India’s Sensex continues to meet resistance at 29000. Twiggs Money Flow now displays a mild bearish divergence. Breakout above 29000 would find resistance at the 2015 high of 30000 which may prove stubborn. Reversal below 28000 is less likely but would warn of another test of primary support at 26000.
Dow Jones Euro Stoxx 50 represents the 50 largest blue chip stocks (Volkswagen, Bayer, Allianz, L’Oreal, Phillips, Unilever, etc.) in the Eurozone, in terms of free-float market capitalization. Breakout above resistance at 3330 signals an advance to 3500*.
* Target: 3300 + ( 3300 – 3100 ) = 3500
The FTSE 100 is testing support at its former resistance level of 7350. Rising troughs on Twiggs Money Flow indicate strong buying pressure. Respect of support is likely and would confirm an advance to 7500*.
* Target: 7100 + ( 7100 – 6700 ) = 7500
Long-term target is 8000: 7000 + (7000 – 6000).
Employment and Participation rates are falling.
Wage rate growth is slowing.
Slowing wage rate growth and inflation confirm that the economy is faltering.
The RBA, with one eye on the housing bubble, has indicated its reluctance to cut rates further. Increased infrastructure spending by Federal and State governments seems the only viable alternative.
With the motor industry winding down and apartment construction headed for a cliff, this is becoming increasingly urgent.
Payrolls jumped by a seasonally adjusted 235,000 jobs in February, setting the Fed on track for another rate rise next week.
GDP growth is projected to lift in line with employment, wage rates and hours worked. At this stage, the Fed is still attempting to normalize interest rates rather than slow the economy to cool inflationary pressures.
Wage rate growth remains muted, at close to 2.5 percent, so rate hikes are likely to proceed at a gradual pace.
The need to tighten monetary policy is only likely to be seriously considered when wage rate growth [light green] exceeds 3.0 percent [dark green line]. Then you are likely to witness a dip in money supply growth [blue], as in 2000 and 2006, with bearish consequences for stocks.
*The dip in 2010 was a mistake by the Fed, taking its foot off the gas pedal too soon after the 2008 crash.
Dow Jones Industrial Average is testing resistance at 21000. Another narrow consolidation, as in December-January, would confirm strong buying pressure already signaled by rising Twiggs Money Flow troughs above zero.
We are witnessing stage III of a bull market. While this is the final leg, it could last several weeks or several years. My guess is that it will last until the Fed is forced to hike interest rates in 2018, to cool inflation.
From WSJ:
The pace of job creation remained robust in February, with payrolls rising by a seasonally adjusted 235,000 new jobs, the Labor Department said.
Evidence of continued health in the U.S. labor market likely cleared the way for the Federal Reserve to raise short-term interest rates next week. The unemployment rate ticked down to 4.7%, as both workforce participation and employment rose….
Source: Robust Job Growth, Higher Wages Show Solid Labor Market – WSJ
Interesting chart from UBS (via Macrobusiness). Movement between 2002 and 2016 for a number of Developed and Emerging Market (DM and EM) countries in the ratio of bank credit to GDP and bank debt to credit.
The good guys are in the top left corner and the bad guys bottom right.
Australia and China are testing record levels of bank credit to GDP, tracing a similar path to Spain. We all know how that ended.
Source: Can Australia dodge the great deleveraging? – MacroBusiness
The Australian Resources sector has been on a tear over the last 12 months, something I was slow to pick up on. China’s PBOC stepped in to boost a slowing economy, sending property prices surging. But now the central bank is tightening monetary policy and housing price growth is slowing.
The ASX 300 Metals & Mining Index is losing momentum, falling below its long-term trendline. Declining Twiggs Money Flow, with peaks near zero, warns of selling pressure.
The fall has slowed advance of the ASX 200. Resistance at 5800 is proving stubborn. Breach of support at 5600 would complete a double top reversal, warning of a primary down-trend. But declining Twiggs Money Flow indicates no more than medium-term selling pressure at present, recovery above 5800 is more likely and would signal a test of 6000*.
* Target medium-term: 5800 + ( 5800 – 5600 ) = 6000
From WSJ:
Federal Reserve Chairwoman Janet Yellen signaled the central bank is likely to raise short-term interest rates at its March meeting and suggested more increases are likely this year if the economy performs as expected.
“At our meeting later this month, the [Federal Open Market] Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Ms. Yellen said in remarks prepared for delivery at the Executives’ Club of Chicago.
The Dollar Index rally continues to meet resistance, with tall shadows on the last three weekly candles signaling selling pressure. Rising interest rates would strengthen the advance, with bearish consequences for gold.
Spot Gold hesitated at $1250/ounce. Rising interest rates also increase the opportunity cost of holding precious metals. Reversal below $1200 would warn of another decline but recovery above $1250 remains more likely and would signal an advance to $1300.
Motor vehicle sales are strong, according to the Federal Chamber of Automotive Industries:
Motor vehicle sales across Australia got off to a solid start in January, with the month’s sales nudging ahead of the same period last year and showing a rise in activity among private purchasers.
Total sales for January, including passenger cars, SUVs, light and heavy commercial vehicles totalled 84,910 for the month, 0.6 percent up on the same month in 2016.
Within the segments, light commercials fell 3.9 per cent, passenger car sales declined slightly (down 0.8 per cent), while SUVs continued their consistent growth pattern with a gain of 3.2 per cent….
But retail sales growth is slowing.
While housing is slowing after a surge in high-density units over the last five years.
Resources exports have been performing well but a slow-down in Chinese housing sales could act as a hand-brake on future growth.
