimlessly between ¥96 and ¥101 against the yen, indicating uncertainty. Breakout from the range will indicate future direction. Reversal of 13-week Twiggs Momentum below zero would suggest a primary down-trend.
* Target calculation: 101 + ( 101 – 96 ) = 106
The Aussie Dollar retraced to test support at $0.93/$0.935 against the greenback after its recent breakout. Respect is likely and would suggest an advance to $0.97*. Follow-through above $0.95 would confirm.
* Target calculations: 0.95 + ( 0.95 – 0.93 ) = 0.97
The Aussie found support at $1.12 against its Kiwi neighbour. Recovery above $1.16 and the descending trendline would complete a double-bottom reversal, offering a target of $1.20*.
* Target calculations: 1.16 + ( 1.16 – 1.12 ) = 1.20
China’s Shanghai Composite Index ran into resistance at 2250 and is likely to retrace to support at 2100. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Respect of 2100 would be bullish, while recovery above 2250 would penetrate the descending trendline, suggesting that the primary down-trend is reversing. A primary up-trend would signal increased demand for resources and give a significant boost to the ASX. Failure of 2100 is unlikely, but would indicate a test of primary support at 1950.
Japan’s Nikkei 225 is testing resistance at 15000. Breakout would signal an advance to 17500*. Earlier bearish divergence on 13-week Twiggs Money Flow, however, warns of a reversal. Penetration of the rising trendline would also suggest the primary up-trend is losing momentum. Failure of support at 13200 remains unlikely, but would signal a reversal.
* Target calculation: 15000 + ( 15000 – 12500 ) = 17500
India’s Sensex retreated below resistance at 20500. Tall shadows and long tails on the weekly chart indicate excessive volatility. Reversal below last week’s low at 19500 would warn of another down-swing. Breach of the rising trendline would strengthen the reversal warning. A 13-week Twiggs Money Flow trough above zero, however, would suggest continuation of the primary up-trend.
* Target calculation: 18500 – ( 20500 – 18500 ) = 16500
ASX 200 recovery above the May high of 5250 indicates a primary advance. Follow-through above 5300 would confirm. Rising 21-day Twiggs Money Flow suggests medium-term buying pressure. Long-term target for an advance would be 5850*.
* Target calculation: 5250 + ( 5250 – 4650 ) = 5850
……a large country with a huge structural current account surplus does not just export products. It also exports bankruptcy and unemployment, particularly if the counterpart capital flow consists of short-term debt.
~ Martin Wolf
Read more at Germany’s strange parallel universe – FT.com.
European markets continue to display healthy primary up-trends with the exception of the FTSE 100 which warns of selling pressure.
Germany’s DAX broke through medium-term resistance at 8500, offering a medium-term target of 9000* and a long-term target of 9500*. Reversal below 8000 is unlikely, but would warn of another test of primary support at 7500.
* Target calculation: 8500 + ( 8500 – 8000 ) = 9000 ; 8500 + ( 8500 – 7500 ) = 9500
France’s CAC-40 is testing resistance at its 2011 high of 4200. Retracement to short-term support at 4100 is likely. Respect of support would be a bullish sign, while breakout above 4200 would offer an immediate target of 4300* and a long-term target of 4500*. Reversal below 3900 is unlikely but would warn of a bull trap.
* Target calculation: 4100 + ( 4100 – 3900 ) = 4300 ; 4050 + ( 4050 – 3600 ) = 4500
Spain’s Madrid General Index followed through above 900, but is now retracing to test the new support level. Respect would confirm a long-term advance to 1050* (960* in the medium-term). Rising 13-week Twiggs Money Flow indicates buying pressure. Reversal below 840 is unlikely, but would warn of a bull trap.
* Target calculation: 900 + ( 900 – 750 ) = 1050 ; 900 + ( 900 – 840 ) = 960
Italy’s MIB Index is testing resistance at 18000. Retracement to support at 17500 is likely, but respect would be bullish. Breakout above 18000 would offer an immediate target of 18500 and a long-term target of 20000*. Reversal below 16500 is most unlikely, but would warn of a bull trap.
* Target calculation: 17500 + ( 17500 – 15000 ) = 20000
Bearish divergence on the FTSE 100 (13-week Twiggs Money Flow) warns of strong selling pressure. Reversal below 6400 would warn of a primary down-trend, confirmed if the rising trendline is broken. Reversal of TMF below zero would strengthen the signal. Breakout above 6750 is unlikely, but would signal a medium-term advance to the 1999 high of 7000.
Bellwether transport stock Fedex displays a healthy primary up-trend on the monthly chart, suggesting that economic activity is improving. Bearish divergence on 13-week Twiggs Money Flow warns of selling pressure at the 2007 high of $120; reversal below zero would indicate a reversal, while a trough above the zero line would signal a primary up-trend. Breakout above $120 would offer a target of $130*.
* Target calculation: 120 + ( 120 – 110 ) = 130
In a paper to Catholic Health Conference Australia, Jeremy Sammut highlights the need for revision of Australia’s national health care system.
….health spending already consumes a third of the NSW budget….. and if health spending continues to grow at current rates, health will consume the entire NSW budget in 20 years time.
Providing free services encourages over-use and, with limited budgets, restricts access to essential services for the most needy. Sammut suggests a shift to self-funding for minor expenditure, with state assistance for chronic or catastrophic needs.
As the increasingly unaffordable United States private health system demonstrates, it is impossible to insure people for all health services without over-use causing a cost and premium spiral. In a private system, moral hazard creates un-affordability; in a free public insurance system like Medicare it causes arbitrary and unethical rationing.
Public and private health systems are both plagued by the problem of ‘first dollar insurance’ – the expectation among consumers that private or public insurance should entitle them to receive treatment entirely paid for by a third-party payer no matter how small the cost or condition.
By contrast, a soundly constructed insurance system should not insure people for all services. Instead, individuals should be required to self insure for minor health needs and expenses. Third party insurance should be reserved to enable people to share exceptional risk involving major health problems, and thus should only cover a minimum package of high-cost treatments for complex chronic and catastrophic conditions. And personal responsibility, consumer sovereignty, and price signals should also feature by using front-end deductibles and copayments to control costs and deter unnecessary use of marginal and discretionary services and trivial claims.
What we also need is for public and private hospitals to compete on an equal footing for the taxpayer’s health care dollar. This system has been successfully implemented in the Lombardy region of Italy, with excellent results. Margherita Stancati at WSJ online reports:
Lombardy, by contrast, has increased its quality standards, set its own reimbursement rates and, most important, put public and private hospitals on an equal footing by making each equally eligible for public funds. If a hospital meets the quality standards and charges the accepted reimbursement rate, it qualifies. Patients are free to choose between state-run and publicly funded private hospitals at no extra cost. Their co-pay is the same in either case. As a result, public and many private hospitals in Lombardy compete directly for patients and funds.
…..Around 30% of hospital care in Lombardy is private now — more than anywhere else in Italy. And service in both the private and public sector has improved.
Read Jeremy Sammut’s presentation at Saving Medicare: The Case for Market-Based Health Reform | Jeremy Sammut.
The Enlightened Economist reviews Joe Studwell’s book, How Asia Works: Success and Failure in the World’s Most Dynamic Region. He highlights three key steps:
Read more at Learning economic lessons from Asia | The Enlightened Economist.