Investors have now pulled more than $130 billion out of mutual funds that invest long term in United States stocks, since May 1.
…..In the six months ending October 31, $114.8 billion already had been pulled out of U.S. stock funds. The peak was in August, when Standard & Poor’s downgraded the rating of U.S. government debt. That month $26.3 billion was pulled out. But the pullout has stayed above $14 billion every month since.
The euro is likely to re-test primary support at $1.32 against the greenback. Declining 63-day Twiggs Momentum, below zero, warns of continuation of the primary down-trend. Breach of support would indicate a primary decline to $1.22*.
* Target calculation: 1.32 – ( 1.42 – 1.32 ) = 1.22
Sterling rallied off primary support at $1.53/$1.54 against the greenback but 63-day Twiggs Momentum again warns of a primary down-trend. Failure of support would offer a target of $1.46*.
* Target calculation: 1.53 – ( 1.60 – 1.53 ) = 1.46
Canada’s Loonie is headed for another test of resistance at $1.01 against the greenback. Declining 63-day Twiggs Momentum, however, continues to warn of a primary down-trend. Respect of resistance is likely, and would signal another test of primary support at $0.95. Declining commodity prices also favor a down-trend.
* Target calculation: 0.95 – ( 1.01 – 0.95 ) = 0.89
The Aussie Dollar appears stronger than the Loonie, which is unusual. Both are affected by commodity prices, but the Aussie tends to be more volatile than its Canadian counterpart. Obviously, higher interest rates in the Southern hemisphere are an attraction. Again, 63-day Twiggs Momentum warns of a primary down-trend. And reversal below parity would warn of another test of primary support at $0.95.
* Target calculation: 0.95 – ( 1.07 – 0.95 ) = 0.83
The greenback has strengthened sharply against the South African Rand and Brazilian Real. Both volatile, resource-rich currencies are likely to re-test their recent highs: the rand at R8.50 and the real at 1.90 against the dollar.
The greenback shows strong bullish divergence against Japan’s yen on 63-day Twiggs Momentum, warning of a reversal. Breach of the long-term descending trendline would strengthen the signal. Breakout above ¥80 would confirm.
Citigroup chief economist Willem Buiter:
There really is no politically feasible route back to sustained economic growth through monetary and/or demand stimulating policies for the EA, the UK, the US and Japan, for many years to come. As regards demand stimulus, expansionary fiscal policy will not be punished by the markets to the point of being self-defeating for all EA member states except for Germany (which will not do it on any significant scale for domestic political reasons). The US also may be technically able to use fiscal expansion to stimulate demand, but even if markets continue to be tolerant, political gridlock makes it impossible. Expansionary monetary policy is at the end of its rope in the US and Japan. The UK could cut the official policy rate by 50 bps and the ECB by 125 bps, and then they too are restricted to quantitative easing (QE), which I consider to be ineffective.
via Buiter: no politically feasible route to sustained growth for many years to come | Credit Writedowns.
Just as the United States was not the only country posting a large current account deficit, so too it was not the only country that experienced asset price booms. Figure 2 shows that countries with large current account deficits in 2006 also tended to have larger house price increases. Of course, there are exceptions. For example, China has experienced rapid house price appreciation despite its enormous current account surplus. But, in general, house price appreciation and current account deficits appear to have been positively associated across many countries.
via FRBSF Economic Letter: Asset Price Booms and Current Account Deficits (2011-37, 12/5/2011).
Colin Twiggs: ~ There appears to be a general rule that large current account deficits lead to asset price booms. But to prove the rule researchers need to address why Japan experienced a massive asset price boom in the 1980s, and why China experienced a similar boom over the last decade, when both were running current account surpluses.
The Federal Reserve should set a “nominal target” for growth in the nation’s gross domestic product that is well above its current low rate for coming out of a recession, said Christina Romer, now an economics professor at the University Of California, Berkeley.“One thing I think it would do is pack a really big expectations wallop,’’ said Romer, speaking at the Super Bowl of Indexing wealth management conference here. “A new operating strategy is something that could really break through and affect people’s behavior.” Such a “new operating strategy” is needed to get the economy on the kind of course normally seen after a recession. In the first nine quarters after the 1982 version, the economy grew at an annual rate of 6.3 percent. In the first nine quarters of this edition, the rate has been 2.4 percent, barely at the nation’s historical rate of growth. And if a new approach is not taken, it could be decades before the nation is back at full employment.
via Romer: Expectations Wallop Needed to Avert 40-Year Recovery.
The TSX 60 index is headed for a test of the descending trendline and resistance at 720 on the weekly chart. Upward breakout would signal a primary advance to 790* and the end of the bear market. Respect of zero by 13-week Twiggs Money Flow would strengthen the signal, indicating strong buying pressure.
* Target calculation: 720 + ( 720 – 650 ) = 790
We are not out of the woods yet, but the S&P 500 weekly chart is starting to diverge from its mid-2008 pattern. Headed for a test of the descending trendline and resistance at 1300, an index breakout would signal a primary advance to 1450* and the end of the bear market. Recovery of 63-day Twiggs Momentum above zero would support this.
* Target calculation: 1300 + ( 1300 – 1150 ) = 1450
Dow Jones Industrial Average, however, displays short-term resistance between 12000 and 12300 on the daily chart. Reversal of 21-day Twiggs Money Flow below zero would warn of rising selling pressure.
* Target calculation: 12300 + ( 12300 – 11200 ) = 13400
Nasdaq 100 Index is headed for resistance at 2400. Upward breakout would offer a target of 2750*. Bearish divergence on 13-week Twiggs Money Flow warns of selling pressure, but breakout above the descending trendline would negate this.
* Target calculation: 2400 + ( 2400 – 2050 ) = 2750
US unemployment fell to 8.6 percent in November, the lowest level in more than 2 years. But let’s take a look at the real figures — without the spin. The unemployment rate only includes those who have actively looked for work in the prior 4 weeks. That excludes anyone who has abandoned hope of finding a job and is no longer seeking work. The Jobless Rate below paints a far bleaker picture, reflecting all unemployed, either full-time or part-time, whether or not they are seeking work. The chart is restricted to males aged 25 to 54 in order to minimize demographic factors that could cause wider variations among females, youth under the age of 25, or 55 or older.
There is a visible improvement, with a fall below 18 percent, but we are a long way from the lows of 12 percent recorded in the last boom. Apart from the massive spike in 2008, what is also evident is the long-term up-trend: the jobless rate has increased steadily over the last 60 years — from a low of just 3.6 percent in 1953. We are a long way from being able to congratulate ourselves on the recovery.
In the midst of the European debt crisis, lingering instability in the oil-rich Middle East and concerns about a Chinese economic slowdown, the American unemployment rate unexpectedly dropped last month to 8.6 percent, its lowest level in two and a half years.
The Labor Department also said that the nation’s employers added 120,000 jobs in November and that job growth for the previous two months was better than initially reported.
via Jobless Rate Dips to Lowest Level in More Than 2 Years – NYTimes.com.
Canada’s Loonie also responded to rising commodity prices with a rally to test resistance at $1.01. Breakout remains unlikely, but would offer a long-term target of $1.07. The probability would increase if 63-day Twiggs Momentum recovers above zero.
* Target calculation: 1.01 + ( 1.01 – 0.95 ) = 1.07
