Category: US & Canada

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Forex: Canadian Loonie and Aussie Dollar

Canada’s Loonie continues its narrow consolidation, having withstood falling crude oil prices over the last two weeks. 63-Day Twiggs Momentum holding above zero indicates a primary up-trend. Breakout above $1.01 would signal a primary advance to the 2011 high of $1.06*. Failure of support at $0.995 is less likely but would warn of a correction to primary support at $0.95.

Canadian Loonie

* Target calculation: 1.01 + ( 1.01 – 0.96 ) = 1.06

Weaker commodity prices are dragging the Aussie Dollar lower. On the weekly chart we can see the Aussie testing medium-term support at $1.02. Respect of the zero line by 63-day Twiggs Momentum suggest a strong up-trend. In the longer term, breakout above $1.085 would offer a target of $1.20*.

Aussie Dollar

* Target calculation: 1.08 + ( 1.08 – 0.96 ) = 1.20

On the daily chart, the Aussie Dollar is testing resistance at $1.045. Breach of its descending trendline indicates that the correction has weakened. Recovery above $1.045 would indicate the start of a fresh advance to test the 2012 high of $1.085.

Aussie Dollar

The Aussie Dollar is also retracing for another test of support against the South African Rand — at R7.90/R8.00. Momentum has fallen sharply and failure of support would warn of a correction to the long-term ascending trendline, around R7.50.

Aussie Dollar/South African Rand

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Sowing Seeds of the Next Major Crisis – WSJ News Hub

Francesco Guerrera: “Prolonged intervention by the authorities is creating fundamental distortions in the financial markets. They are in my view going to create the next crisis.”

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John Mauldin: Hoisington Q1 Review and Outlook

John Mauldin: Lacy Hunt kicks things off with a bang in Hoisington’s Quarterly Review and Outlook, this week’s Outside the Box:

“The standard of living of the average American continues to fall.”

The reason, in a word: debt. Lacy explains what happens:
“Efforts by fiscal and monetary authorities to sustain growth by further debt accumulation may produce some short-term benefit. Sadly, these interludes fade quickly as the debt becomes more destabilizing. The net result of increased indebtedness then becomes the opposite of what policymakers intend when they promote economic growth by either borrowing funds for increased government expenditures or encourage consumers to borrow with artificial and temporary incentives.”

In other words, you can’t get to real, sustained growth of an economy by growing debt after a certain point — one that, sadly, we have already reached.

John Mauldin: Hoisington Q1 Review and Outlook.

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Dems Lay Trap for GOP with Buffett Rule

Do Top Earners Pay Too Little?

Taxpayers earning more than $1 million a year pay an average U.S. income tax rate of nearly 19 percent, according to the Tax Policy Center. The top individual tax rate is 35 percent. Loopholes and other deductions help lower that rate so that most Americans pay a much lower effective rate. A middle-income earner making between $50,000 and $75,000 pays an average 5.7 percent effective rate, while a low-income worker making between $10,000 and $20,000 pays no income tax. Effective rates vary wildly within income groups, however, with some people paying far less than average and some far more.

Critics say this underscores the need for a minimum tax….

via Dems Lay Trap for GOP with Buffett Rule.

Comment:~ I would say this underscores the need to scrap the income tax model which ends up with “some people paying far less than average and some far more” and to impose a flat value-added tax (consumption tax) of around 15%. Impact on the poor could be reduced through subsidies — not tax exemptions which are an administrative nightmare — of basic foodstuffs and other necessities.

Interesting that the proposed “Buffett Tax” would only raise $47 billion if imposed on taxpayers earning more than $1 million. Less than 4 percent of the annual $1.2 trillion federal budget deficit that it is supposed to solve.

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Canada: TSX 60

Canada’s TSX 60 Index broke the band of support at 700, warning of a correction to 650. Reversal of 63-day Twiggs Momentum below zero warns the earlier primary up-trend was a false signal. Expect a test of primary support at 650. Recovery above 700 is unlikely but would indicate resumption of the primary up-trend.

TSX 60 Index

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Selling pressure on S&P 500 and Nasdaq 100

The S&P 500 is testing support at 1350 after penetrating its rising trendline. Failure of support would indicate a correction with an initial target of 1300. Respect of 1300 — and of the zero line by 13-week Twiggs Money Flow — would signal that the primary up-trend is intact and may present a buying opportunity for the more adventurous.

S&P 500 Index Weekly Chart

On the daily chart, recovery of the S&P 500 above 1400 would suggest a new primary advance, while breach of support at 1350 would signal a correction. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure.

S&P 500 Index Daily Chart

A similar (21-day Twiggs Money Flow) bearish divergence on the Nasdaq 100 warns of a correction. Breach of the rising trendline strengthens the signal. Follow-through below 2700 would confirm, offering an initial target of 2400.

Nasdaq 100 Index

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Fedex double top

Bellwether transport stock Fedex completed a double top reversal with a break through the neckline at $88. Retracement found resistance at $90 and reversal below the original neckline at $88 would signal a primary down-trend. Follow-through below Tuesday’s low would confirm. Bearish divergence on 13-week Twiggs Money Flow warns of strong selling pressure. A primary down-trend on Fedex normally warns of slowing activity in the broader economy.

Fedex

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Forex: Canadian Loonie and Aussie Dollar

Canada’s Loonie continues its narrow consolidation between $0.995 and $1.01 but falling crude prices warn that a correction is likely. Breakout below $0.995 and reversal of 63-day Twiggs Momentum below zero would both signal a correction. Upward breakout is currently unlikely but would signal a primary advance to $1.06*.

Canadian Loonie

* Target calculation: 1.01 + ( 1.01 – 0.96 ) = 1.06

On the daily chart, the Aussie Dollar found short-term support at $1.025 and is now rallying to test resistance at $1.045. Respect would indicate continuation of the correction, with a target of parity. Weaker commodity prices increase the likelihood of a strong correction. Reversal of 63-day Twiggs Momentum below zero would strengthen the signal.

Aussie Dollar

* Target calculation: 1.02 – ( 1.04 – 1.02 ) = 1.00

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Robert Shiller: Financial capitalism "Taking over the world"

Yale professor Robert Shiller discusses his book “Finance and the Good Society”.

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Bruce Bartlett: How to Really Simplify the Tax Code – NYTimes.com

BRUCE BARTLETT: Prof. Michael Graetz of Columbia Law School has proposed what I believe is a MacArthur-like solution to tax reform. He would abolish the income tax for the vast bulk of Americans and replace the revenue with a 12.5 percent value-added tax. People would pay their taxes when they buy things and wouldn’t need to worry about keeping records or filing tax returns at all.

The brilliance of the Graetz plan is that no tax expenditures need to be repealed. He would simply give every family a tax exemption of $100,000, which would eliminate the income tax for 90 percent of those now filing returns.

via Bruce Bartlett: How to Really Simplify the Tax Code – NYTimes.com.

Comment:~ Why not abolish the income tax entirely? Retaining a partial system would leave taxpayers vulnerable to bracket creep as inflation pushes them into higher tax brackets. Income tax is a highly inefficient tax to administer and collect compared to broad-based taxes such as VAT. The argument that VAT increases the burden on the poor can be overcome by a subsidy (not an exemption) on basic foodstuffs and other essentials. Switching to a VAT-based system also makes the issues of income-splitting and use of tax havens redundant. One of the few negatives I can think of is that replacing income tax with a VAT may encourage offshore consumption — taking an overseas holiday for example rather than holidaying locally — in order to avoid consumption tax. I would welcome suggestions as to how this could be countered, as well as any further negatives you may think of.

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