Category: Countries & Regions

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The Myth Of Cash On The Sidelines – Jim Bianco | The Big Picture

Last Thursday the Federal Reserve released its quarterly Flow of Funds data, current through December 2011. One of the more popular headlines from this data concerns the record amount of “cash on the sidelines.” Through Q4 2011, nonfarm nonfinancial corporate businesses held $2.23 trillion in liquid assets on their balance sheets. As the argument goes, this must be a sign of pent-up demand just waiting to be unleashed on the market.

The chart below shows liquid assets as a percentage of total nonfarm nonfinancial corporate business assets since 1952. By this measure, the “cash on the sidelines” argument is far less compelling.

Liquid Assets as a Percentage of Total Nonfarm Nonfinancial Corporate Business Assets

via The Myth Of Cash On The Sidelines – An Update | The Big Picture.

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Australia: Hourly ASX 200

The ASX 200 Hourly chart shows a sharp rally and we can expect a test of 4300/4320 tomorrow. Breakout would signal an advance to 4450*. Reversal below the trend channel is unlikely, but breach of support at 4250 would warn of another correction.

ASX 200 Index Hourly Chart

* Target calculation: 4300 + ( 4300 – 4150 ) = 4450

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Forex: Euro, Pound Sterling and Yen

The euro is weakening against the greenback, testing medium-term support at $1.30. Failure would indicate a test of primary support at $1.26 and continuation of the down-trend. Respect is unlikely, but would suggest a test of the declining trendline.

Euro/USD

* Target calculation: 1.26 – ( 1.35 – 1.26 ) = 1.17

Pound Sterling rallied against the Aussie Dollar, testing the new resistance level at $1.50. The down-trend is likely to continue and breach of the rising trendline would warn of another decline, with an immediate target of $1.42*.

Pound Sterling/USD

* Target calculation: 1.46 – ( 1.50 – 1.46 ) = 1.42

The US Dollar is approaching its target of ¥85 Japanese Yen. Expect retracement to confirm the new support level at ¥80, followed by an advance to ¥90*.

USD/Japanese Yen

* Target calculation: 85 + ( 85 – 80 ) = 90

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Forex: Australia, Canada and South Africa

A stronger greenback and weaker commodity prices are likely to depress resource-rich currencies. Canada’s Loonie stood up surprisingly well, mainly because of rising crude oil prices. 63-Day Twiggs Momentum recovered above zero, indicating a primary up-trend. Breakout above $1.01 would strengthen the signal, offering a target of the 2011 high at $1.06.

Canadian Dollar

* Target calculation: 1.01 + ( 1.01 – 0.95 ) = 1.07

The Aussie Dollar weakened along with commodity prices. Failure of support at $1.04 would warn of a correction to primary support at $0.96. Penetration of the rising trendline and reversal of 63-day Twiggs Momentum below zero would strengthen the signal.

Aussie Dollar

The Aussie Dollar found support at R8.00 South African Rand. Expect a rally to test the upper range border at R8.50, but failure of support would test the long-term trendline at R7.50*. Penetration of the trendline and/or reversal of 63-Day Twiggs Momentum below zero would warn of a primary down-trend.

Aussie Dollar/South African Rand

* Target calculation: 8.00 – ( 8.50 – 8.00 ) = 7.50

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Treasury yields surge

The yield on 10-year US Treasury Notes has surged to test resistance at 2.40 percent. Breakout would indicate a rally to the long-term trendline at 3.00 percent on the Monthly chart. Rising treasury yields signal that investors are migrating out of bonds and into stocks, especially when the Fed is attempting to suppress long-term rates.

10-Year Treasury Yields

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S&P 500 and Nasdaq

An Hourly chart shows the S&P 500 Index consolidating below 1400. Breakout above the narrow flag would signal an advance to 1450*. Reversal below the trend channel is unlikely but would warn of retracement to 1340.

S&P 500 Index

* Target calculation: 1300 + ( 1300 – 1150 ) = 1450

The Nasdaq 100 exceeded its initial target of 2650, now revised to 2750, and is due for a correction. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure. Expect a test of support at 2400.

Nasdaq 100 Index

* Target calculation: 2400 + ( 2400 – 2050 ) = 2750

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Hong Kong & Shanghai

Hong Kong’s Hang Seng Index retreated Wednesday in response to a sharp fall in Shanghai. Bearish divergence on 21-day Twiggs Money Flow warns of a correction, but as long as the lower trend channel at 20,000 is respected the primary up-trend remains intact.

Hang Seng Index

* Target calculation: 20000 + ( 20000 – 17500 ) = 22500

Dow Jones Shanghai Index fell sharply to test support at 295. Failure of support would warn of a correction.

Dow Jones Shanghai Index

Shanghai Composite Index shows a similar fall. Follow-through below 2380 would signal a correction to primary support at 2150.

Shanghai Composite Index

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Singapore: Straits Times Index

Singapore’s Straits Times Index gapped above resistance at 3000 today, confirming the primary up-trend, and is currently trading near 3020. Target for the initial advance is 3200*.

Singapore Straits Times Index

* Target calculation: 2900 + ( 2900 – 2600 ) = 3200

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Canada TSX: Momentum trades

Bullish

  • New Zealand Energy [NZ] ~ respected support at $3.00; breakout above $3.80 would confirm another primary advance.
  • Rio Alto Mining [RIO] ~ narrow consolidation favors breakout above $4.70, signaling a new advance; support at $4.30.
  • Roxgold [ROG] ~ good support at $1.90, breakout above $2.15 would signal a new advance.

Watch for breakout

  • Tri-Oil Resources A [TOL] ~ narrow consolidation between $3.50 and $3.80 but strong bearish divergence on 21-day Twiggs Money Flow
  • Argonaut Gold [AR] ~ strong resistance at $10.00, support at $9.00
  • Atna Resources [ATN] ~ support at $1.25, resistance at $1.50.
  • Northern Graphite [NGC] ~ 21-day Twiggs Money Flow below zero is bearish but ascending triangle below $2.20, breakout would signal a fresh advance.
  • Pretium Resources [PVG] ~ breakout above $18.00 would signal continuation
  • TAG Oil [TAO] ~ testing resistance at $10.00
  • Americas Petrogas [BOE] ~ testing support at $4.00, respect would favor breakout above $4.50 and a fresh advance.

Americas Petrogas [BOE]

  • Coastal Energy [CEN] ~ recovered above $20.00, follow-through above $21.00 would confirm a fresh advance.

Americas Petrogas [BOE]

Negative Watch

  • Silvercrest Mines [SVL] ~ strong bearish divergence on 21-day Twiggs Money Flow followed by sharp drop to test support at $2.50.
  • Madalena Ventures [MVN] ~ long correction, headed for test of $1.00.
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