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October 19, 2012

US: Earnings scare

Disappointing quarterly earnings from Google, Microsoft, Intel, IBM and McDonald’s over the past week led to a sell-off on Friday. The S&P 500 is again testing support at 1430. Reversal of 21-day Twiggs Money Flow below zero warns of renewed (medium-term) selling pressure — a peak below zero would strengthen the signal. Breach of 1430 would signal a correction; follow-through below 1420 would confirm.

S&P 500 Index

* Target calculation: 1420 + ( 1420 – 1280 ) = 1560

The Dow Jones Industrial Average is similarly testing support at 13300 (weekly chart). Bearish divergence on 63-day Twiggs Momentum indicates a weakening up-trend, and reversal below zero would warn of a primary down-trend. Reversal below 13000 and the primary trendline would suggest that a top is forming. Recovery above 13650 is unlikely but would indicate an advance.

Dow Jones Industrial Average

* Target calculation: 13000 + ( 13000 – 12000 ) = 14000

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

October 18, 2012

Forex: Euro, Pound Sterling, Canadian Loonie and Aussie Dollar

The Euro rallied off support at $1.28 and is headed for resistance at $1.32. Recovery of 63-day Twiggs Momentum above zero suggests a primary up-trend. Breakout above $1.32 would confirm, offering an immediate target of the 2012 high at $1.35.

Euro/USD

* Target calculation: 1.32 + ( 1.32 – 1.28 ) = 1.36

Pound Sterling is testing primary support at €1.23 against the euro. Breach would signal a primary down-trend. Target for the completed head and shoulders reversal would be $1.18*. Reversal of 63-day Twiggs Momentum below zero would strengthen the signal.

Pound Sterling/Euro

* Target calculation: 1.23 – ( 1.28 – 1.23 ) = 1.18

Canada’s Loonie found strong support between $1.01 and $1.02 (USD). Breakout would indicate an advance to the 2011 highs at $1.06. Rising 63-day Twiggs Momentum strengthens the signal.

Canadian Loonie/Aussie Dollar

The Aussie Dollar found support at $1.02/$1.015 against the greenback. Expect another test of $1.06. 63-Day Twiggs Momentum troughs above zero indicate a primary up-trend. Breakout above $1.06 would offer a target of the 2011 high at $1.10*, though there is bound to be some resistance at $1.08.

Aussie Dollar/USD

* Target calculation: 1.06 + ( 1.06 – 1.02 ) = 1.10

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 15, 2012

China Inc waves a red flag on economic recovery | Reuters

By Vikram Subhedar

(Reuters) – Chinese corporate profits show no sign of a second-half recovery as analysts cut earnings estimates in September by the most in 2-1/2 years, a red flag for investors who expect the world’s second biggest economy to start picking up soon……

via China Inc waves a red flag on economic recovery | Reuters.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 15, 2012

Canada: TSX60 testing support

The TSX 60 continues to test support at 695/700. Failure would signal a correction to 680 and the rising trendline, while respect of support would indicate another test of 718. A 21-day Twiggs Money Flow peak below zero warns of medium-term selling pressure, but the long-term (13-week) indicator remains bullish and completion of a higher (21-day) trough, by recovery above zero, would reflect the return of buyers. Breakout above 718 would indicate a primary up-trend, while follow-through above the 2012 high at 725 would strengthen the signal.

TSX 60 Index

* Target calculation: 725 + ( 725 – 640 ) = 810

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 15, 2012

Australia’s Future Fiscal Shock | Centre For Independent Studies

by Robert Carling

Long-term prospects for Australia’s public finances are not receiving the attention they deserve. It is one thing for Commonwealth and state governments to balance their budgets in the short term, as they are attempting to do, but spending commitments are being made as though nothing beyond the four-year horizon of the forward estimates matters. Under current policies, Australia is heading in the long term for a substantially larger share of government spending in the economy, which will bring pressures for higher taxation or borrowing or both. Spending by governments at all levels as a proportion of gross domestic product (GDP) (currently around 36%) could rise to well above 40% over the decades ahead, if not sooner…….

via Australia’s Future Fiscal Shock (pdf).

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 15, 2012

China’s export growth accelerated in September

by Zarathustra

China’s trade data for September show some improvement in growth. Export growth picked up to 9.9% yoy in September, up from 2.7% yoy in August, and better than consensus estimate fo 5.5% yoy…….

via China’s export growth accelerated in September.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 15, 2012

China iron-ore spot prices surge 30% in just weeks – MarketWatch

By MarketWatch

BEIJING–Iron ore spot prices for China delivery have surged nearly 30% since early September with mills replenishing stocks amid a tentative rebound in the steel sector, suggesting that a recent price decline may have bottomed out.

…..Prices for 63.5% iron ore fines delivered to Qingdao rose 29% from a multiyear low Sept. 7 to around $117 a metric ton Monday, data from The Steel Index showed……

via China iron-ore spot prices surge 30% in just weeks – MarketWatch.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 15, 2012

US: Not yet out of the woods

The S&P 500 found support at 1430, closing the day with a decent blue candle. Avoidance of a double top and recovery above the lower trend channel indicate another test of 1475, but 21-day Twiggs Money Flow below zero still warns of medium-term selling pressure — a peak below zero would strengthen the signal. Breakout above 1475, however, would signal a primary advance, while reversal below 1430 would warn of a correction.

S&P 500 Index

* Target calculation: 1420 + ( 1420 – 1280 ) = 1560

The Dow Jones Industrial Average (weekly chart) is similarly testing support at 13300. Bearish divergence on 63-day Twiggs Momentum indicates a weakening up-trend, and reversal below zero would warn of a primary down-trend. Recovery above 13650 would confirm the advance, while reversal below 13000 and the primary trendline would signal trend weakness.

Dow Jones Industrial Average

* Target calculation: 13000 + ( 13000 – 12000 ) = 14000

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 15, 2012

5 Steps Obama or Romney Must Take to Fix Wall Street

By SUZANNE MCGEE

In [Sheila Bair’s] view ….. we haven’t yet come to grips with many of the problems that produced the crisis.

Too many regulators fall victim to one of several fatal flaws, Bair suggested in a speech to the National Association for Business Economics yesterday. Some of them over or under-regulate (usually at the wrong point in the cycle); they devise impossibly complex rules; they are “closet free-marketeers” proposing convoluted rules to prove it’s impossible to regulate financial institutions, or they are “captive” regulators who, without any corruption or malfeasance involved, have simply subordinated their judgment to those of the organizations they are charged with overseeing.

The former chair of the Federal Deposit Insurance Corporation suggests five steps that presidential candidates should take to fix Wall Street………

via 5 Steps Obama or Romney Must Take to Fix Wall Street.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 12, 2012

Forex: Euro recovers, Aussie & Sterling weaken

The Euro is headed for another re-test of resistance at $1.32 and its descending trendline. Breakout would signal a primary up-trend. Recovery of 63-day Twiggs Momentum above zero strengthens the signal. Reversal below $1.26 is unlikely but would warn of another test of primary support at $1.20.

Euro/USD

* Target calculation: 1.275 + ( 1.275 – 1.20 ) = 1.35

Pound Sterling is testing support at €1.23 against the Euro. Breach of support — and the rising trendline — would warn the primary up-trend is ending. Retreat of 63-day Twiggs Momentum below zero would strengthen the signal.

Pound Sterling/Euro

Canada’s Loonie is testing support against the greenback at $1.02/$1.01. Respect of support — with recovery above $1.027 — would confirm the primary up-trend. A 63-day Twiggs Momentum trough above zero would strengthen the signal. Target for the advance is the 2011 high of $1.06.

Canadian Loonie/Aussie Dollar

* Target calculation: 1.04 +( 1.04 – 1.01 ) = 1.07

The Aussie Dollar found support at $1.02/$1.015 on the daily chart. Follow-through above $1.03 would suggest another test of $1.06. Failure of support is unlikely but would signal a primary down-trend. 63-Day Twiggs Momentum troughs above zero indicate continuation of the primary up-trend. Expect strong resistance at $1.06: the Aussie may be range-bound for some time.

Aussie Dollar/USD

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.