Category: US & Canada

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Housing Is to the U.S. What Greece Is to the Euro Zone – Real Time Economics – WSJ

The beleaguered housing sector is looking like the Greece of the U.S. economy. Just as the euro zone won’t prosper until Greece gets its act together, the U.S. recovery won’t gain traction until the housing sector deals with the excesses of its past……..

Housing and related mortgage problems remain a large drag on economic growth. In August, housing starts stood at a annual rate of 571,000–just one-third of its pace during the boom. And the weak September reading on home builders sentiment suggest builders see more declines ahead.

via Housing Is to the U.S. What Greece Is to the Euro Zone – Real Time Economics – WSJ.

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China to ‘liquidate’ US Treasuries, not dollars – Ambrose Evans-Pritchard

A key rate setter-for China’s central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.

“The incremental parts of our of our foreign reserve holdings should be invested in physical assets,” said Li Daokui at the World Economic Forum in the very rainy city of Dalian….”We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way.”

via China to ‘liquidate’ US Treasuries, not dollars – Telegraph Blogs.

Why would a poor country with GDP per capita of $4000 and an emerging economy be investing in US Treasurys or blue chip stocks? Perhaps because repatriating funds would cause the yuan to rise to a more realistic level against the dollar and end China’s trade advantage.

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Canada: TSX 60

The weekly TSX 60 chart respected resistance at 730 and is retreating to test support at 650/660. Decline of 13-week Twiggs Money Flow below zero warns of further selling pressure. Failure of support would offer a target of 590*.

TSX 60 Index

* Target calculation: 660 – ( 730 – 660 ) = 590

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Bear rally and triple-witching

A narrow range with large volume often acts like a compressed spring — absorbing buying pressure before launching a sharp move in the opposite direction. The spike in volume [W] on Dow Jones Industrial Average was due to triple-witching hour on Friday, but we should nevertheless be wary of a fall below 11400, which would indicate another test of 10600.

Dow Jones Industrial Average

* Target calculation: 11000 – ( 12000 – 11000 ) = 10000

The weekly chart of S&P 500 shows a similar bear rally. Expect a test of 1250/1260. But 63-day Momentum below zero reminds that the index is in a primary down-trend; a peak below the zero line would warn of another down-swing.

S&P 500 Index

* Target calculation: 1125 – ( 1250 – 1125 ) = 1000

NASDAQ 100 Index displays a particularly strong rally, but this remains a bear market. Expect strong resistance at 2400. Failure of support would offer a target of 1700*.

NASDAQ 100 Index

* Target calculation: 2050 – ( 2400 – 2050 ) = 1700

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Chart of the Day: Decoupled from reason – macrobusiness.com.au

First, from long term successful commodity trader Peter Brandt:

It has come to be known as the “risk-on/risk-off” or “all-one-market” phenomena in global markets. It is a situation where seemingly unrelated markets have taken on an historically high correlation. Individual markets seem to be the proxy for all other markets.

I have witnessed periods in the past when unusually strong correlations existed for months and months. But, I have never experienced the level of correlation we have lived with as traders since 2008.

via Chart of the Day: Decoupled from reason – macrobusiness.com.au

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Dow rallies on light volume

Dow Jones Industrial Average rallied on unconfirmed news reports that China is set to buy sovereign debt from troubled Italy. Light volume indicates an absence of selling pressure. This is a bear market, however, and rallies are likely to be of short duration, while breach of support would lead to sharp falls.

Dow Jones Industrial Average

* Target calculation: 11000 – ( 12000 – 11000 ) = 10000

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TSX 60 retreats

The TSX 60 Index retreated to test its rising trendline at 705. Penetration would warn of a test of primary support at 665. And failure of support would signal another down-swing with a target of 600*.

TSX 60 Index

* Target calculation: 665 – ( 735 – 665 ) = 595

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Dissecting the Lies in Obama’s $447 Billion ‘Shock-and-Awe’ Reelection Ploy | Mike Shedlock

Obama: And everything in this bill will be paid for. Everything.

Mish: That is lie number 3……. Obama’s stimulus plan is nothing but another spend now, make cuts later “sleight-of-hand” proposal.

Obama: The purpose of the American Jobs Act is simple: to put more people back to work and more money in the pockets of those who are working…….

Mish: That is lie number 4. The primary purpose of the American Jobs Act is simple: To keep one person (namely President Obama), in his job.

via Dissecting the Lies in Obama’s $447 Billion ‘Shock-and-Awe’ Reelection Ploy… | Mike Shedlock | Safehaven.com.

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Dow acid-test

The Dow is headed for the band of support between 10600 and 10800 — a real acid-test. Support is likely to fail unless we see a substantial increase in volume, indicating buying support. Breach of 10600 would confirm another down-swing with a target of 10000*.

Dow Jones Industrial Average

* Target calculation: 11000 – ( 12000 – 11000 ) = 10000

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