Category: US & Canada

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Depleting Putin’s war chest

From Quartz:

The “First Law of Petropolitics,” coined by New York Times columnist Tom Friedman… states that when oil prices are high, the leaders of petro-states can become demanding and belligerent; when they are low, they are more prone to be pussycats.

Oil prices at elevated levels explain Russian belligerence. The graph below shows Brent Crude prices adjusted by the (US) consumer price index to reflect growth in real crude prices over the last decade. To bring crude prices down to pre-2005 levels will be no small feat.

Real Crude Oil Prices

Read more at How the US might persuade the Saudis to co-conspire in unleashing an oil weapon against Putin – Quartz.

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TSX 60 at 2011 high

Canada’s TSX 60 is testing resistance at 820 on the monthly chart. Sharp divergence on 13-week Twiggs Money Flow warns of medium-term selling pressure. Reversal below 814 would indicate a correction, while follow-through above 826 would signal an advance to 850*.

TSX 60

* Target calculation: 810 + ( 810 – 770 ) = 850

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Fedex bellwether

Bellwether Transport stock Fedex is headed for another test of primary support at $129/$130 on the monthly chart. Recovery above $145 would offer a target of $170*, but breach of support would warn of a primary down-trend — suggesting a broad economic slow-down. Breach of the (secondary) rising trendline, and support at $120, would strengthen the signal.

Fedex

* Target calculation: 145 + ( 145 – 120 ) = 170

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S&P 500 correction threat

The S&P 500 continues to threaten a correction. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure. Breach of support at 1840 would confirm a correction, while recovery above 1880 would signal an advance to 1950*.

S&P 500

* Target calculation: 1850 + ( 1850 – 1750 ) = 1950

CBOE Volatility Index (VIX) at 15, however, suggests low market risk.

VIX Index

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S&P 500 tests resistance

The S&P 500 found support at 1840 and is testing resistance at 1875/1880. Rising 21-day Twiggs Money Flow indicates short-term buying pressure. Breakout above 1880 would signal an advance to 1950*. Reversal below 1840 is less likely, but would warn of a secondary correction.

S&P 500

* Target calculation: 1850 + ( 1850 – 1750 ) = 1950

CBOE Volatility Index (VIX) below 20 continues to indicate low market risk.

VIX Index

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Canada: TSX 60 faces resistance

Canada’s TSX 60 faces resistance at 820. A sharp fall/divergence on 13-week Twiggs Money Flow warns of short-term selling pressure. Reversal below 810 would indicate a correction, while breakout above 820 would signal an advance to 840*.

TSX 60

* Target calculation: 805 + ( 805 – 770 ) = 840

TSX 60 VIX below 15 continues to reflect low risk typical of a bull market.

TSX 60 VIX

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S&P up-trend still healthy

The S&P 500 retreated below support at 1850, warning of a correction, but the primary up-trend remains strong. Trend strength is depicted by this weekly chart of Ichimoku Cloud, with a buy signal at the start of 2013 and price holding high above a green cloud indicating trend strength.

S&P 500

Bearish divergence on 13-week Twiggs Money Flow indicates medium-term selling pressure, consistent with a secondary correction, but respect of the rising trendline would signal a healthy up-trend. And recovery above 1850 would offer a target of 1950*.

S&P 500

* Target calculation: 1850 + ( 1850 – 1750 ) = 1950

CBOE Volatility Index (VIX) is rising and a sustained shift above 20 would signal an increase from low to moderate risk.

VIX Index

The Nasdaq 100 also shows bearish divergence on 13-week Twiggs Money Flow, warning of medium-term selling pressure. Breach of the rising trendline would test primary support at 3400, while respect would confirm a healthy up-trend. Recovery above 3650 would offer a target of 3800*.

Nasdaq 100

* Target calculation: 3600 + ( 3600 – 3400 ) = 3800

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Redistribution boosts consumption, not output | Richmond Fed

Abstract from a February 28, 2014 paper by Kartik Athreya, Andrew Owens, and Felipe Schwartzman:

The aftermath of the recent recession has seen numerous calls to use transfers to poorer households as a means to enhance aggregate activity. We show that the key to understanding the direction and size of such interventions lies in labor supply decisions. We study the aggregate impact of short-term redistributive economic policy in a standard incomplete-markets model. We characterize analytically conditions under which redistribution leads to an increase or decrease in effective hours worked, and hence, output. We then show that under the parameterization that matches the wealth distribution in the U.S. economy (Castaneda et al., 2003),wealth redistribution leads to a boom in consumption, but not in output.

Read more at Does Redistribution Increase Output? The Centrality of Labor Supply | The Big Picture.

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How Market Tops Get Made | Bloomberg

Barry Ritholz interviews Paul Desmond, chief strategist and president of Lowry’s Research:

According to Lowry’s, “the weight of evidence continues to suggest a healthy primary uptrend with no end in sight.”

….. based on the data Desmond follows, he makes a fairly convincing case that this bull market still has a ways to go before it tops out.

Read more at How Market Tops Get Made – Bloomberg View.

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Canada: TSX 60 buying pressure

Canada’s TSX 60 is testing resistance at the 2011 high of 820. Rising troughs above zero on 13-week Twiggs Money Flow signal buying pressure. Breakout above 820 would signal an advance to 840*. Expect support at 800 and the rising trendline.

TSX 60

* Target calculation: 805 + ( 805 – 770 ) = 840

TSX 60 VIX below 15 indicates low risk typical of a bull market.

TSX 60 VIX

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