US & Canada Archives - Page 133 of 173

July 17, 2012

S&P 500 and Dow Industrials remain bearish

The S&P 500 continues to test resistance at 1370 but declining 63-day Twiggs Momentum warns of a primary down-trend. Breach of the rising trendline would indicate a primary down-swing; confirmed if support at 1270 is broken. Reversal of 63-day Twiggs Momentum below zero would strengthen the bear signal. Breakout above 1420 is unlikely, but would signal an advance to 1570*.

S&P 500 Index Weekly Chart

* Target calculation: 1420 + ( 1420 – 1270 ) = 1570

The Dow Industrial Average is in a similar position, with bearish divergence on 13-week Twiggs Money Flow warning of selling pressure. Reversal of TMF below zero would indicate a primary down-trend .

Dow Industrial Average Index

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

July 16, 2012

A lack of money isn't the problem: it's time to shrink – The Drum – ABC News

Alan Kohler: Debt was built up through 30 years of current account imbalances after currencies were finally unshackled from the gold standard in 1971, and the depression of the 70s came to an end in 1982.

Central banks, principally the Federal Reserve, complied in the process of debt build-up by holding down interest rates and allowing asset prices to rise, keeping balance sheets in the black.

The credit crisis of 2007-08 brought asset prices down rapidly and rendered banks suddenly insolvent, so they had to be recapitalised by governments. Now the governments of Europe, the US and Japan are insolvent, and the only question is when the central banks will monetise their debt – that is, print more money and buy their debts…..

via A lack of money isn’t the problem: it’s time to shrink – The Drum – ABC News (Australian Broadcasting Corporation).

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 16, 2012

Treasury yields continue to fall

10-Year Treasury yields are testing support at 1.45 percent. Breach would offer a target of 1.20 percent*. Declining yields suggest that money is flowing out of stocks and into bonds. Recovery above 1.70 percent is unlikely but would suggest another stock market rally.

10-Year Treasury Yields

* Target calculation: 1.45 – ( 1.70 – 1.45 ) = 1.20

Latest stats from the Fed show holdings of Treasury notes and bonds increased by $3.9 billion over the last week, which may have contributed to the decline. Holdings of (short-term) Treasury bills fell to $14.6 billion, leaving little room for further “Twist” operations — where the Fed swaps short-term holdings for long-term Treasuries.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 12, 2012

Forex: Euro, Pound Sterling, Canadian Loonie, Australian Dollar and Japanese Yen

The Euro broke medium-term support at $1.23, signaling a test of the 2010 low at $1.19/$1.20. Declining 63-day Twiggs Momentum warns of a strong down-trend. Breach of the 2010 low becomes likely if the ECB had to indicate an intention to directly or indirectly purchase government bonds — and would suggest a long-term decline.

Euro/USD

Pound Sterling broke through €1.26 against the Euro and is now retracing to test the new support level. Rising 63-day Twiggs Momentum indicates an accelerating up-trend. Respect of support is likely and would offer a target of €1.29.

Pound Sterling/Euro

* Target calculation: 1.26 + ( 1.26 – 1.23 ) = 1.29

Canada’s Loonie is weakening against the Aussie Dollar but long-term bullish divergence on 63-day Twiggs Momentum (and breach of the descending trendline) warns of reversal to an up-trend. Breakout above parity would confirm.

Canadian Loonie/Aussie Dollar

The Aussie Dollar broke support at $1.02 USD and its recent broadening wedge on the 2-hour chart. Expect a decline to $1.01; confirmed if short-term support at $1.015 is broken.

Aussie Dollar/USD

* Target calculation: 1.02 – ( 1.025 – 1.015 ) = 1.01

A long-term chart shows the US dollar forming a bottom against the Yen after long-term bullish divergence on 63-day Twiggs Momentum and breach of the descending trendline. Breakout above the current descending trendline and resistance at ¥80 would indicate another test of ¥84/¥85, while breach of that level would confirm a primary up-trend.

Aussie Dollar/Japanese Yen

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

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 11, 2012

S&P 500: Weak rally suggests down-turn

The S&P 500 is advancing on the weekly chart toward another test of 1420, but falling momentum warns of a primary down-trend. Reversal of 63-day Twiggs Momentum below zero would indicate a primary decline. Failure of primary support at 1270 would confirm, offering a target of 1170*. In the shorter term, recovery above 1370 would indicate a test of 1420. Breakout above 1420 is unlikely at this stage — especially with money flowing into bonds.

S&P 500 Index Weekly Chart

* Target calculation: 1270 – ( 1370 – 1270 ) = 1170

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 11, 2012

Is America the greatest country in the world?

Beginning scene of the new HBO series The Newsroom answers the question: “Why is America the greatest country in the world?”

An honest three and a half minutes of television…. [strong language]

Hat tip Barry Ritholz/Doug Kass

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 10, 2012

Laffer: Increasing taxes will cause a double-dip recession

Art Laffer of Laffer Associates warns that attempts to increase taxes on the top 2% of earners will drive the economy back into recession: “They employ everyone else, invest capital and provide the economic recovery” he said.

http://video.cnbc.com/gallery/?video=3000101378.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 8, 2012

New Jolt Looms for Investors: Earnings – WSJ.com

Jonathan Cheng: Companies begin reporting second-quarter earnings this week, starting with Alcoa Inc. (AA -2.19%) on Monday. Already, 42 companies—including Ford Motor Co. (F -0.73%) and Texas Instruments Inc. (TXN -2.43%) —have warned investors that profits will be lower than initially expected…….

Companies now are being hit on several fronts. Economies in China, Europe and the U.S. are slowing. That is hurting companies dependent on demand from those countries. As well, the U.S. dollar has jumped against the euro and other currencies, reducing profits made from international sales for U.S. companies.

via New Jolt Looms for Investors: Earnings – WSJ.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 8, 2012

S&P 500 dividend yields signal oversold?

Historically the S&P 500 was considered overbought — and ripe for a bear market — when the dividend yield dropped below 3 percent. A surge in share buybacks in the past two decades, however, disrupted this relationship, with the dividend yield falling close to 1.0 percent in the Dotcom era.

What happens when we adjust for share buybacks?

In 2011, S&P 500 share buybacks increased to $409.0 billion. With dividends of $298 billion*, that gives a total cash distribution (dividends and buybacks) of $707 billion for a yield of 5.44 percent. Right in the middle of the 5.0 to 6.0 percent range previously considered typical of an oversold market.

* S&P 500 market capitalization of $12,993 billion at June 29, 2012 multiplied by 2.29 percent

Unfortunately share buybacks fluctuate wildly with the state of the market:

If we omit the highest and lowest readings, and take the average share buyback over the remaining 3 years, it amounts to $349 billion. That would give adjusted total cash distributions of $614 billion and an adjusted yield of 4.98 percent — still close to the oversold range.

Compare to Earnings Yield

The current reported earnings yield of 6.8 percent, however, is way below the highs (10 to 14 percent) of the 1970s and 80s. Current distributions (dividends plus buybacks) amount to 80 percent of current earnings. Payout ratios above 60 percent are considered unsustainable.

My conclusion is that earnings yield offers a more accurate measure of value. And reflects a market that is fairly valued — rather than overbought or oversold — especially when we consider the likelihood of earnings disappointments.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 7, 2012

Falling Treasury yields: Money is flowing out of stocks

10-Year Treasury yields broke medium-term support at 1.55 percent, indicating another decline. Breach of support at 1.45 percent would confirm, offering a target of 1.20 percent*. Latest stats from the Fed show holdings of Treasury notes and bonds fell over the last week, so the fall is not due to “Operation Twist”. Declining yields suggest that the current stock market rally is likely to fail: money is flowing out of stocks and into bonds. Recovery above 1.70 percent is unlikely but would suggest another stock market rally.

10-Year Treasury Yields

* Target calculation: 1.45 – ( 1.70 – 1.45 ) = 1.20

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.