Category: US & Canada

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Forex: Aussie Dollar & Canada's Loonie

The Aussie Dollar broke medium-term support at $1.04 — in response to lower than expected resources exports to China and RBA hints at further rate cuts. Expect a strong correction, testing parity and possibly primary support at $0.97. Reversal of 63-day Twiggs Momentum below zero would indicate trend weakness but suggests a ranging market, with the indicator oscillating around zero, rather than a primary down-trend.

Australian Dollar/USD

Canada’s Loonie is more resilient because of stronger crude oil prices. 63-Day Twiggs Momentum holding above zero indicates a primary up-trend. Breakout above $1.01 would signal an advance to $1.06. Reversal below $0.995 is less likely but would warn of another correction — especially if crude oil weakens.

Canadian Dollar/USD

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

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Canada: TSX 60 resistance

Canada’s TSX 60 index is testing medium-term support at 695/700. Another large 13-week Twiggs Money Flow trough above zero would confirm the primary up-trend — as would breakout above 730. Initial target for the advance would be 790*.

TSX 60 Index

* Target calculation: 720 + ( 720 – 650 ) = 790

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Bearish divergence for US indices

Bearish divergence on 21-day Twiggs Money Flow warns of medium-term selling pressure on the S&P 500 index. Expect a correction to test support at 1350/1370 unless we see 21-day Twiggs Money Flow recovering above 30%.

S&P 500 Index

* Target calculation: 1300 + (1300 – 1150) = 1450

The Nasdaq 100 index encountered resistance at 2800. Bearish divergence on 13-week Twiggs Money Flow over the last two weeks warns of a correction. Breach of the secondary, rising trendline would indicate a correction to the long-term trendline at 2500.

Nasdaq 100 Index

* Target calculation: 2400 + ( 2400 -2050 ) = 2750

Bellwether transport stock Fedex warns of a double-top reversal. Longer-term bearish divergence on 13-week Twiggs Money Flow warns of strong selling pressure. Breach of support at 88 would signal a primary down-trend — and declining activity in the broader economy.

Fedex

* Target calculation: 88 – ( 98 – 88 ) = 78

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Forex: CAD, AUD, ZAR

Canada’s Loonie continues a narrow consolidation below $1.01, suggesting an upward breakout in response to higher oil prices. Recovery of 63-day Twiggs Momentum above zero indicates a primary advance. Target for the advance would be the 2011 high of $1.06. Breach of the rising trendline is unlikely, but would warn of reversal.

CAD/USD

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

The Aussie Dollar reflects broader weakness in commodities. Breach of the rising trendline would warn of a decline to test primary support at $0.96, while respect would indicate another test of $1.08 — and suggest an upward breakout.

AUD/USD

Against the South African Rand, the Aussie Dollar continues to test support at R8.00. Narrow consolidation suggests a downward breakout and test of the long-term trendline at R7.50. Reversal of 63-day Twiggs Momentum below zero would warn of a primary down-trend.

AUD/ZAR

* Target calculation: 8.00 – ( 8.50 – 8.00 ) = 7.50

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S&P 500 early rally

The S&P 500 surprised with an early rally, before the end of the quarter. Breach of resistance at 1415 on the hourly chart signals a new primary advance. Short retracement indicates a healthy up-trend — as does a trough above the zero line on 24-hour (4 day) Twiggs Momentum.

S&P 500 Index Hourly Chart

Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure, but recovery above 30% would negate this. Immediate target for the advance is 1450, while the long-term target is 1600*.

S&P 500 Index

* Target calculation: 1300 + ( 1300 – 1150 ) = 1450; 1350 + (1350 – 1100) =1600

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Canada: TSX 60

Canada’s TSX 60 index found strong support at 700. Rising 13-week Twiggs Money Flow signals buying pressure. Recovery above 720 would indicate a primary advance to 820*; follow-through above 730 would confirm.

TSX 60 Index

* Target calculation: 720 + ( 720 – 620 ) = 820

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Secondary correction, but watch Fedex

The weekly S&P 500 chart suggests retracement to the new support level at 1370. No major deviation on 13-week Twiggs Money Flow indicates this is merely a secondary correction. Respect of 1350 would signal a primary advance. Long-term target for the breakout is 1600*.

S&P 500 Index

* Target calculation: 1350 + ( 1350 – 1100 ) = 1600

Nasdaq 100 Index similarly displays a bearish divergence on 21-day Twiggs Money Flow but no major deviation on the 13-week indicator, suggesting a secondary correction to the long-term rising trendline.

Nasdaq 100 Index

* Target calculation: 2400 + ( 2400 – 2050 ) = 2750

Bellwether transport stock Fedex, however, displays a stronger bearish divergence, on 13-week Twiggs Money Flow. Failure of support at 88.00 would indicate reversal to a primary down-trend; follow-through below 86.00 would confirm. A Fedex down-trend would warn that economic activity is slowing.

Fedex

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Playing Pyongyang's Games – WSJ.com

MICHAEL AUSLIN: It took barely two weeks for North Korea to play its old game of bait and switch, this time gutting the Feb. 29 “Leap Day Agreement” with the Obama administration that promised a moratorium on nuclear and missile testing. In an Ides of March announcement, Pyongyang revealed it would conduct a “satellite launch” on April 15, which coincides with the 100th anniversary of the birth of Kim Il Sung, founder of the North Korean regime.

….In a sense, the Obama administration has only itself to blame for this mess. For three years, it wisely avoided playing Pyongyang’s games. Unlike the Bush administration, which became increasingly desperate to patch holes in a flawed policy of making ever more concessions for little in return, the Obama team kept contact with former leader Kim Jong Il at a minimum, and refused to enter the Alice in Wonderland world of reaching agreement with the North only to face provocation and demands for more concessions.

via Michael Auslin: Playing Pyongyang's Games – WSJ.com.

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"The American Recovery" by Mohamed A El-Erian | Project Syndicate

the economy is not yet in a position to handle the 4-5%-of-GDP “fiscal cliff” that is approaching as all of the hard political decisions that were postponed come into view at the end of this year. The prospect of a disorderly fiscal contraction needs to give way to a more rationally designed approach that avoids undermining the fragile recovery. To accomplish that, the political class must avoid the bickering that almost sent America back into recession in 2011, and that raised major questions about the quality of the country’s economic governance.

…..America’s full recovery is not yet guaranteed. A mix of steadfastness, caution, and good luck is needed for that to happen. And when it does, the country will be in a better position to repay its massive hospital bill.

via "The American Recovery" by Mohamed A El-Erian | Project Syndicate.

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FedEx Pares Global GDP Outlook as Slowdown Damps Profit Forecast- Bloomberg

FedEx said express shipments declined both domestically and internationally because of “below-trend” growth. The operator of the world’s biggest cargo airline said it was parking an unspecified number of planes, paring flight hours and reviewing domestic capacity.

“We just don’t have a strong economy as we had hoped it would be a year ago,” Chief Financial Officer Alan Graf said on an earnings call. “The economic environment and the elasticity that we’re seeing on our premium services from the high-fuel costs” are weighing on this quarter’s earnings outlook.

via FedEx Pares Global GDP Outlook as Slowdown Damps Profit Forecast- Bloomberg.

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