US & Canada Archives - Page 143 of 185

August 7, 2012

US: S&P 500 and Nasdaq 100 buying pressure

The S&P 500 is headed for a test of 1420 on the weekly chart. Breakout would signal an advance to 1570* — the 2007 high. The 13-week Twiggs Money Flow trough above zero indicates strong long-term buying pressure.

S&P 500 Index

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

The Nasdaq 100 is headed for 2800*. A 63-day Twiggs Momentum trough above zero would confirm the primary up-trend. Breakout would offer a target of 3150*.

Nasdaq 100 Index

* Target calculation: 2800 + ( 2800 – 2450 ) = 3150

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.

August 3, 2012

Electronic Trading Glitches Shake Market Confidence

Stock markets are impacted by distortions arising from high-frequency trading algorithms as this article by SUZANNE MCGEE discusses. We really need to consider the benefits versus the costs of HFT. Benefits of HFT liquidity are vastly overstated: what use is an umbrella if withdrawn at the first sign of rain? The costs are far more than the additional +/- $2.5 billion — profits from HFT trading — that institutional and private investors pay for stocks each year. By far the greatest cost is the damage done to market efficiency and to investor trust. An efficient market requires accurate communication of pricing information to market participants. My belief is that HFT distorts this function. And the only reason it is encouraged by exchanges is the huge profits they make from it.

Even if Knight’s [Knight Capital] losses are as large as $300 million, that’s a drop in the bucket when set beside the $862 billion that was temporarily wiped off the value of the U.S. stock market in 2010. High-frequency trading systems and the algorithms they use, these advocates argue, add liquidity to the market, which is a Good Thing.

Well, not really. Not it results in a major crisis of the kind we saw two years ago and a slew of smaller trading anomalies, day after day, week after week, month after month on top of that. Less than two weeks ago for instance, traders reported seeing a bizarre “sawtooth” pattern of trading in a handful of large-cap stocks, including Coca-Cola KO and Apple AAPL. Their prices swung higher and lower with an uncanny degree of synchronicity, zooming higher every hour on the half-hour, and lower once more thirty minutes later. More algorithms, traders muttered gloomily to one another.

via Electronic Trading Glitches Shake Market Confidence.

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.

August 2, 2012

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

The Euro retreated from resistance at $1.24 to test support at $1.22. Downward breakout would test the 2010 low of $1.19. Declining 63-day Twiggs Momentum continues to indicate a strong down-trend.

Euro/USD

* Target calculation: 1.23 – ( 1.27 – 1.23 ) = 1.19

Pound Sterling broke short-term support at €1.27 against the Euro, warning of a correction to €1.25. Respect of support at €1.25, however, would suggest a healthy up-trend.

Pound Sterling/Euro

Canada’s Loonie is testing parity against the greenback. Breakout would advance to $1.02. Recovery of 63-day Twiggs Momentum above zero would indicate a primary up-trend, while a break above $1.02 would confirm.

Canadian Loonie/Aussie Dollar

The Aussie Dollar retreated from resistance at $1.05*. Reversal below $1.045 would test the rising trendline but penetration below $1.03 is unlikely. Recovery of 63-day Twiggs Momentum above zero suggests a primary up-trend.

Aussie Dollar/USD

* Target calculation: 1.05 + ( 1.05 – 1.02 ) = 1.08

The Aussie Dollar respected support at R8.50 South African Rand before rallying to R8.75. Breakout is likely and would offer a target of R9.00*.

Aussie Dollar/South African Rand

* Target calculation: 8.75 + ( 8.75 – 8.50 ) = 9.00

The Australian Dollar is consolidating mid-range (between ¥72 and ¥90) against the Japanese Yen. Breakout above ¥82.50 is likely and would test the upper range border, while reversal below ¥79.50 would test primary support. Recovery of 63-Day Twiggs Momentum above zero would strengthen the bull signal.

Aussie Dollar/Japanese Yen

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.

August 1, 2012

Poles Apart – NYTimes.com

I enjoyed this comment on the NYtimes website by A Man from Poland in response to Paul Krugman’s criticism of Mitt Romney lavishing praise on the Polish economy. Especially because Krugman concludes: “Doesn’t anyone tell Romney to do his homework?”

Mr Krugman,

I see that you don’t know too much about situation in Poland.

Of course I agree that currency depreciation was one of main reasons of Poland’s relative resilience in the crisis.

But there were second very important reason – income tax cuts in 2008.

In 2008, the first time from 10 years we had income tax cut in Poland.

Till 2007 we had 19%, 30% and 40% progressive income tax rates. In 2008 19% tax rate was decreased to 18%, 30% was decreased to 18% and 40% tax rate (for the richest taxpayers) was reduced to 32%. So, we changed 19%-30%-40% progressive system into less progressive, lower income tax system 18%-32%.

In 2008 there was also social security tax reduction which additionally decreased labour cost in Poland.

So, thanks to income tax cuts and social security tax cuts we have maintained (roughly) employment rate and consumption level in Poland and it was second important reason of quite good situation in Poland.

via Poles Apart – NYTimes.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 31, 2012

Canada: TSX60 rising wedge

The TSX 60 is in a rising broadening wedge consolidation rather than a trend channel. Downward breakout would threaten primary support at 640 and another decline, while penetration of the descending trendline would suggest that a bottom is forming. Rising 63-day Twiggs Money Flow also indicates that a bottom is forming — especially if we see recovery above zero.

TSX 60 Index

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 31, 2012

The Dinged-Up, Broken-Down, Fender-Bended Economic Recovery Plan – NYTimes.com

ADAM DAVIDSON highlights that consumers’ cars have aged as they postponed replacement purchases during the GFC. This has led to pent-up demand which is getting auto-makers excited:

New-car sales, which collapsed to less than 11 million in 2009, are expected to surpass 14 million this year. And forecasters believe that they will increase by around a million annually for the next couple of years. In 2015, we could eclipse 16 million vehicles sold, which is near the precrisis peak…….This optimism is also embodied in the number of new models about to hit the production line. A few years ago, the industry introduced only around 50 new models. This year, it is planning 94; next year, there will be another 101.

via The Dinged-Up, Broken-Down, Fender-Bended Economic Recovery Plan – NYTimes.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 31, 2012

No End To Long-Term Unemployment – Business Insider

J BRADFORD DE LONG, professor of economics at University of California at Berkeley, argues for expansionary monetary and fiscal policy.

At its nadir in the winter of 1933, the Great Depression was a form of collective insanity. Workers were idle because firms would not hire them; firms would not hire them because they saw no market for their output; and there was no market for output because workers had no incomes to spend.

I have been arguing for four years that our business-cycle problems call for more aggressively expansionary monetary and fiscal policies, and that our biggest problems would quickly melt away were such policies to be adopted. That is still true. But, over the next two years, barring a sudden and unexpected interruption of current trends, it will become less true.

But private sector deleveraging means expansionary monetary policy is as effective as pushing on a string. And fiscal policy needs to focus on productive infrastructure investment, not just stimulus spending that runs up public liabilities without any assets to show for it on the other side of the balance sheet.

via No End To Long-Term Unemployment – Business Insider.

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 31, 2012

STEPHEN ROACH: America Can't Keep Relying On Spending To Drive The Economy – Business Insider

STEPHEN ROACH highlights the importance of capital investment in any US recovery:

Over the last 18 quarters, annualized growth in real consumer demand has averaged a mere 0.7%, compared to a 3.6% growth trend in the decade before the crisis erupted…… Consumption typically accounts for 70% of GDP (71% in the second quarter, to be precise). But the 70% is barely growing, and is unlikely to expand strongly at any point in the foreseeable future. That puts an enormous burden on the other 30% of the US economy to generate any sort of recovery.

Capital spending and exports, which together account for about 24% of GDP, hold the key to this shift. At just over 10% of GDP, the share of capital spending is well below the peak of nearly 13% in 2000. But capital spending must exceed that peak if US businesses are to be equipped with state-of-the-art capacity, technology, and private infrastructure that will enable them to recapture market share at home and abroad. Only then could export growth, impressive since mid-2009, sustain further increases. And only then could the US stem the rising tide of import penetration by foreign producers.

via STEPHEN ROACH: America Can't Keep Relying On Spending To Drive The Economy – Business Insider.

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 31, 2012

S&P 500 and Nasdaq 100 correction

The monthly chart of the S&P 500 shows 63-day Twiggs Momentum has been falling for about two years but is now threatening to form a trough above zero which would signal resumption of the primary up-trend. Breakout above 1420 would confirm, offering a target of the 2007 high at 1550*. Respect of resistance, however, would mean more of the same gloomy outlook — our steady diet over the past few months.

S&P 500 Index Daily Chart

* Target calculation: 1400 + ( 1400 – 1250 ) = 1550

Respect of 2400 on the Nasdaq 100 monthly chart is also a bullish sign. Breakout above 2800 would offer a target of 3200*.

Nasdaq 100 Index

* Target calculation: 2800 + ( 2800 – 2400 ) = 3200

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 30, 2012

Corporate Profit Streak Faces a Threat – WSJ.com

KATE LINEBAUGH: In the third quarter, earnings by companies in the S&P 500 are expected to shrink for the first time since just after the recession ended, according to Thomson Reuters, which surveys Wall Street analysts…..declining by about 0.4% from the year-earlier quarter…..That follows what will likely have been three straight quarters of decelerating profit growth.

via Corporate Profit Streak Faces a Threat – 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.