Category: UK & Europe

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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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Europe rising

European recovery is highlighted by performance of the euro. Recovery above $1.37 would be bullish, while breakout above $1.38 would confirm a primary advance, with an immediate target of $1.43*. Reversal below $1.355 is unlikely, but would warn of another test of primary support at $1.33.

Euro

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

Dow Jones Euro Stoxx 50 continues to test new-found support at 3100. 13-week Twiggs Momentum holding above zero suggests a healthy up-trend. Follow-through above 3100 would confirm an advance to 3350*. Breach of the rising (secondary) trendline is unlikely, but would warn of a test of the primary trendline and support at 2850.

Dow Jones Euro Stoxx 50

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

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Footsie selling pressure

The FTSE 100 reflects selling pressure, with a large bearish divergence on 13-week Twiggs Money Flow, but breakout above resistance at 6800 would indicate a test of long-term resistance at 6950/7000. Completion of another 13-week Twiggs Money Flow trough above zero would strengthen the signal. Breach of the primary trendline is less likely, but would warn of a reversal, while breach of primary support at 6400 would confirm.

FTSE 100

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

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Bullish lead-in to the New Year

The S&P 500 broke resistance at 1810, signaling an advance to 1910*. Troughs high above zero on 13-week Twiggs Money Flow indicate strong buying pressure.

S&P 500

* Target calculation: 1810 + ( 1810 – 1710 ) = 1910

The FTSE 100 completed its correction with a break above the descending trendline. Troughs above zero on 13-week Twiggs Money Flow indicate buying pressure. Breakout above 6800 would offer a target of 7200*, but expect strong resistance at the 1999 high of 6950/7000.

FTSE 100

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

The Dow Jones Euro Stoxx 50 broke resistance at 3100, signaling an advance to 3350*. Troughs above zero on 13-week Twiggs Momentum indicate a healthy up-trend. Retracement to test the new support level is likely; respect would strengthen the bull signal.

Dow Jones Euro Stoxx 50

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

Germany’s DAX similarly broke resistance at 9400, offering a target of 10200*. Troughs high above zero on 13-week Twiggs Money Flow indicate strong buying pressure.

DAX

* Target calculation: 9400 + ( 9400 – 8600 ) = 10200

India’s SENSEX is testing resistance at 21200 after a correction that respected support at 20200. Breakout would signal an advance to 22200*. A 13-week Twiggs Money Flow trough above zero would indicate buying pressure and a healthy up-trend.

BSE Sensex

* Target calculation: 21200 + ( 21200 – 20200 ) = 22200

Japan’s Nikkei 225 broke resistance at 16000, supported by a strong rise in the Dollar/Yen exchange rate. Breakout signals a primary advance with a long-term target of 19000*. Completion of a 13-week Twiggs Money Flow trough above zero suggests buying pressure and a healthy up-trend.

Nikkei 225

* Target calculation: 16000 + ( 16000- 13000 ) = 19000

A single cloud on the horizon, the Shanghai Composite Index is testing primary support at 2080. Failure of support would signal a primary down-trend with an immediate target of 1900*. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure, but recovery above zero would suggest support.

Shanghai Composite

* Target calculation: 2080 – ( 2260 – 2080 ) = 1900

The ASX 200 is lagging other markets because of negative influence from China. Bearish divergence on 13-week Twiggs Money Flow indicates selling pressure. Respect of resistance at 5450 would be cause for concern if followed by reversal below 5300. Breakout above 5450 and completion of a trough above zero on 13-week Twiggs Money Flow, however, would signal another primary advance, with a target of 5900*.

ASX 200

* Target calculation: 5450 + ( 5450 – 5000 ) = 5900

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Footsie lags behind

The FTSE 100 continues to display selling pressure, with a large bearish divergence on 13-week Twiggs Money Flow. Failure of primary support at 6400, and breach of the rising trendline, would warn of reversal to a primary down-trend. Follow-through below 6300 would confirm. Recovery above the descending trendline is less likely, but would signal continuation of the primary up-trend.

FTSE 100

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

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Euro and DAX lead recovery

European recovery is highlighted by performance of the euro. Breakout above $1.38 would confirm a primary up-trend, with an immediate target of $1.43*. 13-Week Twiggs Momentum troughs above zero indicate a healthy primary up-trend. Reversal below $1.37 is now unlikely, but would warn of another test of primary support at $1.33.

Euro

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

Germany’s DAX found support at 9000. Breakout above 9400 would signal an advance to 9800*. Reversal below 9000 is as likely, however, and would test medium-term support at 8500. Short retracements suggest strong buying pressure — also indicated by 13-week Twiggs Money Flow oscillating high above zero.

DAX

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

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European stocks retreat

Dow Jones Euro Stoxx 50 retreated below the first line of support at 3000, warning of a correction to the rising trendline. 13-Week Twiggs Momentum above zero continues to suggest a primary up-trend. A trough above zero would strengthen the signal. Recovery above 3100 is now unlikely, but would signal an advance to 3500*.

Euro Stoxx 50

* Target calculation: 3000 + ( 3000 – 2500 ) = 3500

Germany’s DAX continues a primary advance with a long-term target of 10000*. Rising 13-week Twiggs Money Flow indicates strong buying pressure. Reversal below 9000, however, would warn of a correction.

DAX

* Target calculation: 7500 + ( 7500 – 5000 ) = 10000

France’s CAC-40 also displays long-term buying pressure, with rising 13-week Twiggs Money Flow, but retreat below the new support level at 4200 warns of a correction. Recovery above 4200 is now unlikely, but would indicate an advance to 4400*.

CAC-40

* Target calculation: 4000 + ( 4000 – 3600 ) = 4400

Bearish divergence on the FTSE 100, 13-week Twiggs Money Flow, indicates selling pressure and breach of support at 6600 signals a correction. Follow-through below the lower border of the flag formation (6500) would confirm. Failure of primary support at 6400 and breach of the rising trendline would warn of reversal to a primary down-trend.

FTSE 100

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

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Forex: Dollar and Sterling strengthen

The Euro is rallying for another test of resistance at $1.37 after finding support at $1.3350 against the greenback. Troughs above zero on 13-week Twiggs Momentum suggest a healthy up-trend. Breakout above $1.37 would signal an advance to $1.40*. Respect of resistance, indicated by reversal below the secondary rising trendline, would, however, warn of a correction to the primary trendline at $1.31.

Euro/USD

* Target calculation: 1.37 + ( 1.37 – 1.34 ) = 1.40

Sterling breakout above resistance at €1.20 signals a primary up-trend. Recovery of 13-week Twiggs Momentum above zero strengthens the signal. Target for the advance is €1.23*. Reversal below €1.19 is unlikely, but would warn of another test of €1.1650.

Sterling/Euro

* Target calculation: 1.20 + ( 1.20 – 1.17 ) = 1.23

The Greenback is likely to retrace to test the new support level at ¥101 Japanese Yen. Respect would confirm an advance with a target of ¥108*. The trough above zero on 13-week Twiggs Momentum strengthens the signal. Reversal below ¥101 is unlikely, penetration of the rising trendline warning of trend weakness.

USD/JPY

* Target calculation: 1.01 + ( 1.01 – 0.94 ) = 1.08

Canada’s Loonie broke primary support at $0.94, signaling another decline with a target of $0.915*. A peak below zero on 13-week Twiggs Momentum strengthens the signal. Recovery above $0.945 is unlikely, but would warn of a bear trap.

Canadian Loonie

* Target calculation: 0.945 – ( 0.975 – 0.945 ) = 0.915

The Aussie Dollar is heading for a test of primary support at $0.89. The peak below zero on 13-week Twiggs Momentum signals continuation of the down-trend. Breakout below $0.89 would offer a long-term target of $0.81*, while respect of support would suggest a rally to $0.93. The RBA needs a weaker Aussie Dollar, without lowering interest rates, and will do all it can to assist the decline.

Aussie Dollar

* Target calculation: 0.89 – ( 0.97 – 0.89 ) = 0.81

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DAX leads the way

The FTSE 100 continues to test support at 6600. Upward breakout from the recent flag formation would signal an advance to the December 1999 high of 6950/7000*. Falling 13-week Twiggs Money Flow suggests medium-term selling pressure, but a trough above zero would be a long-term bull signal. Breach of 6600 would warn of a correction to primary support and the rising trendline at 6400.

FTSE 100

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

Dow Jones Euro Stoxx 50 continues its test of resistance at 3100 on the monthly chart. Rising 13-week Twiggs Momentum suggests a primary up-trend. Breakout above 3100 would signal an advance to 3500*. Reversal below 3000 is unlikely, but would indicate a correction to the rising trendline.

Euro Stoxx 50

* Target calculation: 3000 + ( 3000 – 2500 ) = 3500

Germany’s DAX leads the way with a strong advance to 9500*. Steeply rising 13-week Twiggs Money Flow signals strong buying pressure. Respect of the target at 9500 would suggest a correction to the rising trendline and support at 8500.

DAX

* Target calculation: 8500 + ( 8500 – 7500 ) = 9500

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