Category: US & Canada

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Forex: Aussie breakout

The Euro is consolidating in a narrow band below $1.36. Upward breakout above $1.37 would signal a fresh advance, with a long-term target of $1.47*. The trough above zero on 13-week Twiggs Momentum indicates a healthy up-trend. Failure of support at $1.34 — and penetration of the rising trendline — is unlikely, but would warn of another correction.

Euro/USD

* Target calculation: 1.37 + ( 1.37 – 1.27 ) = 1.47

Sterling broke short-term support at €1.18, warning of another correction to primary support at €1.14. Recovery of 13-week Twiggs Momentum above zero continues to favor a primary up-trend. Breakout above resistance at €1.20 is unlikely, but would signal an advance to €1.24*.

Sterling/Euro

* Target calculation: 1.19 + ( 1.19 – 1.14 ) = 1.24

The greenback respected support against the Japanese Yen at ¥96. Breakout above ¥101 would signal another advance. Declining 13-week Twiggs Momentum, however, continues to warn of a weak up-trend and breach of support at ¥96 would indicate a reversal.

USD/JPY

* Target calculation: 96 – ( 100 – 96 ) = 92

Canada’s Loonie respected support at $0.96, suggesting another attempt at resistance of $0.9750. Breakout would complete a double-bottom reversal with a target of parity*. Bullish divergence on 13-week Twiggs Momentum also favors a primary up-trend. Reversal below $0.96 is unlikely, but would signal another test of the primary level at $0.9450.

Canadian Loonie

* Target calculation: 97.5 + ( 97.5 – 94.5 ) = 100.5

The Aussie Dollar broke through resistance at $0.95, signaling an advance to $0.97*. Retracement to test the new support level at $0.95 is likely. Respect would confirm the primary advance; failure of support — though unlikely — would warn of another test of $0.93.

Aussie Dollar

* Target calculation: 0.95 + ( 0.95 – 0.93 ) = 0.97

Against its Kiwi neighbour, the Aussie Dollar respected resistance at $1.14, suggesting another test of primary support at $1.12. Bullish divergence on 13-week Twiggs Momentum, however, continues to favor a primary up-trend. Recovery above $1.14 — and the descending trendline — would signal a test of primary resistance at $1.16. Breakout above $1.16 would complete a double-bottom reversal with a target of $1.20*. Until then, breach of primary support remains a threat and would warn of a decline to $1.08*.

Kiwi Dollar

* Target calculations: 1.12 – ( 1.16 – 1.12 ) = 1.08

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S&P 500 breakout

The S&P 500 broke through resistance at 1700/1710, indicating a primary advance to 1790/1800*. Troughs close to zero on 21-day Twiggs Money Flow suggest buying pressure. Reversal below 1675 is unlikely at present, but would warn of a test of primary support at 1630.

S&P 500

* Target calculation: 1710 + ( 1710 – 1630 ) = 1790

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TSX 60 threatens breakout

Canada’s TSX 60 continues to test resistance at 740. Follow-through above 745 would indicate a long-term advance to 800*. A trough above zero on 13-week Twiggs Money Flow would signal strong buying pressure. Reversal below 725 is unlikely, but would warn of another correction.

TSX 60

* Target calculation: 740 + ( 740 – 680 ) = 800

TSX 60 VIX below 15 remains in bull territory.

TSX 60 VIX

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S&P 500 reflects bullish LT sentiment

The September quarter-end often heralds a correction as fund managers re-balance their portfolios and shed under-performing stocks. Congressional gridlock raised the probability even higher, but the market has brushed this aside, reflecting bullish long-term sentiment.

The S&P 500 rallied sharply off support at 1650. Follow-through above 1710 would indicate an advance to 1790/1800*. A 21-day Twiggs Money Flow trough close to zero indicates buying pressure. Reversal below 1675 is unlikely at present, but would warn of a test of primary support at 1630.

S&P 500

* Target calculation: 1710 + ( 1710 – 1630 ) = 1790

VIX retreated below 20, signaling low/moderate market risk.

VIX Index

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Dow kaPow!

Dow Jones Industrial Average rose more than 300 points, ending its test of primary support at 14750. One swallow doesn’t make a summer, but this is a good start. S&P 500 breakout above 1710 would signal a fresh primary advance.

Dow Jones Industrial Average

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Forex: Euro, Aussie up-trend

The Euro continues to test its new support level at $1.34/$1.3450. Respect is likely and would signal a test of the February high at $1.37. Breakout above $1.37 would offer a long-term target of $1.47*. A trough above zero on 13-week Twiggs Momentum indicates a healthy up-trend. Failure of support — and penetration of the rising trendline — is unlikely, but would warn of another correction.

Euro/USD

* Target calculation: 1.37 + ( 1.37 – 1.27 ) = 1.47

Sterling faltered after breaking resistance at €1.19. Reversal below €1.18 would warn of another test of primary support at €1.14. Follow-through above €1.20 is less likely, but would signal an advance to €1.24*.

Sterling/Euro

* Target calculation: 1.19 + ( 1.19 – 1.14 ) = 1.24

The greenback is testing primary support at ¥96 against the Yen. Reversal of 13-week Twiggs Momentum below zero would warn of a primary down-trend. Follow-through below ¥94 would confirm. Recovery above ¥101 is less likely, but would indicate another advance.

USD/JPY

* Target calculation: 96 – ( 100 – 96 ) = 92

Canada’s Loonie respected its descending trendline and is testing support at $0.96. Failure (of support) would signal another test of the primary level at $0.9450. Bullish divergence on 13-week Twiggs Momentum continues to favor a primary up-trend. Breakout above $0.9750 is presently unlikely, but would complete a double-bottom reversal with a target of parity*.

Canadian Loonie

* Target calculation: 97.5 + ( 97.5 – 94.5 ) = 100.5

The Aussie Dollar is retracing to test its new support level at $0.94 against the greenback. Respect would indicate a test of resistance at $0.95, but failure is as likely and would warn of another test of medium-term support at $0.93. Breach of $0.93 would be more serious, warning of a correction to primary support at $0.89.

Aussie Dollar

* Target calculations: 0.95 + ( 0.95 – 0.93 ) = 0.97

The Aussie continues to test primary support at $1.12 against its Kiwi neighbour. Recovery above $1.14 — and the descending trendline — would indicate a test of primary resistance at $1.16. Breakout above $1.16 would complete a double-bottom reversal with a target of $1.20*. Breach of primary support remains as likely, however, and would offer a target of $1.08*.

Kiwi Dollar

* Target calculations: 1.12 – ( 1.16 – 1.12 ) = 1.08

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Household Debt to Income ratio

Barry Ritholz highlights the alarming debt to income ratio for Canada compared to the USA:
Household Debt to Income ratio

How does Australia compare?
Australian Household Debt to Income ratio
Australian household debt to income is similar to Canada’s. There has been discussion recently about whether Australia is in a housing bubble. As Anna Schwartz (joint author of A Monetary History of the United States, 1867-1960 with Milton Friedman) pointed out: there is only one kind of bubble and that is a debt bubble. It may manifest through rising real estate, stock or other asset prices, but the underlying driver is the same: a rapid expansion of the money supply through easy credit.

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TSX threatens reversal

Canada’s TSX 60 index encountered strong resistance at 740 and is now testing short-term support at 725. Failure of support at 725 would indicate another test of primary support at 710. Bearish divergence on 13-week Twiggs Money Flow warns of a reversal. Breach of primary support would confirm.

TSX 60

TSX 60 VIX crossed to above 15, but remains in bull territory.

TSX 60 VIX

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Dow threatens reversal

The S&P 500 broke support at the May high of 1675 and penetrated the (secondary) rising trendline, signaling a correction to primary support at 1625/1630. Recovery above 1700 is most unlikely at present, but would indicate another advance.

S&P 500

VIX crossed to above 20: no-man’s-land between low and high. Follow-through above 25 would warn of elevated market risk.

VIX Index

Dow Jones Industrial Average is testing primary support at 14750. Bearish divergence on 21-day (and 13-week) Twiggs Money Flow warns of a reversal. Breach of 14750 would strengthen the signal. Follow-through below 14500/14600 would confirm. Recovery above 15000 is unlikely, but would indicate a rally to 15700.

Dow Jones Industrial Average

The September quarter-end often heralds a correction as fund managers re-balance their portfolios and shed under-performing stocks. Congressional gridlock raises the probability even higher.

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