US & Canada Archives - Page 131 of 169

June 24, 2012

Quantitative easing and the (lack of) responses in bond yields

…When the Fed was performing quantitative easing, treasury yields rose as the economy recovered and inflation expectation rose. On the other hand, treasury yields fall when the Fed was not performing quantitative easing as the period without quantitative easing coincided with the weakening of the economy as well as the deterioration of the Euro Crisis.

10-Year Treasury Yields

via Quantitative easing and the (lack of) responses in bond yields.

Comment:~ Quantitative easing (QE) expands the stock of money in the economy as the government, through its agent the Fed, issues new banknotes (or equivalent deposits) in payment of goods and services. The resulting inflation would drive up yields.

June 22, 2012

Bernanke Acknowledges Treasury Strategy at Odds With Fed Policy – WSJ

Kristina Peterson and Jon Hilsenrath: The Fed’s [Twist] program is designed to work by taking long-term bonds off the market, nudging investors into riskier assets, such as stocks, that could help boost the economy. The problem is that while the Fed has been snapping long-term bonds off the market, the Treasury Department has been ramping up its issuance of long-term debt to take advantage of historically low long-term rates. Since October 2008, the average maturity of outstanding marketable Treasurys has climbed by nearly 32%, reaching almost 64 months in May, the agency said earlier this month. That’s its highest level in a decade.

via Bernanke Acknowledges Treasury Strategy at Odds With Fed Policy – Real Time Economics – WSJ.

June 21, 2012

Moody's Downgrades Morgan Stanley, Other Banks – WSJ.com

Moody’s Investors Service dealt a fresh blow to the financial sector, downgrading more than a dozen global banks to reflect declining profitability in an industry being rocked by soft economic growth, tougher regulations and nervous investors. The move hit five of the six biggest U.S. banks by assets, including Morgan Stanley, which had mounted a campaign to persuade Moody’s not to cut its rating by three notches. It was downgraded instead by two.

…it also cut the ratings of giant European banks with substantial trading operations, including Deutsche Bank AG, Barclays PLC and HSBC Holdings PLC.

via Moody’s Downgrades Morgan Stanley, Other Banks – WSJ.com.

June 21, 2012

Forex: Europe, Australia, Canada, South Africa and Japan

The Euro is testing its new resistance level at $1.26. Respect would offer a target of $1.17*. Bullish divergence on 63-day Twiggs Momentum, however, warns that the down-trend is weakening; recovery above zero would suggest reversal to a primary up-trend. Breach of the descending trendline would strengthen the signal.

EUR/USD

* Target calculation: 1.26 – ( 1.35 – 1.26 ) = 1.17

Pound Sterling displays a strong up-trend against the euro, again testing resistance at €1.25. Breakout would signal an advance to €1.30*. 63-Day Twiggs Momentum oscillating high above zero indicates trend strength.

GBP/USD

* Target calculation: 1.26 + ( 1.26 – 1.22 ) = 1.30

The Greenback has corrected sharply against the Japanese Yen before finding medium-term support at ¥78. Recovery above ¥80 (and the descending trendline) would indicate that the correction is over, while breach of support would test primary support at ¥75.50/76.50. The long-term bullish divergence on 63-Day Twiggs Momentum continues to warn of reversal to an up-trend.

USD/JPY

* Target calculation: 84 + ( 84 – 78 ) = 90

Sharply falling crude oil prices have weakened Canada’s Loonie relative to the Aussie Dollar. Against the greenback, the Loonie bounced of short-term support at $0.96 but this is unlikely to last and we should expect a test of primary support at $0.94/0.95. A 63-day Twiggs Momentum peak below zero would warn of a primary down-trend.

Canadian Dollar

* Target calculation: 0.96 – ( 0.98 – 0.96 ) = 0.94

The Aussie Dollar lifted along with commodity prices and is headed for a test of $1.02 (USD). Upward breakout would signal an advance to $1.08, while respect of resistance (and the descending trendline) would warn of a decline to $0.90*. A 63-day Twiggs Momentum peak below zero would strengthen the bear signal.

Aussie Dollar

* Target calculation: 0.96 – ( 1.02 – 0.96 ) = 0.90

The Aussie Dollar is headed for a test of resistance at R8.50 (South African Rand). Breakout would offer a target of R9.00*. Reversal of 63-Day Twiggs Momentum below zero, however, would warn of a primary down-trend.

Aussie Dollar/South African Rand

* Target calculation: 8.50 + ( 8.50 – 8.00 ) = 9.00

June 20, 2012

Fed Extends Operation Twist – WSJ.com

U.S. Federal Reserve officials extended through the end of the year a program meant to drive down long-term interest rates and signaled that they were “prepared to take further action” if needed amid heightened worry about the economy’s performance.

By continuing the program, known as “Operation Twist,” the Fed will buy $267 billion in long-term Treasury bonds and notes while it sells short-term Treasurys. The program had been set to expire this month.

via Fed Extends Operation Twist – WSJ.com.

June 19, 2012

FedEx Signals Freightload of Economic Woe – WSJ.com

Air-freight competitor UTi Worldwide, which recently reported results, sounded a note of caution about business in coming months. And April data on volumes from FedEx, the latest available, suggest a 9% drop in international cargo through its main hub in Memphis.

All this hints that fourth-quarter results for the period ended in May, due Tuesday, could be accompanied by cautious guidance for the next fiscal year…….A glance at sales and income from previous downturns shows how sensitive FedEx is to economic growth…. the kind of company that catches a cold when the world economy merely sneezes.

via AHEAD OF THE TAPE: – WSJ.com.

June 18, 2012

S&P 500 and Dow: correction is over

The S&P 500 closed Friday above resistance at 1340, confirming the bullish divergence on 21-day Twiggs Money Flow (hat tip johnb). Expect retracement to test the new support level, followed by a rally to the March/April high of 1420. Wait for breakout on the Nasdaq 100 to confirm the Dow and S&P 500 signals.

S&P 500 Index

Dow Jones Industrial Average broke medium-term resistance at 12600/12700, indicating a rally to 13300. Expect retracement to first test the new support level. A bounce off the zero line by 13-week Twiggs Money Flow indicates medium-term buying pressure — and a likely rally — but the long-term bearish divergence remains and suggests strong resistance at 13300.

Dow Jones Industrial Average

Nasdaq 100 has penetrated its descending trendline, signaling a bottom, but has yet to break resistance at 2580 — which would signal an advance to 2800 and confirm the Dow/S&P signals. Bullish divergence on 21-day Twiggs Money Flow indicates medium-term buying pressure.

Nasdaq 100 Index

June 18, 2012

Canada: TSX 60

The TSX 60 continues to test primary support at 640. Positive sentiment on US markets and from Greek election results is likely to fuel a rally. Breakout above 670 would confirm. Breach of the descending trendline would warn that a bottom is forming. Recovery of 63-day Twiggs Momentum above zero would complete a large bullish divergence, suggesting a primary up-trend. Respect of zero, however, would indicate continuation of the down-trend.

TSX 60 Index

June 17, 2012

The future of natural gas – an interview with Raymond Learsy – On Line Opinion

Raymond Learsy: Let me show you this. It is from a study that MIT made ….. it goes into a great deal of detail that natural gas will result in demand reduction and displacement of coal-fired power by a gas-fired generation. And because of its more limited CO2 emissions further de-carbonization of the energy sector will be required and natural gas provides a cost effective bridge to such a low carbon future. In other words, natural gas, the way it’s structured, it’s enormous availability (we are finding more and more of it since these articles have been written), and it’s extraordinary low cost, present a very real danger to other forms of hydrocarbons…..At $2.50 an MMBtu, the amount of energy that is delivered by that quotient of natural gas, the price of oil would have to be around fifteen dollars a barrel.

via The future of natural gas – an interview with Raymond Learsy – On Line Opinion – 13/6/2012.

June 16, 2012

Guess Who's Buying All the Bonds? (It's Not the Fed) – CNBC

The demand among average investors has swelled so much, in fact, that they bought more Treasurys in the first quarter than foreigners and the Fed combined.

Households picked up about $170 billion in the low-yielding government debt during the quarter, while foreigners increased their holdings by $110 billion.

via Guess Who’s Buying All the Bonds? (It’s Not the Fed) – US Business News – CNBC.

Comment:~ Jim Bianco points out: “If mom and pop were really the end buyers we would expect to see similarly booming numbers from the mutual fund industry. However….mutual fund purchases are a somewhat insignificant portion of domestic buying. Our guess is the domestic buyer is a leveraged carry trader, a mutual fund, a brokerage subsidiary or other group that does not have its own category so it gets ‘dumped’ into the default category of households.”

[Hat tip to Barry Ritholz]