The ASX 200 broke out above its descending trendline — warning that the down-trend was ending — but ran into selling pressure. Bearish divergence on 21-day Twiggs Money Flow confirms the tall shadow on Friday’s candle. Respect of support at 4100 would suggest a primary up-trend, while failure would re-test primary support at 3850.
* Target calculation: 4300 + ( 4300 – 3900 ) = 4700
Support levels are clearer on the weekly chart.
Canada’s TSX 60 index is headed for a test of resistance at 720/730 on the weekly chart. Expect a retracement. Respect of the trendline would warn of another test of primary support. Breakout above the descending trendline would signal that the primary down-trend has weakened and a bottom is forming. A 13-week Twiggs Money Flow trough that respects the zero line would indicate strong buying pressure.
* Target calculation: 720 + ( 720 – 640 ) = 800
* Target calculation: 720 + ( 720 – 640 ) = 800
The FTSE 100 index is headed for a test of its 2011 high at 6000/6100. Rising 13-week Twiggs Money Flow signals strong buying pressure. Expect retracement to test support at 5400. Respect would confirm a primary up-trend; failure would re-test support at 4800.
* Target calculation: 5400 + ( 5400 – 4800 ) = 6000
Germany’s DAX is testing resistance at 6500. Retracement would test support at 5600. A 63-day Twiggs Momentum peak that respects the zero line would warn that the bear market will continue.
* Target calculation: 5700 + ( 5700 – 5000 ) = 6400
Italy is the latest canary in the coal mine. The FTSE MIB index rallied to test its secondary descending trendline at 17000. Respect would warn of another test of primary support at 13000, while breakout would offer a target of 19000*. The primary trend remains downward despite 13-week Twiggs Money Flow having crossed above zero.
* Target calculation: 17 + ( 17 – 15 ) = 19
Several weeks ago, when asked what it would take to reverse the bear market, I replied that it would take 3 strong blue candles on the weekly chart followed by a correction — of at least two red candles — that respects the earlier low. We have had three strong blue candles. Now for the correction.
On the S&P 500 expect retracement to test support at 1200 or 1250. Respect of 1250 would signal a strong up-trend, while failure of support at 1200 would warn of another test of primary support at 1100. A trough on 13-week Twiggs Money Flow that respects the zero line would also indicate strong buying pressure.
* Target calculation: 1225 + ( 1225 – 1100 ) = 1350
Dow Jones Industrial Average weekly chart displays a similar picture. Expect retracement to test support at 11500. A peak on 63-day Twiggs Momentum that respects the zero line would be bearish — warning of continuation of the primary down-trend.
* Target calculation: 11500 + ( 11500 – 10500 ) = 12500
The Nasdaq 100 is testing resistance at 2400 — close to the 2011 high. Breakout would signal a primary advance to 2800*, while respect would warn of another test of primary support at 2000. Bullish divergence on 13-week Twiggs Money Flow has warned of a reversal for several weeks.
* Target calculation: 2400 + ( 2400 – 2000 ) = 2800
On Friday, Chinese and European officials sought to play down expectations about when and how China may deploy its vast financial resources to help bail out indebted countries in Europe.
A Chinese Vice Finance Minister said China must first see the details of a new European bailout fund before making any commitments. “We of course must wait until its structure is extremely clear,” Zhu Guangyao told a press briefing. “And moreover, this investment must be decided on after serious, technical discussions.”
Mr. Regling told reporters he doesn’t expect “any precise outcome” from his visit to China and said “it’s too early to say what kind of amounts might be envisioned.”
…..Mr. Regling dismissed suggestions that European leaders will be forced to offer concessions to China in return for investment. “I am not here to discuss concessions,” he said, noting that China already buys EFSF bonds and gets no special considerations.
Friday’s Commerce Department report shows that personal income indicator has declined for three consecutive months — at a 2% annual rate. In the past, such steep drops in that category have been followed, three-quarters of the time, by a recession, according to Mr. Rosenberg’s [David Rosenberg of Gluskin Sheff & Associates Inc.] research. So while consumers boosted spending in the third quarter, they pulled it off by dipping into their savings and spending government dollars, not by earning more money at work. Mr. Rosenberg says stagnant wages, plunging consumer confidence, and low expectations for wage growth are a recipe for a dramatic drop in consumer spending in coming months.
via Income Excluding Government Transfers Drops Again – Real Time Economics – WSJ.
Albert Edwards from Société Générale said the ECB will have to act, over a German veto if necessary. “The increasingly frenzied attempts of eurozone governments to persuade financial markets that they can draw a line under this crisis will ultimately fail.”
“The impending threat of a euro break-up will force the ECB to begin printing money, very reluctantly joining the global QE party. The question is whether Germany will leave the eurozone in the face of such monetary debauchery,” he said.
via Europe’s rescue euphoria threatened as Portugal enters ‘Grecian vortex’ – Telegraph.
Monetary contraction in Portugal has intensified at an alarming pace and is mimicking the pattern seen in Greece before its economy spiralled out of control, raising concerns that the EU summit deal may soon [be] washed over by fast-moving events.
via Europe’s rescue euphoria threatened as Portugal enters ‘Grecian vortex’ – Telegraph.
From the FT:
Chinese metals companies, lynchpins in the global economy, are warning that Beijing’s monetary tightening has gone too far, causing domestic customers to delay orders and raising the risk of payment default.
In one of the clearest signs yet of deteriorating sentiment, Baosteel, China’s second-largest steel producer, has told the Financial Times that its customers were pushing back scheduled deliveries “due to declining economic growth and tightening credit”.
via China spoils the party – macrobusiness.com.au | macrobusiness.com.au.
So where once investors worried that it [the Bank of England] had got policy plain wrong, there’s now a chance they’ll start to fear that the bank has got things all too right, after all, and that the U.K. really does need policy settings appropriate for an economic ice age……
And a government focused on austerity measures is in no position to offer fiscal support even if it wanted to, and, according to the treasury’s pronouncements, it doesn’t. It’s sticking with the deficit-cutting plan A, come what may.
So this is clearly an economy with huge problems anywhere you might care to look. Its remaining cardinal virtue, perhaps, is that it isn’t in the euro zone, so the bloc’s more pressing concerns have shielded it from harsher scrutiny. It can’t rely on that shield for all time.
