Category: UK & Europe

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DAX finds support

The Euro retraced from resistance at $1.39 but appears unlikely to penetrate the rising trendline (having recently signaled a primary advance). Breach would warn of of trend weakness, but recovery above $1.39 is more likely and would signal an advance to $1.46*.

Euro

* Target calculation: 1.37 + ( 1.37 – 1.28 ) = 1.46

The dragonfly candlestick on Germany’s DAX indicates strong support at 9000. Recovery above 9400 would suggest the correction is over and breakout above 9800 would signal a fresh advance with a target of 10600*. Reversal below 9000 is unlikely, but would warn of a correction to the primary trendline. Completion of another 13-week Twiggs Money Flow trough high above zero would signal strong long-term buying pressure.

DAX

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

Retreat of DAX Volatility below 20 suggests low risk indicative of a bull market.

DAX

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Crude: Nymex WTI down-trend

Nymex Light Crude is headed for another test of resistance at $100/barrel. Respect of resistance is likely, given the primary down-trend, and would suggest another test of primary support at $92/barrel. Breach of primary support would offer a target of $84/barrel*. Recovery above $100 is unlikely and another 13-week Twiggs Momentum peak below zero would strengthen the bear signal. Brent crude is headed for another test of support at $104/barrel. Breach would join Nymex crude in a primary down-trend.

Brent Crude and Nymex Crude

* Target calculation: 92 – ( 100 – 92 ) = 84

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What a good economy should look like | Warren Mosler

Warren Mosler, from a talk in Chianciano, Italy, on January 11, 2014 entitled Oltre L’Euro: La Sinistra. La Crisi. L’Alternativa.

What a good economy should look like

I just want to say a quick word about what a good economy is because it’s been so long since we’ve had a good economy. You’ve got to be at least as old as I am to remember it. In a good economy business competes for people. There is a shortage of people to work for business. Everybody wants to hire you. They’ll train you, whatever it takes. They hire students before they get out of school. You can change jobs if you want to because other companies are always trying to hire you. That’s the way the economy is supposed to be but that’s all turned around. For one reason, which I’ll keep coming back to, the budget deficit is too small. As soon as they started tightening up on budget deficits many years ago, we transformed from a good economy where the people were the most important thing to what I call this ‘crime against humanity’ that we have today……

So what you do is you target full employment, because that’s the kind of economy everybody wants to live in. And the right size deficit is whatever deficit corresponds to full employment…….

Read more at Beyond The Euro: The Left. The Crisis. The Alternative | New Economic Perspectives.

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DAX selling pressure

Germany’s DAX shows medium-term selling pressure, with bearish divergence on 13-week Twiggs Money Flow. Breach of support at 9400 — and the latest rising trendline — would warn of a correction to 9000. Respect of 9400 is unlikely, but would signal a primary advance to 10200*.

DAX

* Target calculation: 9800 + ( 9800 – 9400 ) = 10200

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Footsie warns of correction

The FTSE 100 retreated below short-term support at 6700 after a false break above 6800, signaling a correction to test primary support at 6400. Bearish divergence on 13-week Twiggs Money Flow warns of long-term selling pressure. Recovery above 6800 is unlikely, but would signal a fresh advance.

FTSE 100

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

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Footsie breaks out

The FTSE 100 broke resistance at 6800, indicating a test of long-term resistance at 6950/7000. Completion of another 13-week Twiggs Money Flow trough above zero would signal long-term buying pressure. Retracement to test the new support level at 6800 is likely. Respect would strengthen the bull signal. Reversal below 6700 is unlikely, but would warn of a correction.

FTSE 100

* Target calculation: 6700 + ( 6700 – 6400 ) = 7000

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DAX heading for 10000

Germany’s DAX broke resistance at 9600, heading for the psychological barrier of 10000. Reversal below the secondary trendline is unlikely, but would warn of a correction. Completion of another 13-week Twiggs Money Flow high above zero would signal strong long-term buying pressure.

DAX

* Target calculation: 9400 + ( 9400 – 9000 ) = 9800

Low DAX Volatility suggests a bull market.

DAX

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European markets bullish despite weak euro

The Euro penetrated its rising trendline, warning of a correction. Breach of primary support at $1.33 is unlikely, but would signal a reversal.

Euro

* Target calculation: 1.38 + ( 1.38 – 1.33 ) = 1.43

Dow Jones Euro Stoxx 50 appears undeterred, following through above resistance at 3100 to signal an advance to 3350*. 13-week Twiggs Momentum oscillating above zero suggests a healthy up-trend. Breach of the secondary trendline is unlikely, but would warn of a correction.

Dow Jones Euro Stoxx 50

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

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Desperately Seeking Demand | Patrick Chovanec

I have followed Patrick Chovanec on Twitter for several years and really enjoy his insights. His latest Quarterly Report for Silvercrest Asset Management is no exception.

For the past several decades, the U.S. has served as the world’s consumer of last resort. That allowed developing countries – namely Japan, and later China – to turbo-charge growth by producing more than they consumed, confident in the knowledge that Americans would provide the demand by consuming more than they produced. (A parallel pattern emerged within the EU, with Germany playing net producer and the rest of Europe net consumer). The surplus countries kept the game going by taking their export proceeds and lending them back to their customers so the deficit countries could keep buying. This is the global growth model we all became comfortable with……

Listen to most market commentators: while they may say that the financial crisis showed us the error of our ways, their every word belies a tacit wish to return to the world we knew before 2008. “When,” they ask, “will the U.S. consumer start spending again? When will Chinese output get back on track?” Europe, they dare to hope, will turn out okay as long as more countries learn to imitate Germany. Maybe a cheaper Yen will give a renewed boost to Japan’s exports.

These hopes are misplaced. We’re not going back to the past. The old growth model is broken. Here’s what will replace it…..

Read Patrick’s outlook at SILVERCREST ASSET MANAGEMENT GROUP LLC 1Q 2014: Desperately Seeking Demand

Hat tip to Leith van Onselen at Macrobusiness.com.au

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