Category: UK & Europe

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Europe: DAX and Footsie test resistance

  • Euro weakens.
  • Stocks in a strong up-trend.

The Euro is testing primary support and the rising trendline at $1.35 on the weekly chart. Bearish divergence on 13-week Twiggs Momentum, followed by a cross below zero, warns of a trend reversal. Breach of support would strengthen the signal. Recovery above $1.37, however, would suggest another test of $1.40.

Euro

Dow Jones Euro Stoxx 50 is trending strongly on the monthly chart. Recovery of 13-week Twiggs Momentum above 10% would complete another trough above zero, further strengthening the trend. Reversal below 3000 and the primary trendline is most unlikely, but would warn of a reversal.

Dow Jones Euro Stoxx 50

* Target calculation: 3200 + ( 3200 – 3000 ) = 3400

The Footsie is again testing resistance at 6850. Follow-through above 6900 would signal an advance to 7200*. Falling 13-week Twiggs Money Flow indicates short-term selling pressure, but long-term oscillations above zero reflect strong buying pressure. Reversal below 6800 is less likely, but would warn of another correction.

FTSE 100

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

The DAX is sitting at the psychological barrier of 10000. Expect retracement to test support at 9800. Respect is likely and follow-through above 10000 would signal an advance to 10500* Recovery of 13-week Twiggs Money Flow above the declining trendline suggests that selling pressure is easing. Reversal below 9750/9800 is unlikely, but would warn of a correction to the rising trendline.

DAX

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

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Footsie and DAX tentative breakout

The Footsie is again testing resistance at 6850. Follow-through above 6900 would signal an advance to 7200*. Rising 13-week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Reversal below 6800 is unlikely, but would warn of another correction.

FTSE 100

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

The DAX broke resistance at 9800. Expect retracement to test the new support level. Respect is likely and follow-through above 10000 would signal an advance to 10500*. Recovery of 13-week Twiggs Money Flow above the declining trendline suggests that selling pressure is easing. Reversal below 9750/9800 is unlikely, but would warn of another correction.

DAX

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

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BOE’s Carney Tells Bankers to Clean Up Their Acts | Real Time Economics – WSJ

By Jason Douglas

Bank of England Gov. Mark Carney said Tuesday the misdeeds of the financial sector risk undermining public support for free markets and called on bankers to radically improve their behavior, a sign of simmering frustration in policy circles over a string of misdemeanors.

In a forthright speech, Mr. Carney said recent scandals in currency and commodity markets highlight “a malaise in corners of finance that must be remedied,” saying such “corruption” has hurt trust in modern capitalism, according to the text of his speech.

His remarks echoed criticism of the financial sector earlier Tuesday by International Monetary Fund Managing Director Christine Lagarde, who accused banks of delaying much-needed reforms to the financial system, which were agreed to in the wake of the crisis that tipped the world into recession in 2009…..

Read more at Bank of England’s Carney Tells Bankers to Clean Up Their Acts – Real Time Economics – WSJ.

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Putin’s strategy: Turning Russia into China’s Ukraine

What is starting to dawn on Vladimir Putin is that, in a free-market system, one is more beholden to one’s customers than to one’s suppliers. It is easier for customers to take their business elsewhere than for suppliers to do so.

China’s biggest customers are Europe and the United States. Russia is attempting to switch their customer from Europe to China. That would move them further down, not up, the supply chain. As Prof Timothy Snyder points out:

…Putin would have to fall back on China, and Russia would become China’s Ukraine.

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How Hitler’s roads won German hearts and minds | VOX

Interesting conclusion from Hans-Joachim Voth and Nico Voigtländer, writing at VOX.

Long before the Nazi regime committed its singular crimes, it had become remarkably popular in Germany (Evans 2006). Voting records from 1933 and 1934 reveal the effect of one factor that, according to many historians, boosted support for the regime – the building of the Autobahn. Using detailed information on the geography of road-building, we isolate the effect of construction on voting behaviour by analysing the ‘swing’ in favour of the regime over a nine-month period (November 1933 to August 1934). We find that opposition declined much faster where the new ‘roads of the Führer’ ran.

Direct economic benefits for residents in Autobahn districts may have played a role, but they were probably small. More importantly, the new roads provided concrete proof of the regime’s actions, delivering on its promise to get ‘Germany moving again’. Within a couple of months of taking power, a highly ambitious highway construction project was under way at 17 different locations all over the country, affecting more than 100 electoral districts. In other words, the visible progress of road construction made the regime’s ability to follow through on its promises salient for many Germans.

Combined with effective propaganda trumpeting the regime’s successes, the roads succeeded in winning the hearts and minds of many Germans. Nor were they the only ones to be impressed. When the US Army rolled into Germany at the end of World War II, one of the officers taken with the ease of transport on motorways was Dwight D. Eisenhower. When he became President of the United States, he lead the initiative to built the country’s interstate highway system.

Read more at Nazi pork and popularity: How Hitler’s roads won German hearts and minds | vox.

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Norway teaches Britain how to choke house booms without killing economy – Telegraph Blogs

Ambrose Evans-Pritchard reports the resounding success of Norway’s central bank in using macroprudential tools to take the steam out of a housing bubble:

if the Bank [BOE] wishes to contain credit, it should learn from Norway’s success. Instead of raising rates, it has used “macroprudential” tools. It cut the loan-to-value ceiling on mortgages from 90pc to 85pc. It forced the banks to raise to capital buffers further.

The Norges Bank has recommended a 1pc counter-cyclical buffer based on its view of what constitutes a safe level of credit growth.

Contrary to claims that these tools never work, they worked splendidly, as you can see from this chart today from HSBC’s David Bloom.

Norway/UK House Prices

The RBNZ adopted similar measures and it is puzzling why the RBA, which faces an equal threat, is not doing the same.

Read more at Norway teaches Britain how to choke house booms without killing economy – Telegraph Blogs.

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Swiss voters reject $US25/hour minimum wage | Business Insider

An example of direct democracy at work. Caroline Copley writes:

Swiss voters on Sunday rejected proposals to introduce the world’s highest minimum wage……

About 76 per cent of voters in the wealthy nation dismissed the proposal made by Swiss union SGB and backed by the Socialist and Green parties for a minimum wage of 22 Swiss francs ($25) per hour, final results showed.

Read more at Swiss Voters Just Rejected A $US25 An Hour Minimum Wage | Business Insider.

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Footsie breakout, DAX to follow?

The Footsie broke resistance at 6850, signaling an advance to 7200*. Completion of another 13-week Twiggs Money Flow trough above zero indicates strong buying pressure. Reversal below 6700 is unlikely, but would signal a bull trap (and test of 6400/6500).

FTSE 100

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

The DAX is testing resistance at 9800. Breakout would offer a target of 10600*. Recovery of 13-week Twiggs Money Flow above 30% would suggest that the bearish divergence is over. Respect of resistance is less likely, but would warn of another test of primary support at 9000.

DAX

* Target calculation: 9800 + ( 9800 – 9000 ) = 10600

Dow Jones Euro Stoxx 50 overcame long-term resistance at 3050/3100 and follow-through above 3240 would confirm a target of 3400*. Recovery above 3180 would signal another advance, but bearish divergence on 13-week Twiggs Momentum suggests weakness. Failure of 3100 would warn of a correction to test 2900/3000.

Dow Jones Euro Stoxx 50

* Target calculation: 3200 + ( 3200 – 3000 ) = 3400

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Robust European Recovery

Dow Jones Euro Stoxx 50 respected support at 3100 and follow-through above 3180 would indicate an advance to 3350*. 13-Week Twiggs Money Flow oscillating above zero indicates a healthy up-trend. Reversal below 3100 is unlikely, but would warn of a correction to the primary trendline.

Dow Jones Euro Stoxx 50

* Target calculation: 3100 + ( 3100 – 2850 ) = 3350

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