The Bovespa Index broke its descending trendline and resistance at 58000 to complete a classic Dow reversal. A higher trough on 13-week Twiggs Money Flow indicates long-term buying support. Consolidation below 60000 has formed a bullish ascending triangle; upward breakout is likely and would confirm a target of 70000.
* Target calculation: 60 + ( 60 – 50 ) = 70
LONDON—European banks, increasingly concerned about their ability to access funding, are devising complex and potentially risky new deals that enable them to continue borrowing from the European Central Bank…..
They also are a sign that struggling banks across Europe are preparing for a period of prolonged reliance on financial lifelines from the ECB. The Continent’s intensifying financial crisis has made it difficult for many banks to obtain funding from customary market sources.
The Aussie is testing support at parity against the greenback. The “iceberg” on 63-day Twiggs Momentum indicates a primary down-trend. Failure of parity would test primary support at $0.94 and, in the long-term, breach of primary support would signal a decline to $0.80*.
* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80
63-Day Twiggs Momentum indicates a stronger down-trend on Canada’s Loonie. Failure of support at $0.975 would test primary support at $0.94 and, in the long-term, breach of the $0.94 level would signal decline to $0.80*.
* Target calculation: 0.94 – ( 1.01 – 0.94 ) = 0.87
The Aussie and Loonie normally move in sympathy with the CRB Commodities Index and a CRB break of its primary down-trend would warn of a reversal on the above two currencies.
The euro broke support at $1.36 and is headed for a test of primary support at $1.32. Respect of zero by 63-day Twiggs Momentum signals a strong down-trend. Failure of support would signal a decline to $1.22*.
* Target calculation: 1.32 – ( 1.42 – 1.32 ) = 1.22
The pound is also retracing, to test primary support at $1.53. 63-Day Twiggs Momentum indicates a strong down-trend. Failure of support would signal a decline to $1.45*.
* Target calculation: 1.53 – ( 1.61 – 1.53 ) = 1.45
The Office for National Statistics said its comprehensive internationally comparable measure of unemployment rose 129,000 in the three months to September to 2.62 million, the highest level since 1994. That lifted the unemployment rate to 8.3%, the highest rate since 1996, compared with 8.1% in the three months to August.
Within that figure, the number of unemployed people between 16 and 24 years old, known as youth unemployment, rose 67,000 in the three months to September to 1.02 million, a rate of 21.9%.
Markets largely shrugged off the ECB, as long-term investors continued to dump everything but German bonds—considered the market’s safe harbor—and it became increasingly difficult to find private buyers for bonds issued by the large, indebted countries such as Italy and Spain…..The ECB fought a running battle throughout the day, traders said, in an attempt to drive the yield on the 10-year Italian note below 7%. The trading session started with price rally that drove the closely watched rate down to 6.84%. Then, as ECB buying lightened, private sellers took over, driving the yield—which moves in the opposite direction of price—up to 7.22%, according to Tradeweb data. Prices then rallied in the afternoon, with some market participants citing more ECB buying as well as comments from German Chancellor Angela Merkel indicating German support for more fiscal integration in the euro zone.
via ECB Fights to Put Lid on European Bond Yields – WSJ.com.
Dow Jones Europe Index is testing medium-term support at 230. Bearish divergence on 21-day Twiggs Money Flow warns of selling pressure. Failure of support would test the primary level at 210 — and breach of primary support would signal another decline, with a target of 160*.
* Target calculation: 210 – ( 260 – 210 ) = 160
WASHINGTON — The Federal Housing Administration has a “close to 50” percent chance of requiring a bailout if the housing market deteriorates next year, the agency’s independent auditor said in a report released Tuesday.
The F.H.A., which offers private lenders guarantees against homeowner default, has just $2.6 billion in cash reserves, the report found, down from $4.7 billion last year.
The agency’s woes stem from the national foreclosure crisis. In the last three years, the F.H.A. has paid $37 billion in insurance claims against defaulting homeowners, shrinking its cash cushion.
FT reports:
The president of Germany’s powerful Bundesbank has firmly rebuffed international demands for decisive intervention in the bond markets by the European Central Bank to combat the eurozone debt crisis, warning that such steps would add to instability by violating European law. Bundesbank president Jens Weidmann told the Financial Times that only politicians could resolve the crisis, and he rejected the idea of using the ECB as “lender of last resort” to governments.
We’ve seen this movie before. Higher rates after a severe debt-deflation recession are burdensome, perhaps economically fatal. Hiding behind the excuse that we must fight inflation NOW requires a grand dismissal of economic history. There are times to impose austerity and don the hawkish posture, but there are times when that’s exactly wrong. This is one of those times, particularly for Europe.
via EconoMonitor : EconoMonitor » The Triumph of Austerity (and its Consequences).
Italy is running a primary surplus. The only thing sending her over the edge is the simple fact that the Italian government cannot borrow at low-enough rates. At 4% (where rates were a year ago), they can gradually begin to adjust their debt ratios and still finance their borrowing – it will not be easy, but they, unlike their spendthrift cousins in the Aegean, have one of the highest savings rates in the OECD…..
via Things That Make You Go Hmmm… – Outside the Box Investment Newsletter – John Mauldin.
