Category: UK & Europe

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Europe tests primary support

Summary:

  • Europe threatens reversal to a down-trend.
  • S&P 500 finds support.
  • VIX continues to indicate a bull market.
  • China’s Shanghai Composite encounters selling pressure.
  • ASX 200 experiences a secondary correction.

Dow Jones Europe Index is testing the primary trendline and support at 315. 13-Week Twiggs Momentum below zero already warns of a primary down-trend. Breach of primary support at 315 would confirm. Respect of primary support and recovery above 330, however, would suggest that the primary trend is intact.

Dow Jones Europe Index

Germany’s DAX continues to test primary support at 9000. A long tail on Friday suggests short-term support. Failure of support would warn of a decline to 8000*, while respect would suggest another test of 10000.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The S&P 500 found support at 1900 and recovery above 1950 would indicate another advance. The latest decline on 13-week Twiggs Money Flow is relatively small and recovery above its July high would suggest that buyers have taken control. Failure of 1900, however, would warn that the primary trend is slowing.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

CBOE Volatility Index (VIX) spiked upwards, to between 16 and 17, but remains low by historical standards and continues to suggest a bull market.

S&P 500 VIX

China’s Shanghai Composite Index encountered selling pressure below resistance at 2250, with tall wicks/shadows on the last two weekly candles and a sharp fall in 13-week Twiggs Money Flow. Reversal below 2150 would warn of another test of primary support at 1990/2000. Follow-through above 2250, however, would confirm a primary up-trend.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 is heading for a test of support at 5350/5400 and the primary trendline. Direction will largely be influenced by the US and Chinese markets, but reversal of 13-week Twiggs Money Flow below zero — after long-term bearish divergence — would warn of strong selling pressure. Recovery above 5550 is unlikely at present, but would suggest another advance. Reversal below 5050 is also unlikely, but would signal a trend change.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

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Vladimir Putin’s pointless conflict with Europe leaves it a vassal of China – Telegraph

From Ambrose Evans-Pritchard:

European officials calculate that Mr Putin will not dare to cut off energy supplies, since to do so would bring the Russian state to its knees within months. But even if he tried – as a shock tactic – it would not achieve much. Oil can be obtained anywhere.

Europe’s gas inventories have risen to 81pc of capacity, up from 46pc in March. Britain is at 94pc……Japan has just given the go-ahead for two nuclear reactors to restart in October, with seven likely by the end of the year. Koreans are also firing up closed nuclear reactors. All this frees up LNG.

Whether this is fruit of a co-ordinated strategy, the net effect is that inventories and spare LNG could cover a Russian cut-off for a long time, probably through the winter with rationing. Areas of eastern Europe have no pipeline supply from the West, but “regas” ships could plug some gaps in an emergency. The gas weapon is not what it seems.

The Kremlin is counting on acquiescence from the BRICS quintet as it confronts the West, and counting on capital from China to offset the loss of Western money. This is a pipedream. China’s Xi Jinping drove a brutal bargain in May on a future Gazprom pipeline, securing a price near $350 per 1,000 cubic metres that is barely above Russia’s production costs….

Read more at Vladimir Putin's pointless conflict with Europe leaves it a vassal of China – Telegraph.

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Falling crude prices are good news

Crude oil prices are falling sharply. Nymex Light Crude broke support at $98/barrel and Brent Crude is testing support at $104. Breach of that support level would confirm a primary down-trend.

Nymex WTI Crude

The theory has been bandied about that lower crude prices are a Barack Obama strategy to deter Vladimir Putin in East Ukraine. But there are signs of an economic slow-down in Europe, especially Italy, that would hurt demand for Brent Crude. And the Baltic Dry Index, which reflects bulk commodity shipping rates, indicates global trade is at a low ebb. Whichever is correct, low crude prices are welcome — good for the medium-term outlook of the global economy.

Baltic Dry Index

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Europe: Dax selling pressure

Germany’s DAX is broke support at 9600, warning of a correction to 9000 — and a weakening primary up-trend. Decline of 13-week Twiggs Money Flow below zero reflects (long-term) selling pressure. Breach of primary support at 8900/9000 would signal a primary down-trend. Recovery above 9800/10000 is unlikely at present, but would indicate another advance.

DAX

* Target calculation: 9750 + ( 9750 – 9000 ) = 10500

Deutsche Post AG (y_DPW.DE) serves as a bellwether for European markets. Deutsche Post DHL couriers holds a similar position to that of Fedex in US markets. The stock broke support at 24.00/25.00, completing a rounding top. Decline of 13-week Twiggs Money Flow below zero reflects (long-term) selling pressure. Target for the breakout is 20.00*. A down-trend warns of slowing economic activity.

Deutsche Post AG

* Target calculation: 24 – ( 28 – 24 ) = 20

Dow Jones Euro Stoxx 50 is retracing to test support at 3000/3100. Breach of support would suggest a decline to 2500 as indicated on the monthly chart. Respect of support, however, would indicate another advance.

Dow Jones Euro Stoxx 50

* Target calculation: 3150 + ( 3150 – 3000 ) = 3300

A quarterly chart shows the Footsie consolidating in a long-term triangle below its previous high of 6950. Ascending triangles favor an upward breakout, but I would be cautious with the current outlook for Europe. Reversal below 6650 would warn of a correction to 6400/6500.

FTSE 100

* Target calculation: 6900 + ( 6900 – 6500 ) = 7300

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Has Vladimir Putin taken a dangerous ideological turn?

Vladimir Putin has long shown himself to be ruthless and cynical. But also pragmatic and rational.

In his third term in the Kremlin, however, and particularly in the Ukraine crisis, Putin appears to have taken a decisive ideological turn.

As pressure mounts from Western sanctions and Russia becomes more isolated, speculation has intensified about whether Putin will seek an exit strategy from the Ukraine crisis, or whether he will escalate yet again.

The answer largely depends on which Putin — the pragmatist or the ideologue — the West is dealing with.

On the latest “Power Vertical Podcast” Brian Whitmore discusses the issue with co-host Mark Galeotti, a professor at NYU, an expert on Russia’s security services, and author of the blog “In Moscow’s Shadows”; and Kremlin-watcher Ben Judah, author of the book “Fragile Empire: How Russia Fell Out Of Love With Vladimir Putin.”

Also on the podcast, Mark, Ben, and Brian discuss how attitudes in Europe about Russia are changing — and changing dramatically.

From Radio Free Europe/ Radio Liberty.

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Europe leads markets lower

Summary:

  • Europe retreats as the Ukraine/Russia crisis escalates.
  • S&P 500 displays milder selling pressure and the primary trend remains intact.
  • VIX continues to indicate a bull market.
  • China’s Shanghai Composite is bullish in the medium-term.
  • ASX 200 may experience a secondary correction, but the primary trend displays buying support.

European leaders are waking up to the seriousness of the menace posed by Russia in the East, summed up in a recent Der Spiegel editorial:

Europe, and we Germans, will certainly have to pay a price for sanctions. But the price would be incomparably greater were Putin allowed to continue to violate international law. Peace and security in Europe would then be in serious danger.

Vladimir Putin will not alter course because of a light slap on the wrist. President Obama is going to have to find Teddy Roosevelt’s “big stick” — misplacement of which is largely responsible for Russia’s current flagrant disregard of national borders. And Europe is going to have to endure real pain in order to face down the Russian threat in the East. Delivery of French Mistral warships, for example, would show that Europe remains divided and will encourage the Russian bear to grow even bolder.

Russian Deputy Prime Minister Dmitry Rogozin said, however, that he doubted France would cancel the deal, despite coming under pressure from other Western leaders: “This is billions of euros. The French are very pragmatic. I doubt it [that the deal will be canceled].”
— The Moscow Times

The whole of Europe is likely to have to share the cost of cancelling deals like this, but it is important to do so and present a united front.

Markets reacted negatively to the latest escalation, with Dow Jones Europe Index falling almost 6% over the last month. 13-Week Twiggs Momentum dipped below zero after several months of bearish divergence, warning not necessarily of a primary down-trend, but of a serious test of primary support at 315. Respect of 325 and the rising trendline would reassure that the primary trend is intact.

Dow Jones Europe Index

The S&P 500 displays milder selling pressure on 13-week Twiggs Money Flow and the correction is likely to test the rising trendline and support at 1850/1900, but not primary support at 1750. Respect of the zero line by 13-week Twiggs Money Flow would signal a buying opportunity for long-term investors. Recovery above 2000 is unlikely at present, but breakout would offer a (long-term) target of 2250*.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

CBOE Volatility Index (VIX) spiked upwards, but remains low by historical standards and continues to suggest a bull market.

S&P 500 VIX

China’s Shanghai Composite Index broke resistance at 2150, suggesting a primary up-trend, but I will wait for confirmation from a follow-through above 2250. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 2050 is unlikely at present but would warn of another test of primary support at 1990/2000. The PBOC is simply kicking the can down the road by injecting more liquidity into the banking system. That may defer the eventual day of reckoning by a year or two, but it cannot be avoided. And each time the problem is deferred, it grows bigger. So the medium-term outlook may be improving, but I still have doubts about the long-term.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 is likely to retrace to test the rising trendline around 5450, but 13-week Twiggs Money Flow holding above zero continues to indicate buying support. Recovery above 5600 is unlikely at present, but would present a target of 5800*. Reversal below 5050 would signal a trend change, but that is most unlikely despite current bearishness.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

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Moscow fights back after sanctions | Reuters

From By Polina Devitt and Gabriela Baczynska at Reuters:

The first European economic victims of the trade war were Polish apple growers, who sell more than half their exports to Russia. Moscow is by far the biggest importer of EU fruit and vegetables, buying more than 2 billion euros’ worth a year.Russia said the ban, covering most Polish fruit and vegetables, was for sanitary reasons and it would look into expanding it to the rest of the EU.

Please buy Polish apples.

Read more at Moscow fights back after sanctions; battle rages near Ukraine crash site | Reuters.

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Footsie bullish but DAX selling pressure

The Footsie is headed for another test of 6850/6900. Respect of the zero line by 13-week Twiggs Money Flow indicates healthy long-term buying pressure. Breakout would offer an intermediate target 7300*. Reversal below 6650, however, would warn of a correction to 6400/6500.

FTSE 100

* Target calculation: 6900 + ( 6900 – 6500 ) = 7300

Germany’s DAX is testing support at 9600. Breach would warn of a correction to 9000 — and a weakening primary up-trend. Declining 13-week Twiggs Money Flow indicates selling pressure, but respect of the zero line would suggest the primary trend is intact. Breach of primary support at 8900/9000 is unlikely, but would signal a primary down-trend. Recovery above 10000 is also unlikely at present, but would indicate an advance to 10500*.

DAX

* Target calculation: 9750 + ( 9750 – 9000 ) = 10500

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DAX warns of correction

Germany’s DAX retreated below medium-term support at 9700, warning of a secondary correction. Follow-through below 9600 would confirm. Declining 21-day Twiggs Money Flow, below zero, indicates medium-term selling pressure. Breach of primary support at 8900/9000 is unlikely, but would warn of a primary down-trend. Recovery above 10000 is also unlikely at present, but would indicate an advance to 10500*. Respect of the long-term trendline at 9500 would indicate that momentum and the primary up-trend are intact.

DAX

* Target calculation: 9750 + ( 9750 – 9000 ) = 10500

Deutsche Post AG (y_DPW.DE) serves as a bellwether for European markets. Deutsche Post DHL couriers holds a similar position to that of Fedex in US markets. The stock formed a rounding top over the last year and is now testing primary support at 25.00. Breach of support would warn of a slow-down in economic activity.

Deutsche Post AG

The Footsie follows a similar path to the DAX in recent weeks. Reversal below 6700 would warn of a correction; follow-through below 6670 would confirm. Declining 21-day Twiggs Money Flow indicates selling pressure, but respect of the zero line would suggest long-term buying support. Recovery above 6800 is unlikely at present, but would suggest a rally to 6880. Breach of primary support is even less likely, but would signal reversal to a primary down-trend.

FTSE 100

* Target calculation: 6800 + ( 6800 – 6400 ) = 7200

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