Bellwether transport stock Fedex, in a primary down-trend, warns of slowing economic activity in the US. The 6-month Twiggs Momentum peak below zero flags a strong down-trend. Breach of support at 130.00 would warn of another decline — and worsening economic climate.
European equivalent Deutsche Post AG (DPW.DE), owner of DHL, also warns of declining economic activity. Breach of support at 23.00 would warn of another decline.
I would have expected a gold rally in response to the falling Dollar but the response is so far muted.
The Euro leapt 3.08% last Thursday, December 3rd, in response to a weaker-than-expected stimulus package from the European Central Bank.
The Dollar Index, with a 57.6% weighting against the Euro, fell 2.26%.
Other factors also weaken the Dollar. The Peoples Bank of China is selling off reserves to support the falling Yuan. This is likely to continue as capital outflows from China maintain pressure on the currency.
A weaker Dollar would boost US exports and accelerate domestic growth. Strong bearish divergence between 13-week Twiggs Momentum and the Dollar Index warns of a reversal. Breach of support at 98 would indicate a test of primary support at 93. Failure of primary support remains unlikely, but reversal of 13-week Twiggs Momentum below zero would strengthen the warning.
Long-term interest rates remain soft despite the anticipated Fed rate hike. 10-Year Treasury yields respected support at 2.0 percent. Breakout above 2.50 percent would indicate a test of 3.00 percent.
Gold is headed for a test of support at $1000/ounce* after breaching $1100. 13-Week Twiggs Momentum peaks below zero confirm a strong primary down-trend. A weaker Dollar would increase support for gold but there is no sign of this yet.
* Target calculation: 1100 – ( 1200 – 1100 ) = 1000
Retired Lt. Gen. Michael Flynn, former director of the Defense Intelligence Agency, interview on CNN.
https://youtu.be/wy4_IccAYTU
Ben Craig and Sara Millington at FRB Cleveland say “liquidity is not diffusing through the banking system, but is instead staying concentrated on the balance sheets of the largest banks.” Banks from the European Union (EU) have also substantially increased their holdings of excess reserves at the Fed.
Hat tip to Barry Ritholz
Gold fell to $1070/ounce, breaching the band of primary support between $1080 and $1100 per ounce. 13-Week Twiggs Momentum peaks below zero indicate a strong primary down-trend. The next level of support is $1000/ounce*.
* Target calculation: 1100 – ( 1200 – 1100 ) = 1000
Core CPI is close to the Fed target of 2.0 percent but inflation expectations continue to fall, with the 5-year breakeven rate (5-year Treasury minus 5-year TIPS yield) as low as 1.2 percent.
Long-term interest rates are rising, anticipating a Fed rate hike. 10-Year Treasury yields retraced to test the new support level after breaking through 2.25 percent. Respect of support is likely and will signal an advance to 2.50 percent. Recovery of 13-week Twiggs Momentum above zero suggests an up-trend. Breakout above 2.50 percent would confirm.
Low inflation and a stronger Dollar are weakening demand for gold. The Dollar Index is testing resistance at 100. Respect of zero by 13-week Twiggs Momentum indicates long-term buying pressure. Breakout above 100 is likely and would signal an advance to 107*.
* Target calculation: 100 + ( 100 – 93 ) = 107
Solid job numbers have boosted the prospects for an interest rate hike before the end of the year. Employment is growing steadily, having exceeded its 2008 high by more than 4.2 million new jobs.
Unemployment is falling as job growth holds above 2.0 percent a year.
Long-term interest rates are rising, with 10-year Treasury yields headed for a test of resistance at 2.50 percent after breaking through 2.25 percent. Recovery of 13-week Twiggs Momentum above zero indicates an up-trend. Breakout above 2.50 percent would confirm.
The Dollar strengthened in response to rising yields, the Dollar Index breaking resistance at 98. Respect of zero by 13-week Twiggs Momentum indicates long-term buying pressure. Breakout above 100 would confirm another advance, with a target of 107*.
* Target calculation: 100 + ( 100 – 93 ) = 107
Gold fell as the Dollar strengthened, testing primary support at $1100/ounce. 13-Week Twiggs Momentum peaks below zero indicate a strong (primary) down-trend. Follow-through below $1080 would signal another decline, with a target of $1000/ounce*.
* Target calculation: 1100 – ( 1200 – 1100 ) = 1000
From Elliot Clarke at Westpac:
Recent softer gains for nonfarm payrolls cast doubt over labour market momentum, giving cause for some to question whether the FOMC would be able to deliver a first hike before the year is out.
The October report changed that view, with the 271k gain for payrolls taking the month-average pace back up to 206k as the unemployment rate declined to 5.0%.
There is certainly more room for improvement in the US labour market. But subsequent gains need to come at a more measured pace.
We continue to anticipate that a first rate hike will be delivered at the December FOMC meeting.
Read more at Northern Exposure: October payrolls justifies December move
GDP rose at an annual rate of 1.5 percent in Q3, according to advance estimate https://t.co/vWMdoOL9TA pic.twitter.com/PFNZ7lXa8D
— St. Louis Fed (@stlouisfed) October 29, 2015
From Elliot Clarke at Westpac:
In assessing the strength and persistence of US growth, it is important to recognise the impact that inventories and net exports continue to have on headline results. Inventories added significantly to growth through the first half of 2015 on rapid inventory accrual; but a more modest pace of stocking in Q3 resulted in a 1.4ppt subtraction from quarterly GDP growth. Similarly, while net exports reduced the annualised Q1 headline outcome by 1.9ppts, it subsequently added modestly to growth in Q2, circa 0.2ppts. If we omit both factors from our assessment (and thereby focus on domestic final demand, DFD), we see a robust, enduring underlying growth trend. Annualised DFD growth in 2015 averages out at 2.7% – or 3.3% if we focus solely on the past six months, when the weather was more favourable.
On the whole, stripping away the impact of inventories and net exports, the past two years have seen a material improvement in the growth trend. This acceleration has primarily been the result of stronger consumption growth, particularly within the services sub-sector and in housing construction. Given the ongoing improvement in the labour market and credit availability as well as robust consumer confidence, this trend should endure into 2016.
Construction spending is the key.
Bloomberg News quotes Zhu Jimin, deputy head of the China Iron & Steel Association, representing major steel producers, at their quarterly briefing on Wednesday:
“Production cuts are slower than the contraction in demand, therefore oversupply is worsening.”
“China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed,” Zhu said. “As demand quickly contracted, steel mills are lowering prices in competition to get contracts.”
Little wonder that bulk commodity prices are falling sharply.
Australian producers have been ramping up production to compensate for lower prices.
But with further production due to come on line, the market looks ready for a meltdown. This from David Llewellyn-Smith at Macrobusiness:
Yes, China is still shutting in supply and is on track for 270 million tonnes this year but it’s not going to drop enough in the future (at the very best down to 200mt) as Roy Hill, Sino, Anglo, Vale and India (and possibly Tonkolili as well) continue the great ramp up, adding another 200mt plus in the next two years even as Chinese steel production keeps falling at 2-3% per year, taking 40mt per annum out of demand….. the total seaborne iron ore market is about to peak and then shrink….
The ASX 300 Metals & Mining Index is testing its 2008 low. Breach appears likely and would offer a target of 1700*.
* Target calculation: 2200 – ( 2700 – 2200 ) = 1700
The S&P 500 respected support at 2050 and is headed for a test of the previous high at 2130 on the back of strong earnings performance. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure but expect strong resistance at 2130. Reversal below 2050 is unlikely, but would warn of another test of primary support at 1870.
* Target calculation: 2000 + ( 2000 – 1870 ) = 2130
A declining CBOE Volatility Index (VIX) indicates market risk is easing.
NYSE short sales remain subdued.
Dow Jones Industrial Average is similarly headed for a test of 18300, with 13-week Twiggs Money Flow rising steeply.
Canada’s TSX 60 continues to test stubborn resistance at 825. Weak 13-week Twiggs Momentum, below zero, indicates the market remains bearish. Breakout would signal an advance to 900, but reversal below the former primary support level at 800 is as likely and would warn of another decline.
* Target calculation: 775 – ( 825 – 775 ) = 725
Germany’s DAX is testing resistance at 11000. Recovery of 13-week Twiggs Money Flow above zero indicates medium-term buying pressure. Breakout above the descending trendline would suggest another test of the previous high at 12400. Expect stubborn resistance, however, and reversal below 10000 would warn of another decline.
The Footsie is similarly testing resistance at 6500. Breakout above the descending trendline would suggest another test of the previous high at 7100. 13-Week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Reversal below 6250 is unlikely, but would warn of another test of primary support at 6000.
The Shanghai Composite Index continues to test resistance at 3500. Respect is likely and would indicate a re-test of government-backed support at 3000.
Hong Kong’s Hang Seng Index is retracing to test support at 22500. Respect would indicate a rally to 24000, but failure remains as likely and would test primary support at 21000. A 13-week Twiggs Money Flow trough above zero would indicate (long-term) buying pressure.
Japan’s Nikkei 225 is testing resistance at 19000. Breakout would signal another test of 21000. Respect is less likely, but would warn of another test of primary support at 17000.
* Target calculation: 19000 + ( 19000 – 17000 ) = 21000
India’s Sensex encountered resistance at 27500. Rising 13-week Twiggs Money Flow troughs above zero indicate long-term buyiong pressure. Expect another test of 26500 but respect is likely and would indicate continuation of the rally. Reversal below 26500 would warn of another (primary) decline.
* Target calculation: 25000 – ( 27500 – 25000 ) = 22500
The ASX 200 is retracing to test medium-term support between 5200 and 5300. Reversal of 21-day Twiggs Money Flow below its rising trendline indicates (medium-term) selling pressure; decline below zero would strengthen the signal. Breach of 5200 would warn of another test of primary support at 5000. Recovery above the descending trendline is unlikely at this stage, but would suggest another test of 6000.
* Target calculation: 5000 – ( 5400 – 5000 ) = 4600
From the Brookings Institute:
Since the time of Catherine the Great, Crimea has been a global tinderbox. Most recently, the world was stunned when the forces of Russian President Vladimir Putin invaded and seized Crimea in March 2014. In the months since, Putin’s actions in Crimea, eastern Ukraine and, more recently, in Syria have provoked a sharp deterioration in East-West relations. Basic questions have been raised about Putin’s provocative policies, his motivations, and the future of U.S.-Russian relations—and whether the world has now entered a new Cold War.
On October 26, the Foreign Policy program at Brookings hosted Nonresident Senior Fellow Marvin Kalb for the launch of his new book, “Imperial Gamble: Putin, Ukraine, and the New Cold War” (Brookings Institution Press, 2015). In “Imperial Gamble,” Kalb examines Putin’s actions in Ukraine, the impact on East-West relations, and how the future of the post-Cold War world hangs on the controversial decisions of one reckless autocrat, Vladimir Putin.
Joining the discussion were Thomas Friedman, The New York Times columnist, and Nina Khrushcheva, professor of international relations at The New School. Brookings President Strobe Talbott provided introductory remarks, and Martin Indyk, Brookings executive vice president, moderated the discussion.