Category: US & Canada

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Commodity prices and the S&P 500

The CRB Commodities Index is testing primary support at 295 and respect of the zero line (from below) by 63-day Twiggs Momentum warns of another primary decline. Target for a breakout would be 265*. Divergence between commodities and the S&P 500 suggests that stocks are over-priced, with the Fed doing its best to depress bond yields and pump up stock prices ahead of the November election.

CRB Commodities Index and S&P 500 Index

* Target calculation: 295 – ( 325 – 295 ) = 265

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Fannie Mae Profit Signals a Stabilizing Housing Market – NYTimes.com

[Fannie Mae] reported quarterly net income of $2.7 billion, up from a $6.5 billion loss in the first quarter of 2011……..Across the country, there are signs that the housing market is stabilizing. Home prices have continued to fall, but at a much slower pace. More Americans are buying houses than they were a year ago. Housing starts have climbed more than 10 percent in the last year, as home builders pick up construction of new homes and apartment buildings.

via Fannie Mae Profit Signals a Stabilizing Housing Market – NYTimes.com.

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Nasdaq 100 and S&P 500 threaten a correction

The Nasdaq 100 is testing medium-term support at 2630. Reversal of 21-day Twiggs Money Flow below zero warns of a correction; follow-through below Friday’s low of 2620 would confirm, offering an initial target of 2400.

Nasdaq 100 Index

The S&P 500 continues to test support at 1350/1370 on the weekly chart after penetrating its rising trendline. Declining 13-week Twiggs Money Flow indicates medium-term selling pressure. Failure of support would signal a correction with an initial target of 1300*, but the primary up-trend is not under immediate threat.

S&P 500 Index Weekly Chart

* Target calculation: 1350 – ( 1400 – 1350 ) = 1300

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Fedex double top

Bellwether transport stock Fedex is consolidating in a narrow band above the neckline of a double top reversal at $88. Follow-through below $85 would confirm a primary down-trend, warning of a slow-down in the broader economy. Reversal of 63-day Twiggs Momentum below zero would strengthen the signal. Recovery above $90 is less likely, but would suggest continuation of the primary up-trend.

Fedex

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Canada TSX 60 breaks support

Canada’s TSX 60 index broke medium-term support at 675, signaling continuation of the secondary correction. Reversal of 63-day Twiggs Momentum below zero warns that the primary down-trend will continue, but 13-week Twiggs Money Flow holding above zero continues to indicate healthy buying pressure. Primary support at 650 is expected to hold and be followed by a rally to test resistance at 725.

TSX 60 Index
TSX 60 Index Twiggs Money Flow

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Forex: Australia, Canada and South Africa

The Australian dollar has tracked the CRB Commodities Index fairly closely since 2009. Weakening commodity prices warn that the Aussie is likely to follow.

CRB Commodities Index and Australian Dollar

Against the US dollar, the Aussie is headed  for another test of support at $1.02. Reversal of 63-day Twiggs Momentum below zero warns of a primary down-trend. Failure of support at $1.02 would confirm this, offering an initial target of $0.99.

Australian Dollar

* Target calculation: 1.02 – ( 1.05 – 1.02 ) = 0.99

Canada’s Loonie is in a primary up-trend against the Aussie dollar — as signaled by the 63-day Twiggs Momentum cross to above zero. Breakout above $0.982 completes a bullish ascending triangle formation with a target of parity.

Canadian Dollar

* Target calculation: 0.98 + ( 0.98 – 0.96 ) = 1.00

The Aussie is also weakening against the South African Rand. Cross of 63-day Twiggs Momentum below zero warns of a primary down-trend. Failure of support at R7.90 would confirm, offering an initial target of R7.50*.

South African Rand

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

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Paul L. Kasriel: Don’t End the Fed, Mend the Fed

Although the return to a gold standard for our monetary system has much appeal, it is unlikely to occur. So, let’s not let the perfect be the enemy of the good. Perhaps there is second-best monetary policy approach to the gold standard that might achieve most of the desirable outcomes of a gold standard but might have a greater probability of actually being adopted……. My suggested approach is very similar to one advocated by Milton Friedman at least 60 years ago. The more things change, the more they stay the same, I guess. I am proposing that the Federal Reserve target and control growth in the sum of credit created by private monetary financial institutions (commercial banks, S&Ls and credit unions) and the credit created by the Fed itself. I believe that this approach to monetary policy would reduce the amplitude of business cycles, would prevent sustained rapid increases in the prices of goods/services and would prevent asset-price bubbles of the magnitude of the recent NASDAQ and housing experiences.

econtrarian_043012.pdf (application/pdf Object).

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FRB| Governor Tarullo: Regulatory Reform since the Financial Crisis

It is sobering to recognize that, more than four years after the failure of Bear Stearns began the acute phase of the financial crisis, so much remains to be done–in implementing reforms that have already been developed, in modifying or supplementing these reforms as needed, and in fashioning a reform program to address shadow banking concerns. For some time my concern has been that the momentum generated during the crisis will wane or be redirected to other issues before reforms have been completed. As you can tell from my remarks today, this remains a very real concern.

via FRB: Speech–Tarullo, Regulatory Reform since the Financial Crisis–May 2, 2012.

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Fedex

Bellwether transport stock Fedex continues to test support at $88, the neckline for a double top reversal. Long tails on the last two candles suggest short-term buying pressure, but bearish divergence on 13-week Twiggs Money Flow warns of long-term selling pressure. A close below $86.50 would confirm that economic activity is declining.

Fedex

* Target calculation: 88 – ( 96 – 88 ) = 80

long-term

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Canada: TSX 60

Canada’s TSX 60 continues to consolidate between 675 and 700. Upward breakout would suggest a primary advance to 775*, while failure of support would target the primary level at 650. Rising 13-week Twiggs Money Flow indicates buying pressure, favoring resumption of the primary up-trend.

TSX 60 Index

* Target calculation: 725 + ( 725 – 675 ) = 775

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