US & Canada Archives - Page 97 of 177

September 25, 2013

Forex: Aussie and Euro breakout

The Euro broke through resistance at $1.34/$1.3450, offering a medium-term target of $1.37* and long-term target of $1.40*. A trough above zero on 13-week Twiggs Momentum indicates a healthy up-trend.

Euro/USD

* Target calculation: 1.34 + ( 1.34 – 1.31 ) = 1.37; 1.34 + ( 1.34 – 1.28 ) = 1.40

The greenback is ranging aimlessly between ¥96 and ¥101 against the yen, indicating uncertainty. Breakout from the range will indicate future direction. Reversal of 13-week Twiggs Momentum below zero would suggest a primary down-trend.

USD/JPY

* Target calculation: 101 + ( 101 – 96 ) = 106

The Aussie Dollar retraced to test support at $0.93/$0.935 against the greenback after its recent breakout. Respect is likely and would suggest an advance to $0.97*. Follow-through above $0.95 would confirm.

Aussie Dollar

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

The Aussie found support at $1.12 against its Kiwi neighbour. Recovery above $1.16 and the descending trendline would complete a double-bottom reversal, offering a target of $1.20*.

Kiwi Dollar

* Target calculations: 1.16 + ( 1.16 – 1.12 ) = 1.20

September 24, 2013

Bellwether Fedex suggests improving economy

Bellwether transport stock Fedex displays a healthy primary up-trend on the monthly chart, suggesting that economic activity is improving. Bearish divergence on 13-week Twiggs Money Flow warns of selling pressure at the 2007 high of $120; reversal below zero would indicate a reversal, while a trough above the zero line would signal a primary up-trend. Breakout above $120 would offer a target of $130*.

Fedex

* Target calculation: 120 + ( 120 – 110 ) = 130

September 23, 2013

Interest on Reserves, Settlement, and the Effectiveness of Monetary Policy

Joshua R. Hendrickson suggests that paying interest on excess reserves at the Fed reduces the effectiveness of monetary policy. Money paid to purchase Treasuries finds its way back to the Fed in the form of excess reserves. Here is the abstract from his paper:

Over the last several years, the Federal Reserve has conducted a series of large scale asset purchases. The effectiveness of these purchases is dependent on the monetary transmission mechanism. Federal Reserve chairman Ben Bernanke has argued that large scale assets purchase are effective because they induce portfolio reallocations that ultimately lead to changes in economic activity. Despite these claims, a large fraction of the expansion of the monetary base is held as excess reserves by commercial banks. Concurrent with the large scale asset purchases, the Federal Reserve began paying interest on reserves and enacted changes in its Payment System Risk policy that have effectively made reserves and interest-bearing assets perfect substitutes. This paper demonstrates that these policy changes have had statistically and economically significant effects on the demand for reserves and simply that the effectiveness of conventional monetary policy has been significantly weakened.

Read the entire paper at Interest on Reserves, Settlement, and the Effectiveness of Monetary Policy |
Joshua R. Hendrickson.

September 23, 2013

TSX meets resistance

Canada’s TSX Composite index also displays tall shadows on last week’s candle, indicating short-term selling pressure. Follow-through below 12700 would suggest another test of primary support at 12400. Reversal of 13-week Twiggs Money Flow below zero would warn of long-term selling pressure, while a trough above the zero line would again suggest a primary up-trend. Breakout above 12900 is unlikely at present, but would confirm.

TSX Composite

* Target calculation: 12900 + ( 12900 – 11900 ) = 13900

September 23, 2013

Dow warns of reversal but VIX refutes

Dow Jones Industrial Average tall shadow (or wick) on last week’s candle warns of short-term selling pressure — echoing the long-term bearish divergence on 13-week Twiggs Money Flow. Reversal below 14800 would confirm a primary down-trend. Breakout above 15660 is unlikely, but would signal a fresh advance.

Dow Jones Industrial Average

However, VIX below 15 continues to suggest a bull market.

VIX Index

I have more faith in the calculation of the S&P 500 index — which displays a milder bearish divergence. While reversal below 1630 would signal a reversal, it would not penetrate the long-term rising trendline; only breach of 1530 would be cause for serious alarm. Respect of support at 1630, on the other hand, would be bullish, suggesting an advance to 1850.

S&P 500

* Target calculation: 1700 + ( 1700 – 1550 ) = 1850

September 22, 2013

Emperors of Banking Have No Clothes | Bloomberg

The too-big-to-fail problem for banks is greater today than it was in 2008. Since then, the largest U.S. banks have become much larger. On March 31, 2012, the debt of JPMorgan Chase was valued at $2.13 trillion and that of Bank of America Corp. at $1.95 trillion, more than three times the debt of Lehman Brothers Holdings Inc. The debt of the five largest U.S. banks totals about $8 trillion. These figures would be even larger under European accounting rules.

By Anat Admati & Martin Hellwig

September 19, 2013

Companies Unplug From the Electric Grid, Delivering a Jolt to Utilities | WSJ.com

On a hill overlooking the Susquehanna River, two big wind turbines crank out electricity for Kroger Co.’s KR +0.02% Turkey Hill Dairy in rural Lancaster County, Pa., allowing it to save 25% on its power bill for the past two years.

….From big-box retailers to high-tech manufacturers, more companies across the country are producing their own power. Since 2006, the number of electricity-generation units at commercial and industrial sites has more than quadrupled to roughly 40,000 from about 10,000, according to federal statistics.

By REBECCA SMITH and CASSANDRA SWEET

September 17, 2013

Forex: Euro, Sterling and Aussie Dollar strengthen

The Euro found support at $1.31, the short retracement suggesting a breakout above resistance at $1.34/$1.3450. Breakout would offer a target of $1.40*. Rising 13-week Twiggs Momentum indicates a healthy primary up-trend.

Euro/USD

* Target calculation: 1.34 + ( 1.34 – 1.28 ) = 1.40

Sterling is doing even better, breaking through resistance at €1.19 after piercing the descending trendline. Breakout completes a double bottom reversal with a target of €1.24*. Recovery of 13-week Twiggs Momentum above zero also suggests a primary up-trend. Reversal below €1.16 would warn of a bull trap, but is most unlikely.

Sterling/Euro

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

The greenback is stabilizing against the Yen after losing momentum over the last 3 months. The recent rally respected resistance at ¥100/101 and another test of ¥96 is likely. Breakout above ¥101 would offer a target of ¥106*, but failure of support at ¥96 remains as likely, and would warn of a primary down-trend.

USD/JPY

* Target calculation: 101 + ( 101 – 96 ) = 106

Canada’s Loonie is headed for a test of the descending trendline and resistance at $0.9750. Bullish divergence on 13-week Twiggs Momentum favors a breakout, while recovery above zero would suggest a primary up-trend. Breakout would also complete a double-bottom reversal, with a target of parity*. Reversal below $0.96 is unlikely, but would warn of another test of primary support at $0.9450.

Canadian Loonie

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

The Aussie Dollar also completed a double-bottom reversal against the greenback — this time on a daily chart — offering a target of $0.95*. Follow-through above $0.93 confirms the signal. Reversal below $0.92 is unlikely, but would warn of another test of primary support at $0.89.

Aussie Dollar

* Target calculations: 0.92 + ( 0.92 – 0.89 ) = 0.95

The Aussie continues to weaken against its Kiwi neighbour. Respect of primary support at $1.12 and recovery above the descending trendline, however, would warn that a bottom is forming. Breakout above $1.16 would confirm, offering a target of $1.20*.

Kiwi Dollar

* Target calculations: 1.16 + ( 1.16 – 1.12 ) = 1.20

September 17, 2013

Higher Bank Capital Requirements are Necessary but not Sufficient to Prevent the Next Crisis | naked capitalism

Bill Black explains why higher capital requirements for banks is only part of the solution. Capital is simply an accounting measure of Assets minus Liabilities and bankers are not above gaming this to their advantage.

….There were hundreds of Office of Thrift Supervision examiners whose opinions repeatedly proved vastly superior to the economists’ predictions during the S&L debacle. Akerlof and Romer concluded their 1993 article with these sentences in order to emphasize this message to their peers.

The S&L crisis, however, was also caused by misunderstanding. Neither the public nor economists foresaw that the [deregulation] of the 1980s were bound to produce looting. Nor, unaware of the concept, could they have known how serious it would be. Thus the regulators in the field who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better. If we learn from experience, history need not repeat itself. (Akerlof and Romer 1993: 60)

Larry and Janet: please listen to the regulators in the field. Please end Ben Bernanke’s practice of placing economists in charge of Fed supervision. The Fed’s economists are a major source of the Fed’s problems….. the solution needs to come from the people in the field. That is particularly true with regard to detecting systemic risks.

September 16, 2013

TSX finds stubborn resistance

Canada’s TSX Composite retreated from stubborn resistance at 12900 on the weekly chart. 13-Week Twiggs Money Flow turned down, indicating medium-term selling pressure. Another trough above zero, however, would suggest a primary up-trend. Breakout above 12900 would offer a long-term target of 14000*, but breach of support at 12400 remains as likely — and would signal a decline to 11750.

TSX Composite Index

* Target calculation: 12900 + ( 12900 – 11800 ) = 14000