Category: Stock Markets

Analysis of major stock markets around the world.

Posted on

Declining US commercial bank loans?

Sober Look highlights the sharply declining ratio of commercial bank loans and leases to bank deposits.

Ratio of commercial bank loans and leases to bank deposits

Its only when we examine the detail, however, that we note cash reserves have ballooned in the last 10 years. And most of those cash reserves are deposits at the Fed which now (post-GFC) earn interest. Adjust total deposits at commercial banks, for the excess reserves deposited back with the Fed, and the current ratio of 1:1 looks a lot healthier.

Ratio of commercial bank loans and leases to bank deposits Adjusted for Excess Reserves

As I pointed out in November, most new money created by the Fed QE program is being deposited straight back with the Fed as excess reserves. We need to adjust bank deposits for this effect to obtain a true reflection of bank lending activity.

Posted on

ASX 200 hammer

The ASX 200 recovered above 5200 Monday after a last week’s hammer candlestick flagged support. Follow-through above the descending trendline would suggest another advance. Breakout above 5400 would confirm. A 13-week Twiggs Money Flow trough above zero would strengthen the signal. Failure to break the descending trendline would warn of another decline, however, and breach of 5000 would signal a primary down-trend.

ASX 200

The ASX 200 VIX retreated to below 15, reflecting low market risk.

ASX 200

Posted on

India: Sensex finds support

India’s Sensex found support at 20000. Respect would indicate another test of the 2007 and 2010 high of 21000. A 13-week Twiggs Money Flow trough above zero would strengthen the signal. Failure of support is less likely, but would test the rising trendline (around 19000).

Sensex

* Target calculation: 21000 + ( 21000 – 20000 ) = 22000

Posted on

Shanghai rally

Declining 13-week Twiggs Money Flow (not shown) warns of long-term selling pressure on China’s Shanghai Composite Index, but the daily chart shows medium-term buying pressure. The index is currently testing 2080 on Monday, after the lunar new year last week, but the primary trend remains down. Respect of resistance at 2120 would reinforce this. Breach of support at 1950 is unlikely at present, but would test the 2008 low of 1700*.

Shanghai Composite Index

* Target calculation: 1950 – ( 2200 – 1950 ) = 1700

Posted on

Japan: Dollar supports Nikkei

The US Dollar found support at ¥101 against the Yen. Recovery above the May high at ¥104 would suggest a healthy up-trend, while breakout above ¥106 would offer a target of ¥110*. Divergence on 13-week Twiggs Momentum remains bearish, but another trough above zero would reverse this. Breach of support at ¥101 now seems unlikely, but would warn of trend weakness.

Nikkei 225

* Target calculation: 106 + ( 106 – 102 ) = 110

A rising Dollar/Yen exchange rate would assist Japanese stocks. The Nikkei 225 found support at 14000 on the monthly chart. Recovery above 15000 would suggest another advance, while breakout above 16000 would confirm. Reversal of 13-week Twiggs Money Flow below zero, however, would warn of a primary down-trend.

Nikkei 225

Posted on

Footsie finds support

The FTSE 100 found support at 6400 and the rising trendline. Recovery above 6600 would indicate another test of 6850. Rise of 13-week Twiggs Money Flow trough above 17% (the most recent high) would strengthen the signal. Failure of support at 6400 is unlikely, but would warn of a primary down-trend.

FTSE 100

* Target calculation: 6700 + ( 6700 – 6400 ) = 7000

Posted on

DAX finds support

The Euro retraced from resistance at $1.39 but appears unlikely to penetrate the rising trendline (having recently signaled a primary advance). Breach would warn of of trend weakness, but recovery above $1.39 is more likely and would signal an advance to $1.46*.

Euro

* Target calculation: 1.37 + ( 1.37 – 1.28 ) = 1.46

The dragonfly candlestick on Germany’s DAX indicates strong support at 9000. Recovery above 9400 would suggest the correction is over and breakout above 9800 would signal a fresh advance with a target of 10600*. Reversal below 9000 is unlikely, but would warn of a correction to the primary trendline. Completion of another 13-week Twiggs Money Flow trough high above zero would signal strong long-term buying pressure.

DAX

* Target calculation: 9800 + ( 9800 – 9000 ) = 10600

Retreat of DAX Volatility below 20 suggests low risk indicative of a bull market.

DAX

Posted on

S&P 500 finds support

The S&P 500 hammer candlestick on the weekly chart indicates support at 1750 and the secondary trendline. Follow-through above 1800 would strengthen the signal, suggesting an advance to 2000*. Breakout above 1850 would confirm. Recovery of 13-week Twiggs Money Flow above 40% (the most recent high) would indicate that the correction is over. Breach of 1750 seems unlikely, but would warn of a test of the primary trendline, around 1700.

S&P 500

* Target calculation: 1850 + ( 1850 – 1700 ) = 2000

CBOE Volatility Index (VIX) retreated below 20, suggesting low risk typical of a bull market.

VIX Index

Posted on

Taxes and corporate profits

A secondary element — when compared to wages, raw materials and interest rates — is the impact of a lower effective tax rate [blue line] on US corporate profits (CP/GDP). Part of the post-GFC fall in the effective corporate tax rate can be attributed to tax losses, incurred during the GFC and used to shield current income. Tax savings are likely to be short-lived, with effective tax rates returning to pre-GFC levels around 24%.

Effective Corporate Tax Rate

Posted on

ASX 200 at risk

The ASX 200 is at far greater risk of reverting to a primary down-trend. Retreat of 13-week Twiggs Money Flow below zero, after a bearish divergence, warns of strong selling pressure. Failure of support at 5050 would strengthen the signal, while breach of 5000 would confirm. Respect of the rising trendline is unlikely, but would continue the up-trend.

ASX 200

Breach of support at 5000 would suggest a fall to the long-term trendline, around 4600. Reversal of 13-week Twiggs Momentum below zero again suggests a primary down-trend.

ASX 200

The ASX 200 VIX is rising, but below 20 still reflects low market risk.

ASX 200

Also, none of our macro-economic/volatility indicators indicate elevated risk, but you can’t argue with the tape.

Powered by WordPress / WordPress Maintenance Service By Website Helper