S&P 500 Bollinger Band Squeeze

John Bollinger says that a Band Width squeeze has preceded many spectacular moves on the S&P 500. A Bollinger Band squeeze highlights when the bands contract into a narrow “neck” indicating low volatility. The squeeze is normally signaled by a fall in the Band Width indicator to below 2.0%.

S&P 500

Upward breakout from a narrow “squeeze” in late January flagged a strong advance, from 2280 to 2400.

Now we have the opposite, with breakout below 2360 warning of a correction. But Bollinger warns that the market often starts with a fake move, in the wrong direction, before the real move commences. So we need to be cautious.

Dow breaches support

The commentator’s curse. Three days after I posted that Dow Jones Industrial Average was consolidating in a bullish narrow band below resistance at 21000, the Dow breached support at 20800. Downward breakout warns of a correction. Expect support at 20000. The false break above 21000 was a hint that all was not well with the trend. Unfortunately we often only see what we expect to see and miss the subtle clues.

Dow Jones Industrial Average

The Dow is in Stage III of a bull market, with long-term Twiggs Money Flow signaling strong buying pressure. Chances of a (primary trend) reversal seem low.

[Correction: Breach of support was at 20800, not 21800.]

Sensex breakout

India’s Sensex broke through resistance at 29000, signaling another advance. Twiggs Money Flow swung upward, the trough above zero indicating strong buying pressure. Resistance at the 2015 high of 30000 may yet prove stubborn, but the target for the advance is 32000*.

Sensex Index

* Target: 29000 + ( 29000 – 26000 ) = 32000

Europe advances

Germany’s DAX is testing the band of resistance between 12000 and its April 2015 high of 12400. Rising troughs on Twiggs Money Flow indicate strong buying pressure. Breakout is expected but we are likely to experience consolidation below 12400, or a moderate correction, ahead of this.

DAX

The FTSE 100 followed through above resistance at 7350, signaling another advance. Rising troughs on Twiggs Money Flow indicate strong buying pressure. Target for the advance is 7600*.

FTSE 100

* Target: 7350 + ( 7350 – 7100 ) = 7600

Don’t Believe the Hype: China’s North Korea Policy is All Smoke and Mirrors

Dr. Van Jackson is an Associate Professor at the Asia-Pacific Center for Security Studies, and author of the book Rival Reputations: Coercion and Credibility in US-North Korea Relations:

Social media is abuzz with news that China’s Ministry of Commerce announced it will suspend coal imports from North Korea as part of U.N. Security Council sanctions enforcement for the North’s most recent nuclear and ballistic missile tests in violation of prior Security Council resolutions. So China is finally standing arm-in-arm with the United States and international community to actually do something about North Korea. That’s great, right? Wrong.

China’s suspension of coal imports is smoke and mirrors; an act of geopolitical misdirection. The United States is being played, as it has in the numerous past instances when China supported sanctions resolutions against North Korea at the United Nations only to fail to implement them….

….China’s “emotions” toward North Korea don’t drive its policy. China has a long tradition of paying lip service toward cooperation with the United States and the international community while largely failing to apply any meaningful pressure on North Korea, and for good reason: It doesn’t want a nuclear-armed neighbor on its border to become a nuclear-armed enemy. We ignore China’s enduring strategic interests in North Korea at our peril.

Source: Don’t Believe the Hype: China’s North Korea Policy is All Smoke and Mirrors

The Catch-22 in U.S.-Chinese Relations | Carnegie-Tsinghua Center

Paul Haenle served as the director for China, Taiwan, and Mongolian Affairs on the National Security Council staffs of former presidents George W. Bush and Barack Obama prior to joining Carnegie:

When, at the no-necktie summit in California in 2013, Xi [Chinese President Xi Jinping] put forward the [strategic partnership] concept, he mentioned three foundational principles: no conflict and no confrontation; mutual respect, including for both countries’ core interests and major concerns; and win-win cooperation. The United States has long reiterated that the relationship should be based not on slogans but on the quality of the cooperation.

….But China’s call for respect for core interests has been a showstopper in Washington, seen as an indication that what China really seeks is U.S. concessions on areas of long-standing disagreement between the two countries.

Historically China has defined its core interests as including Taiwan, Tibet, and Xinjiang (the Uyghur Autonomous Region) but these have lately expanded to include the South China Sea (9-dash line) and Diaoyu (Senkaku) islands administered by Japan.

Vladimir Lenin advocated: “Probe with a bayonet. If you meet steel, stop. If you meet mush, then push.”

Any attempt at conciliation would encourage further expansion.

Source: The Catch-22 in U.S.-Chinese Relations – Carnegie-Tsinghua Center – Carnegie Endowment for International Peace

The Road to a Free Europe Goes Through Moscow | POLITICO

From James Kirchick, author of The End of Europe: Dictators, Demagogues and the Coming Dark Age:

….The West wants peace and Russia wants victory. These desires are incompatible. Those who cherish liberal democracy and wish to see it endure must accept the fact that a Russian regime is once against trying to debilitate and subvert the free world. While Russia today may not be as conventionally strong an adversary as it was during the Cold War, the threat it poses is more diffuse. Russia is as much an enemy as it was a generation ago, and we need to adopt a more hardheaded, adversarial footing and mentality to defeat it. In a globalized world where the cancerous influences of Russian money and disinformation can more easily corrupt us than when an Iron Curtain divided Europe, and where the ideological terrain is more confusing than the Cold War’s rigid bipolarity, containing Russia presents different challenges than it did a generation ago, not the least of which is maintaining Western unity against a more ambiguous adversary skilled at fighting asymmetrically. We must steel ourselves once again for a generational, ideological struggle in defense of liberal values and open societies and avoid self-inflicted wounds. Never during the Cold War, for instance, was there such a traumatic break within the Western political alliance as Britain’s departure from the European Union—nor, for that matter, did an overtly pro-Russian leader ever capture the presidency of the United States.

Source: The Road to a Free Europe Goes Through Moscow – POLITICO Magazine

A huge hole in Trump’s promise to bring back US manufacturing jobs | Business Insider

By Pedro Nicolaci da Costa:

US manufacturing employment has been declining since a 1970 peak, a drop that accelerated after China’s entry into the World Trade Organisation but, tellingly, not after the US entered the North American Free Trade Agreement with Mexico and Canada in 1994.

….SoftWear’s business, along with so many others across the US, should remind Trump of a factor he has yet to acknowledge: the role of automation in reducing the number of manufacturing jobs available…..

That fits a nationwide pattern of manufacturing output hitting record highs in recent years, even as manufacturing employment continues its steady decline.

….Mark Muro, a senior fellow and the director of policy at the Metropolitan Policy Program at the Brookings Institution, wrote in MIT’s Technology Review. “No one should be under the illusion that millions of manufacturing jobs are coming back to America.”

Source: There is a huge hole in Trump’s promise to bring back US manufacturing jobs | Business Insider

ASX 200 bullish

The ASX 200 is testing resistance at 5800 after a weak retracement. Rising Twiggs Money Flow troughs above zero signal strong buying pressure. Breakout above 5800 is highly likely and would signal a test of 6000*.

ASX 200

* Target medium-term: 5800 + ( 5800 – 5600 ) = 6000

Dow bullish

Dow Jones Industrial Average is consolidating in a narrow band below resistance at 21000, a bullish sign. Strong buying pressure is also signaled by rising Twiggs Money Flow troughs above zero. Breakout would offer a short-term target of 22000.

Dow Jones Industrial Average