Since the recession ended in mid-2009, U.S. corporate profits have jumped by about 43% to a record $1.45 trillion as of the first quarter, after taxes, inventory and accounting adjustments, according to the Commerce Department.
What hasn’t recovered, however, is economic growth. Indeed, in real terms, gross domestic product hasn’t even returned to its pre-recession peak.
via Ahead of the Tape: More Liquidity Only Douses Growth Sparks – WSJ.com.
The Euro is testing resistance at $1.455 after consolidating between $1.40 and that level for the last two months. Twiggs Momentum oscillating in a tight band around zero reflects no real trend and this is likely to continue unless the Fed introduces a new round of quantitative easing.
* Target calculation: 1.45 + ( 1.45 – 1.40 ) = 1.50
The Pound is testing resistance at $1.66 against the greenback. Breakout above the 2011 high of $1.67 would signal another primary advance, but Momentum is falling and we can expect strong resistance between $1.66 and $1.70.
* Target calculation: 1.65 + ( 1.65 – 1.60 ) = 1.70
The Swiss Franc is testing support at $1.25 against the greenback. Respect of support is likely, but breakout above $1.30 is also unlikely in the short-term unless Ben Bernanke announces further quantitative easing.
A three-year chart shows strong support for the US dollar at R6.50. Earlier breach of the descending trendline and rising 63-day Twiggs Momentum both warn that the Rand is likely to weaken. Now we have a break above resistance at R7.00 testing the 2011 high of R7.35. Breakout would signal an advance to R8.00*.
* Target calculation: 7.30 + ( 7.30 – 6.50 ) = 8.10
A long-term chart shows the dramatic fall of the greenback against the yen over the last three decades. The bear trend continues with breakout below ¥80 signaling further decline to around ¥60* over the next few years. Quantitative easing by the Fed would accelerate the process.
* Target calculation: 80 – ( 100 – 80 ) = 60
The Aussie Dollar continues to consolidate between $1.03 and $1.06 against the greenback. Failure of support at $1.03 would test parity, while breakout above $1.06 would target resistance at $1.10. In the long term, declining commodity prices are likely to drag the Aussie lower — unless the Fed starts printing money again.
* Target calculation: 1.03 – ( 1.06 – 1.03 ) = 1.00
The Aussie Dollar is testing the upper border of the declining trend channel against its Kiwi counterpart. Reversal below short-term support at $1.255 would indicate respect of the upper channel and a down-swing to around $1.20*. Breakout above $1.28 is unlikely but would warn that the down-trend is weakening.
* Target calculation: 1.24 – ( 1.28 – 1.24 ) = 1.20
The Candian Loonie is consolidating in a narrow band above parity, warning of selling pressure. Earlier penetration of the long-term rising trendline indicates the up-trend has weakened. Breach of support would confirm a primary down-trend, with an initial target of $0.94 against the greenback.
* Target calculation: 1.00 – ( 1.06 – 1.00 ) = 0.94
Equity funds had estimated inflows of $1.48 billion for the week, compared to estimated outflows of $30.01 billion in the previous week.
via $1.1B Comes Back into Mutual Funds Investing in U.S. Stocks.
In the week ending August 10, $40.3 billion was pulled out of long-term mutual funds of all types, the Investment Company Institute reported.
New Zealand is one of the few markets that is bucking the trend — its agriculture-based economy fairly insulated from the global down-turn. ENZL, the MSCI New Zealand ETF, recovered above its former primary support level at 31.50 after strong bullish divergence on 13-week Twiggs Money Flow. While technically still a bear market, retracement that respects the new support level of 31.50 would confirm a test of 34.
The Dow Jones Industrial Average rallied Tuesday on fairly light volume. Expect resistance at 11500. This is a bear market, with reactions to good news likely to be short — and declines from bad news severe. Target for the next decline is 10000*.
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
