US & Asia: Contrasting economic activity

While Fedex broke through long-term resistance at $100, signaling rising activity in North America….
Fedex
The Harpex index of container shipping (charter) rates, primarily for movement of finished goods, is close to its 2009 low. There is no indication of a resurgence in exports between Asia and the West.
Harpex Container Index

The Sequester Will Be Good for the Economy | Cato Institute

Jeffrey Miron argues that we should use cost-benefit analysis to evaluate government expenditure:

…even if transfers help stimulate consumer spending, their net effect on the economy is unclear. This implies that whether the sequester will harm or help the economy depends on whether cost-benefit considerations can justify the existing level of government expenditure. And on this question, the answer is clear. Across all categories, federal expenditure is far greater than necessary to achieve the legitimate goals of government intervention.

Read more at The Sequester Will Be Good for the Economy | Cato Institute.

ECB Says Private Lending Contracted for Ninth Month in January – Bloomberg

Jana Randow at Reuters writes:

Lending to households and companies in the euro area shrank for a ninth month in January as the recession damped demand for credit.

Read more at ECB Says Private Lending Contracted for Ninth Month in January – Bloomberg.

S&P 500 breaks support at 1500

The S&P 500 broke support at 1500 and is headed for support at 1475.

S&P 500 Index

On the weekly chart we can see that a correction below 1475 would target support at 1425 (the secondary trendline). Only primary support at 1350, however, would signal a reversal. A 63-day Twiggs Momentum trough above zero would indicate continuation of the up-trend, while retreat below zero would suggest a primary reversal.

S&P 500 Index

S&P 500 finds support but Nasdaq warns caution

The S&P 500 found support at 1500 and is headed for a re-test of resistance at 1525/1530. Bearish divergence on 21-day Twiggs Money Flow warns of mild selling pressure. Breakout above resistance would negate this, while reversal below 1500 and the rising trendline would warn of a correction.

S&P 500 Index

Breach of the secondary trendline (above) would indicate a correction to test primary support at 1350. Recovery of 63-day  Twiggs Momentum above 10% would increase likelihood of an upward breakout — with a target of 1750* — while retreat below zero would suggest a primary reversal.
S&P 500 Index

* Target calculation: 1550 + ( 1550 – 1350 ) = 1750

The Nasdaq 100 is weaker, with bearish divergence on 13-week Twiggs Money Flow warning of a primary trend reversal. Breakout below primary support at 2500 would confirm, offering a target of 2100*.
Nasdaq 100 Index

* Target calculation: 2500 + ( 2900 – 2500 ) = 2100

Scott Minerd: The Keynesian Depression | John Mauldin

Scott Minerd, Chief Investment Officer at Guggenheim Funds, writes:

Though some may be cheered by the relative policy successes this time around, at the current trajectory it will still take almost as long for total employment to fully recover as it did in the 1930s. While job loss was not as severe this time, the recovery in job creation has been much slower. Although nominal and real gross domestic production have returned to new highs on a per capita basis, we are still below 2007 levels. In the same way the Great Depression and the depressions before it lasted eight to 10 years, we will likely continue to see constrained economic growth until 2015-2016 roughly nine years after U.S. home prices began to slide.

Read more at Scott Minerd: The Keynesian Depression | John Mauldin – Outside the Box.

Bernard Connolly: Why the Euro Crisis Isn't Over | WSJ.com

From Brian Carney’s weekend interview with Bernard Connolly:

…But even if the Greeks were undisciplined, he says, “both the sovereign-debt crisis and the banking crisis are symptoms, not causes. And the underlying problem has been that there was a massive bubble generated in the world as a whole by monetary policy—but particularly in the euro zone” by European Central Bank policy.

The bubble formed like this: When countries such as Ireland, Greece and Spain joined the euro, their interest rates immediately dropped to near-German levels, in some cases from double-digit territory. “The optimism created by these countries’ suddenly finding that they could have low interest rates without their currencies collapsing, which had been their previous experience, led people to think that there was a genuine rate-of-return revolution going on,” he says.

There had been an increase in the rates of return in Ireland “and to some extent in Spain” in the run-up to euro membership, thanks to structural reforms in those countries in the pre-euro period. But by the time the euro rolled around, money was flowing into these countries out of all proportion to the opportunities available…..

Read more at The Weekend Interview with Bernard Connolly: Why the Euro Crisis Isn't Over – WSJ.com.

The final verdict on George Osborne as Chancellor | Mainly Macro

Simon Wren-Lewis, economics professor at Oxford University, writes:

What George Osborne did with his austerity programme was the equivalent of putting a sick patient on a starvation diet accompanied by cold showers. The UK economy without accelerated austerity would still have been in poor shape, but under George Osborne it has been a disaster.

Read more at mainly macro: The final verdict on George Osborne as Chancellor.

China Property Bubble by Gillem Tulloch [video]

Quick summary of the Chinese property bubble by Gillem Tulloch of Forensic Asia Limited.

S&P 500 caution

The S&P 500 retreated below 1525, heading for support at 1500. Failure of support would test the secondary trendline at 1475. Bearish divergence on 21-day Twiggs Money Flow warns of selling pressure, but may not be sufficient to start a full-blown correction.

S&P 500 Index

Breach of the secondary trendline at 1475 would indicate a test of primary support at 1350. Recovery of 63-day  Twiggs Momentum above 10% would increase likelihood of an upward breakout — with a target of 1750* — while retreat below zero would suggest a primary reversal.
S&P 500 Index

* Target calculation: 1550 + ( 1550 – 1350 ) = 1750