10-Year Treasury yields remain weak. Look for recovery above 2.40 percent to confirm the primary up-trend in stocks.
US breakout
The S&P 500 index followed through to confirm the breakout above resistance at 1300, signaling the start of a primary up-trend. Rising 13-week Twiggs Money Flow indicates selling pressure. Target for the advance is 1440*.
* Target calculation: 1300 + ( 1300 – 1160 ) = 1440
Nasdaq 100 shows a stronger breakout above 2400, with similar buying pressure reflected on 13-week Twiggs Money Flow. Initial target for the primary advance is 2600*.
* Target calculation: 2400 + ( 2400 – 2200 ) = 2600
Bellwether transport stocks, Fedex and UPS, reinforce the S&P and Nasdaq signal with new highs signaling a primary up-trend.
Always bear in mind that the primary up-trend rests on unstable foundations (private sector deleveraging offset by deep government sector deficits) and may not last much longer than the November elections.
Banks Point to a Pickup in Lending – WSJ.com
At Citi, retail-banking loans rose 15% from a year ago to $133 billion, as the New York bank lent more to individuals and local businesses. At San Francisco-based Wells, commercial and industrial loans rose 11% from a year earlier to $167 billion at Dec. 31, amid what Chief Financial Officer Tim Sloan called broad-based growth.
All told, loans outstanding at the companies and J.P. Morgan rose by $41 billion from a year ago in the fourth quarter, to $2.14 trillion. That’s the first increase for the three giant lenders since 2008…
via Banks Point to a Pickup in Lending – WSJ.com.
Comment: ~ Private sector deleveraging is slowing and new capital investment improving, but this may prove a temporary respite as purchases were brought forward to take advantage of accelerated tax depreciation in 2011. The 100% write-off of new capital investment (in the year of purchase) will expire in 2012 if not extended by Congress.
Nouriel Roubini’s Global EconoMonitor » The Straits of America
Given the bearish outlook for US economic growth, the Fed can be expected to engage in another round of quantitative easing. But the Fed also faces political constraints, and will do too little, and move too late, to help the economy significantly. Moreover, a vocal minority on the Fed’s rate-setting Federal Open Market Committee is against further easing. In any case, monetary policy cannot address only liquidity problems – and banks are flush with excess reserves.
Most importantly, the US – and many other advanced economies – remains in the early stages of a deleveraging cycle. A recession caused by too much debt and leverage (first in the private sector, and then on public balance sheets) will require a long period of spending less and saving more. This year will be no different, as public-sector deleveraging has barely started.
via EconoMonitor : Nouriel Roubini’s Global EconoMonitor » The Straits of America.
Singapore & Korea
Singapore’s Straits Times Index is establishing a base between 2600 and 2900. Rising 63-day Twiggs Momentum warns that the down-trend is weakening. Breakout above 2900 would signal a primary advance to 3200*.
* Target calculation: 2900 + ( 2900 – 2600 ) = 3200
South Korea’s Seoul Composite Index is headed for a test of resistance at 1920. Breakout would signal a primary advance to 2150*, but bearish divergence warns of medium-term selling pressure. It advisable to wait for retracement to respect the new support level, confirming the breakout.
* Target calculation: 1900 + ( 1900 – 1650 ) = 2150
JSE & Bovespa threaten breakout
South Africa’s JSE Overall Index broke resistance at 33000 to signal a primary advance. Target for the initial advance is 35000*. Bearish divergence on 13-week Twiggs Money Flow, however, warns of medium-term selling pressure; we should wait for confirmation from a retracement that respects the new support level. The indicator is rising in the long-term, however, indicating buying support.
* Target calculation: 33 + ( 33 – 31 ) = 35
Brazil’s Bovespa index is testing resistance at 60000. Breakout would confirm a primary up-trend, but bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Again, we need to wait for retracement to confirm the breakout.
* Target calculation: 60 + ( 60 – 55 ) = 65
Canada: TSX60
The TSX 60 broke its descending long-term trendline, suggesting that the index is forming a base. Rising 13-week Twiggs Money Flow signals buying pressure. Breakout above 720 would signal the start of a primary up-trend.
* Target calculation: 720 + ( 720 – 640 ) = 800
Australia and Asia
Australia’s ASX 200 index continues to range between 3850 and 4350. Declining 21-day Twiggs Money Flow reflects medium-term selling pressure, but the long-term rise reflects buying support. Failure of support at 4000 would suggest another test of 3850, but only breakout from the range will offer a clear long-term signal.
China’s Shanghai Composite index respected resistance at 2300, suggesting a decline to 2000*. Deep negative values on 63-day Twiggs Momentum are evidence of a strong primary down-trend.
* Target calculation: 2150 – ( 2300 – 2150 ) = 2000
India’s Nifty Index is headed for a test of the upper border of its downward trend channel at 5200. 63-Day Twiggs Momentum holding below zero continues to indicate a strong primary down-trend.
* Target calculation: 5600 + ( 6600 – 5600 ) = 5100
Japan’s Nikkei 225 Index fell sharply Monday to test short-term support at 8360. 13-Week Twiggs Money Flow below zero indicates selling pressure. Breakout below 8200 would warn of another primary decline, with a target of 7400*.
* Target calculation: 8200 – ( 9000 – 8200 ) = 7400
European markets
The FTSE 100 is testing resistance at 5750 but bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Respect of resistance would suggest another test of primary support at 5050. Upward breakout is less likely, but would indicate an advance to 6300*.
* Target calculation: 5700 + ( 5700 – 5100 ) = 6300
The DAX is testing resistance at 6400. Breakout would indicate an advance to 7400*, but reversal of below the rising trendline — or 13-week Twiggs Money Flow below zero — would warn of another test of primary support at 5000.
* Target calculation: 6400 + ( 6400 – 5400 ) = 7400
Italy’s MIB Index is more hesitant than the DAX. Breakout above 17000 would signal a primary advance, but failure of support at 13000 would indicate a decline to 9000*. Reversal of 13-week Twiggs Money Flow below zero would warn of increased selling pressure.
* Target calculation: 13 – ( 17 – 13 ) = 9
S&P 500 and Nasdaq test resistance
The S&P 500 index is testing resistance at 1300. Breakout would signal a primary up-trend with a target of 1450* for the initial advance. Mild bearish divergence on 13-week Twiggs Money Flow warns of selling pressure, however, and reversal below the rising trendline would indicate another test of primary support at 1160.
* Target calculation: 1300 + ( 1300 – 1150 ) = 1450
The Nasdaq 100 is also testing resistance, at 2400. Rising 63-day Twiggs Momentum and 13-week Twiggs Money Flow both suggest an upward breakout, which would offer a target of 2800* for the initial advance.
* Target calculation: 2400 + ( 2400 – 2000 ) = 2800
Treasury yields are falling, indicating a flight to safety. Uncertainty in Europe and China is likely to hurt the market and we should only accept bull signals if they have strong confirmation.
