Countries & Regions Archives - Page 339 of 375

October 25, 2011

2008 Deja Vu

Early May 2008, the S&P 500 index recovered above resistance at the former primary support level of 1400 on its second attempt. 13-Week Twiggs Money Flow broke back above zero, indicating secondary buying pressure. Breakout was followed by two pull-backs in May. The first made a false break below the new support level; the second followed through, commencing a 50% decline to 700.

S&P 500 Index Weekly Chart - 2008

We are now at a similar watershed. Expect retracement in the week ahead to test the new support level at 1250. Respect of support would strengthen the signal, but beware of any penetration. Follow-through above 1300 would signal that the (immediate) danger is over. Until then, consider this a bear market.

S&P 500 Index Weekly - 2011

* Target calculation: 1250 + ( 1250 – 1100 ) = 1400

October 25, 2011

Dow not yet out of the woods

Dow Jones Industrial Average followed through on its breakout above the 10600-11700 trading range but expect some resistance at 12000. The index looks set for a decent rally after narrow consolidation below resistance at 11700. Target for the breakout is 12600*.

Dow Jones Industrial Average

* Target calculation: 11600 + ( 11600 – 10600 ) = 12600

Yields on 10-year Treasury notes also rallied as funds flowed back into stocks, but we are not yet out of the woods.

10-Year Treasury Yield

There is bound to be a relief rally when EU leaders announce details of their rescue package — followed by a pull-back when traders figure out the costs involved. The danger is that Germany and France do an “Ireland” and rescue the banks but put themselves at risk. Both have public debt to GDP ratios close to 80 percent and it would not take much to push them into the danger zone. If they are down-graded then the kids are home alone — there will be no adults left in the room. A down-grade would raise their cost of funding and place their own budgets under pressure.

The S&P 500 is also testing resistance at 1260; breakout would confirm a Dow signal. 13-Week Twiggs Money Flow is rising but no bullish divergence means this could be secondary (medium-term) buying pressure.

S&P 500 Index

* Target calculation: 1120 + ( 1220 – 1120 ) = 1320

Nasdaq 100 index displays an ascending broadening wedge as it approaches resistance at 2400. The ascending wedge is a bearish pattern: Bulkowski maintains that it breaks out downward 73% of the time. Target would be the base of the pattern at 2000. Bullish divergence on 13-Week Twiggs Money Flow, however, indicates strong buying pressure. Breakout above 2450 would signal a primary advance to 2600*.

Nasdaq 100 Index

* Target calculation: 2400 + ( 2400 – 2200 ) = 2600

October 24, 2011

Australia: How the CPI hid the housing bubble – On Line Opinion

We can combine the main areas where housing has been stricken from the CPI – the removal of mortgage costs, quality adjustments to rent, and reduction in weight to home ownership costs – to see what difference it would make had the pre-1998 methodology been continued. The resulting MacroStats cost-of-living index is plotted below against the headline CPI.

MacroStats Cost-of-living index

….We can again see how this measure tracks the official CPI very closely until 1998. Since 1998 it is 0.73 percentage points higher on average (or 3.8%), and in the period 2001-2008, it averaged 1.3 percentage points higher (or 4.4%pa). That gives you some idea of how significant the 1998 methodological shift in the CPI was in disguising housing inflation and creating a feedback loop with lower monetary policy.

via How the CPI hid the housing bubble – On Line Opinion – 20/10/2011.

We need to be wary of bodies like the RBA lobbying to change the composition of the CPI. Performance measurement has to be independent in order to be effective.

October 24, 2011

E-Commerce Shipments to Drive Record FedEx Holiday Volume | FedEx Global Newsroom

MEMPHIS, Tenn., Oct. 24, 2011 – FedEx Corp. (NYSE: FDX) expects to move more than 17 million shipments – almost double its daily average volume – through its global networks on December 12, the projected busiest day in company history. The 10 percent year-over-year increase will be driven by FedEx SmartPost, a residential shipping service designed for online and catalog retailers, as well as expected increased volume at FedEx Ground and FedEx Home Delivery.

via E-Commerce Shipments to Drive Record FedEx Holiday Volume | FedEx Global Newsroom.

October 24, 2011

Euro Zone – ‘Miserable’ Euro PMI Heightens Recession Risk: Economists – CNBC

The euro zone’s manufacturing PMI fell to 47.3 in October, its lowest level since July 2009, with German manufacturing falling for the first time in two years because of a combination of drops in output and new orders and backlogs of work.

The fall in euro zone PMI “reflected steep declines in both the manufacturing and services indices, suggesting that the deterioration in growth prospects reflects developments both at home and abroad,” Ben May, European economist at Capital Economist, wrote in a market note.

via Euro Zone – ‘Miserable’ Euro PMI Heightens Recession Risk: Economists – CNBC.

October 24, 2011

Europe Leaders Debate Severe Options for Accord – WSJ.com

“For the first time, I found the leadership of the euro zone focusing on the fundamentals here in respect to the situation arising from Greece, and the fear of contagion,” said Irish Prime Minister Enda Kenny. “There was clearly an understanding that the world is watching Europe and that there isn’t any point in doing this in a half-hearted fashion.”

The options being debated now are more severe and far-reaching than those under consideration in months past. Last year, when the crisis first threatened the euro zone’s stability, leaders insisted that Greece would not default and that assistance would only be provided to countries on the brink of collapse, and at punitive cost to discourage free-riders.

Now, the question is how big a default Greece will have, and leaders are scrambling to open floodgates of aid to several countries.

via Europe Leaders Debate Severe Options for Accord – WSJ.com.

October 24, 2011

Podcast: Paul Volcker’s Warnings, the S.E.C.’s Privacy Problem and Some Economic Pitfalls – NYTimes.com

Paul Volcker, the former Federal Reserve chairman, warns that we are not out of the woods yet….. Mr. Volcker focuses on two big problems.

First, he says, money market funds should be treated like other mutual funds — whose price can fluctuate — rather than as guaranteed stores of value, like bank accounts. In addition, he says, the United States needs to plan on eventually shutting down Fannie Mae and Freddie Mac, the two agencies that now dominate the mortgage market.

via Podcast: Paul Volcker’s Warnings, the S.E.C.’s Privacy Problem and Some Economic Pitfalls – NYTimes.com.

October 24, 2011

France appears to have conceded to German-ECB position on bailout fund | Credit Writedowns

France appears to have backed down in the face of a German-ECB joint position that strenuously objected to the EFSF becoming a bank to borrow from the ECB. Instead, it appears that the insurance/guarantee function of the EFSF is going to dominate. Although the situation still appears fluid, the momentum seems to favor those who want to have this guarantee function only for new issuance of Spain and Italy.

via France appears to have conceded to German-ECB position on bailout fund | Credit Writedowns.

October 23, 2011

Crunch Time for Franco-German Relations – WSJ.com

…what euro-zone leaders appear to be inching toward is yet another fudge: a Greek deal that avoids default but still falls short of putting debt on a sustainable basis; a bank recapitalization that’s not sufficient to withstand multiple defaults and an expanded bailout fund that isn’t big enough to restore the confidence of sovereign and bank debt markets. That would send a worrying signal that the rift between Germany and France hasn’t been mended. And the longer they leave it, the wider it is sure to grow.

via Crunch Time for Franco-German Relations – WSJ.com.

October 23, 2011

The Dismal Optimist by Peter T. Treadway

Supply side measures are something most macro economists – with a few exceptions – never consider. By supply side I mean those rules, regulations, laws and taxes that hold back economic growth. Supply side measures are growth enhancers and would include:

1. A simplified tax code that maximizes revenue and does not punish the successful. Raising taxes in the midst of a recession, as is now being tried in Greece, is simply the wrong approach.

2. Reform and liberalization of the labor markets. This is particularly important in Europe which suffers from rigid labor laws. German labor reforms under former Chancellor Gerhard Schroeder have been cited as a major reason for increased German productivity over the last few years.

3. The removal of massive regulatory burdens and government bureaucracies supporting them. The recent media report that the government-based Washington DC area now has the highest income of any area in the United States is not good news. (I am told by people in the energy field that the US is now swimming in oil and natural gas thanks to new discoveries and new technologies. But the current US Administration is blocking their development).

4. The removal of barriers to commerce such as protectionist tariff and non-tariff regulations etc.

5. The elimination of government subsidies to pet industries be they green or gray.

6. A privatized approach to education to train people to compete in the globalized, technologically accelerating, highly competitive twenty first century world.

via The Dismal Optimist by Peter T. Treadway.