The euro found short-term support at $1.35 against the greenback but is now weakening. Failure of support would confirm the target of $1.30*. A peak below zero on the 63-day Momentum oscillator would confirm the primary down-trend.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
“China is a poor country with only $4,000 per capita income,” Yu Yongding, a Chinese top economist and former member of the central bank’s monetary policy committee said in an interview in China. “To talk and think about China to rescue countries with $40,000 per capita incomes is ridiculous.”
China is ready to help, Mr. Yu said, “but European countries first should show that they have a clear road map and convincing policies to preserve the euro and solve their problems as well as the political will to make necessary sacrifices.”
via Europe Is Urged to Take Bolder Action on Debt – NYTimes.com.
China might have more to worry about. Wages in the low-skill manufacturing sector are rising fast. On their current trajectory, they will double in the next five years. Low-skill jobs have already started to migrate elsewhere and will continue to do so. Public spending on education, at 3% of GDP in 2009, compares unfavorably to an average of 5% in the grouping of upper-middle-income countries to which China aspires. Reform of the financial system has fallen by the wayside as banks continue to funnel savings to low-yielding state-sponsored projects.
via Heard on the Street: China’s Lessons From Mexico and Japan – WSJ.com.
Brazil’s Bovespa Index again found short-term support at 54000. Narrow consolidation is a bullish sign, suggesting upward breakout above 58000. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. This is a strong rally for a bear market, but is not a sign yet that a base is forming.
South Africa’s Johannesburg Overall Index also made a reasonable rally before retreating below 30000. Penetration of the rising trendline would indicate another test of support at 28400.
Japan’s Nikkei 225 Index broke support at 8600, signaling a down-swing to test the 2009 low of 7000*. 13-Week Twiggs Money Flow respect of the zero line warns of selling pressure.
* Target calculation: 8600 – ( 10200 – 8600 ) = 7000
South Korea’s Seoul Composite Index fared better, consolidating between 1700 and 1900. Failure of support is more likely (this is a bear market) and would offer a target of 1500*.
* Target calculation: 1700 – ( 1900 – 1700 ) = 1500
Dow Jones Industrial Average rallied on unconfirmed news reports that China is set to buy sovereign debt from troubled Italy. Light volume indicates an absence of selling pressure. This is a bear market, however, and rallies are likely to be of short duration, while breach of support would lead to sharp falls.
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
DJ Europe Index broke support at 225, signaling another down-swing to the 2010 low at 205. The calculated target is lower at 195.
* Target calculation: 230 – ( 265 – 230 ) = 195
Dow Jones India 30 Titans Index is headed for another test of support at 152. 21-Day Twiggs Money Flow holding below zero indicates selling pressure. Failure of support would warn of a down-swing to 136*.
* Target calculation: 152 – ( 168 – 152 ) = 136
Dow Jones Singapore Index is testing the band of support between 220 and 215. Low volume indicates weak support. Failure of 215 would offer a target of 200*.
* Target calculation: 220 – ( 240 – 220 ) = 200
The TSX 60 Index retreated to test its rising trendline at 705. Penetration would warn of a test of primary support at 665. And failure of support would signal another down-swing with a target of 600*.
* Target calculation: 665 – ( 735 – 665 ) = 595
The ASX 200 fell sharply, headed for a test of its key support level at 4000. Low volume indicates weak support and downward breakout would signal a primary down-swing to 3500*.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
