TSX 60 Archives - Page 2 of 5 - the patient investor

September 24, 2015April 18, 2024

Beware of the Bear

This time it’s not the Russian bear but stock market bears that we need to beware of. Signals across global markets warn of a major down-turn.

North America

The S&P 500 respected resistance at 2000, the false break warning of a bull trap. A 21-day Twiggs Money Flow peak just above zero indicates (medium-term) selling pressure. Recovery above 2000 is unlikely, but would signal a relieving rally. Breach of support at 1870 would confirm the primary down-trend.

S&P 500 Index

* Target calculation: 1900 – ( 2000 – 1900 ) = 1800

The CBOE Volatility Index (VIX) is holding above 20, indicating elevated market risk.

S&P 500 VIX

NYSE short sales spiked up close to 1.2 billion on Friday, September 18th.

NYSE Short Sales

13-Week Twiggs Money Flow crossed below zero on the (S&P 500) weekly chart, warning of a primary down-trend.

S&P 500 Index

Dow Jones Industrial Average is testing support at 16000. Decline of 13-week Twiggs Money Flow below zero warns of a primary down-trend. Breach of 16000 would confirm the signal.

Dow Jones Industrial Average

Canada’s TSX 60 retreated below 790, confirming a primary down-trend. Declining 13-week Twiggs Momentum below zero strengthens the signal.

TSX 60 Index

* Target calculation: 800 – ( 900 – 800 ) = 700

Europe

Germany’s DAX retreated below support at 10000. Decline of 13-week Twiggs Money Flow below zero again warns of a primary down-trend.

DAX

The Footsie is in a similar position, with 13-week Twiggs Money Flow below zero. Breach of support at 6000 would confirm a primary down-trend.

FTSE 100

Asia

The Shanghai Composite Index continues to test (government-backed) support at 3000. Recovery above 3500 is most unlikely. Breach of 3000 would warn of a sharp sell-off.

Dow Jones Shanghai Index

Hong Kong’s Hang Seng Index bear rally failed and the index is again testing support at 21000. Breach would confirm the primary down-trend signaled by 13-week Twiggs Money Flow.

Hang Seng Index

Japan’s Nikkei 225 is having difficulty breaking resistance at 19000. Gradual decline on 13-week Twiggs Money Flow suggests medium-term selling pressure, but reversal of 13-week Momentum below zero warns of a primary down-trend.

Nikkei 225 Index

* Target calculation: 17500 – ( 19000 – 17500 ) = 16000

India’s Sensex respected resistance at 26500. Reversal below 25000 would confirm a primary down-trend. 13-Week Twiggs Money Flow holding above zero indicates medium-term buying pressure.

SENSEX

But 13-week Twiggs Momentum below zero warns of a primary down-trend.

SENSEX

* Target calculation: 25000 – ( 26500 – 25000 ) = 23500

Australia

The ASX 200 also displays medium-term buying pressure, with rising 21-Day Twiggs Money Flow. But this is unlikely to withstand global bearish forces. Breach of 5000 would confirm a primary down-trend. Recovery above 5300 is most unlikely, but would indicate a bear rally.

ASX 200

* Target calculation: 5000 – ( 5400 – 5000 ) = 4600

More….

Gold: No safety here

Crude at $30 per barrel?

Deflation supercycle is over as world runs out of workers | Telegraph

Australia: Latest SMSF statistics | FINSIA

Deleveragings go on for about 15 years. The process of raising debt relative to incomes goes on for 30 or 40 years, typically. There’s a last big surge, which we had in the two years from 2005 to 2007 and from 1927 to 1929, and in Japan from 1988 to 1990, when the pace becomes manic. That’s the classic bubble. And then it takes about 15 years to adjust.

~ Ray Dalio, Bridgewater Associates

September 17, 2015April 18, 2024

Will the Fed hike rates?

The market eagerly awaits the decision of the Fed Open Market Committee (FOMC) on whether to lift the target interest rate (FFR) from its 0.00 – 0.25 percent range maintained since the dark days of 2008.

Core CPI

Core CPI remains subdued at 1.83 percent for the 12 months to August — close to its 2 percent target — so there is no urgency to increase rates despite a strengthening job market.

The act of revising the target rate is largely symbolic. There is no doubt that the economy can withstand an increase in the Fed Funds Rate to 0.5%. But commencement of a tightening cycle may scare an already jittery market. There is a fairly equal split amongst economists as to whether the Fed should proceed with the rate rise or not. My guess is that the Fed will opt for a bet each way, with a wider target range (say 0.00 to 0.50 percent) or a reduced increment (say 0.10 to 0.30 percent). The effective FFR is currently sitting at 0.14 percent and I am sure the Fed’s plan is to continue with a gradual increase over time and no sudden movements.

Effective Fed Funds Rate

The S&P 500 is testing resistance at 2000 after a higher trough and rising 21-day Twiggs Money Flow indicate buying pressure. Recovery above 2000 would signal a relieving rally, while respect of resistance would suggest another test of support at 1900.

S&P 500 Index

* Target calculation: 1900 – ( 2000 – 1900 ) = 1800

The CBOE Volatility Index (VIX) indicates market risk is declining.

S&P 500 VIX

NYSE short sales are also declining.

NYSE Short Sales

Dow Jones Industrial Average closed above resistance at 16700. Follow-through after the FOMC decision would confirm a relieving rally. Reversal below 16600 would warn of another test of 16000. Failure of support at 16000 is unlikely, but would signal a primary down-trend. Recovery of 21-day Twiggs Money Flow above zero indicates medium-term buying pressure.

Dow Jones Industrial Average

Canada’s TSX 60 recovered above 800, indicating solid support between 790 and 800. Recovery above 820 and the descending channel would signal that the correction has ended. Rising 13-week Twiggs Momentum would strengthen the signal, while recovery above zero would confirm.

TSX 60 Index

* Target calculation: 800 – ( 900 – 800 ) = 700

Europe

Germany’s DAX found support at 10000. Recovery above 10500 would suggest a relieving rally, but only follow-through above the descending trendline and resistance at 11000 would confirm. Respect of the zero line by 13-week Twiggs Money Flow is a bullish sign; completion of a trough above zero would confirm long-term buying pressure.

DAX

The Footsie similarly found support at 6000. Recovery above 6300 would indicate a relieving rally. Penetration of the descending trendline would confirm.

FTSE 100

Asia

The Shanghai Composite Index continues to test (enforced) support at 3000. Recovery above 3500 is unlikely, but would indicate that the crisis has passed.

Dow Jones Shanghai Index

Hong Kong’s Hang Seng Index found support at 21000 and is likely to test the former primary support level at 23000. 13-Week Twiggs Money Flow below zero indicates long-term selling pressure, but recovery above zero would suggest a false signal. Breakout above 23000 and the descending trendline is unlikely, but would signal that the down-trend is over.

Hang Seng Index

Japan’s Nikkei 225 found support at 17500. Recovery above 19000 would signal a rally to test resistance at 21000. The gradual decline on 13-week Twiggs Money Flow suggests medium-term selling pressure rather than a primary (long-term) shift.

Nikkei 225 Index

* Target calculation: 19000 + ( 19000 – 17500 ) = 20500

India’s Sensex is headed for a test of the new resistance level at 26500. The primary trend is downward. Respect of the zero line by 13-week Twiggs Money Flow indicates medium-term buying pressure. Recovery above 26500 is unlikely, but would warn of a bear trap. Respect of resistance remains more likely and would suggest another decline.

SENSEX

* Target calculation: 25000 – ( 26500 – 25000 ) = 23500

Australia

The ASX 200 continues to test primary support at 5000. 21-Day Twiggs Money Flow oscillating around zero indicates uncertainty. Breach of 5000 would confirm a primary down-trend. Recovery above 5300 is less likely, but would indicate a bear rally.

ASX 200

* Target calculation: 5000 – ( 5400 – 5000 ) = 4600

Just a word of caution. Relieving rallies can (and often do) fail. Probability of a continued primary up-trend will only improve once support levels have been tested. Early movers always face greater uncertainty. Which is why our long-term portfolios continue to hold high levels of cash.

More….

Why Europe Failed

Not much wrong with the US economy

NYSE short sales easing

Marcus Miller & Eric Clapton [music]

You really wonder why leaders want these jobs when they really do not want to lead. And what is their risk? That Barack Obama will not get a second term? Or that Angela Merkel’s coalition might finally end up on the rocks? If they actually made the leap they might astound themselves. Because, in the end, everyone in political life gets carried out — the only relevant question is whether the pallbearers will be crying.

~ Paul Keating, 24th Prime Minister of Australia (2011)

September 3, 2015April 18, 2024

The illusion of unstoppable Chinese growth

Throughout history, from Dutch tulips to South Sea investments, investors experiencing a bubble have refused to believe that it will end. Forecasters with the temerity to suggest otherwise were attacked and ridiculed. Denial is a powerful emotion.

The last three decades have been no different, as we moved through a succession of bubbles: from Japan in 1989/90, to the 1997/98 Asian crisis, to the Dotcom crash in 2000/01, and the GFC in 2007/08. All had the same primary cause: state interference with two major pricing mechanisms that allow markets to clear. Central bank suppression of interest rates fueled rapid debt growth and forced investors to assume greater risk in order to achieve a viable return, building huge imbalances within the economy. Suppression of exchange rates through accumulation of vast foreign reserves, primarily foreign debt, has also been used by emerging economies such as China to boost exports and maintain a current account surplus. But this ignores the inevitable feedback loop that results.

China’s and other emerging markets current account surpluses caused the US to suffer a persistent current account deficit.

US Current Account Deficit

The effect on the US is twofold. First, a persistent current account deficit hurts economic growth. Second, foreign purchases of US debt suppress long-term interest rates. Like most central banks, the Fed preferred to address the symptoms (falling growth and rising unemployment) rather than address the underlying cause (if your only tool is a hammer then every problem starts to resemble a nail). Fed suppression of interest rates created a wash of easy money looking for a return. A large chunk of this flowed into China and other emerging markets — primarily as credit to domestic borrowers — taking advantage of low interest rates in the US and higher yields in these rapidly growing economies, while enjoying the protection of a currency pegged to the Dollar.

Now that the Fed is making noises about raising interest rates, margins are likely to be squeezed and the currency peg appears vulnerable. Recent capital outflows forced China to devalue the Yuan. But devaluation is likely to fuel further outflows. Supporting the currency — purchasing Yuan using China’s more than $4 trillion of foreign reserves — may appear a simple solution but that contracts the amount of money in circulation, threatening deflation.

Attempts to stem the outgoing tide are likely to sap confidence and exacerbate the problem. China and other emerging markets can expect a hard landing. US and European markets survived the crises of 1989/90 and 1997/98 but global economies are now far more intertwined. I prefer to err on the side of caution.

North America

The S&P 500 respected the new resistance level at 2000, suggesting that the rally has failed. Wednesday’s blue harami candle offers feint hope of a reversal, but the overriding trend is downward. Rising short sales warn of increased selling pressure. Recovery above 2000 is unlikely but would offer hope of a relieving rally. Breach of short-term support at 1900 would suggest another decline, while failure of 1870 would confirm.

S&P 500 Index

* Target calculation: 1900 – ( 2000 – 1900 ) = 1800

The CBOE Volatility Index (VIX) continues to indicate elevated market risk.

S&P 500 VIX

Dow Jones Industrial Average is in a similar position to the S&P 500. Breach of support at 16000 would confirm a primary down-trend. Recovery above 17000 is less likely, but would signal buying pressure.

Dow Jones Industrial Average

Canada’s TSX 60 rallied above resistance at 800 but has since reversed. Follow-through below say 790 would confirm the primary down-trend. Declining 13-week Twiggs Momentum below zero continues to warn of a down-trend. Recovery above 820 is less likely but would indicate buying pressure.

TSX 60 Index

* Target calculation: 800 – ( 900 – 800 ) = 700

Europe

Germany’s DAX recovered above support at 10000. Follow-through above last week’s candle at 10500 would indicate a rally to test the descending trendline. Respect of the zero line by 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 10000 is less likely, but would warn of a primary down-trend.

DAX

The Footsie is testing primary support at 6100. Reversal below that level would confirm a primary down-trend, while recovery above 6250 would indicate a rally to test 6500. Respect of the zero line by 13-week Twiggs Money Flow again indicates medium-term support.

FTSE 100

Asia

Chinese markets are closed Thursday and Friday for the World War II 70th Anniversary. The Shanghai Composite index is testing support at 3000. Intervention to support the market is unlikely to succeed. Reversal of 13-week Twiggs Money Flow below zero would confirm a primary down-trend.

Dow Jones Shanghai Index

Hong Kong’s Hang Seng Index gives a clearer picture of investor sentiment without government intervention. Breach of support at 22500 and declining 13-week Twiggs Money Flow (below zero) both signal a primary down-trend. Failure of the next level of support at 21000 further strengthens the signal.

Dow Jones Shanghai Index

* Target calculation: 440 – ( 550 – 440 ) = 330

Japan’s Nikkei 225 retreated below support at 19000 and is likely to test primary support at 17000. The gradual decline of 13-week Twiggs Money Flow indicates medium-term selling pressure — more a secondary correction than a primary reversal.

Nikkei 225 Index

* Target calculation: 19000 – ( 21000 – 19000 ) = 17000

India’s Sensex retreated below 26000, confirming a primary down-trend. Reversal of 13-week Twiggs Money Flow below zero would further strengthen the signal.

SENSEX

* Target calculation: 27000 – ( 30000 – 27000 ) = 24000

Australia

The ASX 200 is testing key support at 5000. Respect of the zero line (from below) on 21-day Twiggs Money Flow indicates selling pressure. Breach of 5000 is likely and would confirm a primary down-trend. Respect is unlikely, but would indicate another test of medium-term resistance at 5300.

ASX 200

* Target calculation: 5000 – ( 5400 – 5000 ) = 4600

More….

NYSE short selling rises

If we don’t understand both sides of China’s balance sheet, we understand neither | Michael Pettis

Volatile crude

China: It just got worse

S&P 500: Dead cat bounce?

China’s conundrum: Capital flight or deflation

There is a theory which states that if ever anyone discovers exactly what the Universe is for and why it is here, it will instantly disappear and be replaced by something even more bizarre and inexplicable.

There is another theory which states that this has already happened.

~ Douglas Adams: Hitchhiker’s Guide to the Galaxy

August 23, 2015

A bad case of the ‘nineties

The 1990s featured two significant upheavals in global financial markets. First, 1990 saw the Nikkei collapse from its high of 39000, reaching an eventual low of 7000 in 2008.

Nikkei 225 Index

The collapse followed strong appreciation of the Yen after the September 1985 Plaza Accord and the ensuing October 1987 global stock market crash. The Plaza Accord attempted to curtail long-term currency manipulation by Japan who had built up foreign reserves — mainly through purchases of US Treasuries — to suppress appreciation of the Yen against the Dollar and maintain a current account surplus.

Seven years later, collapsing currencies during the 1997 Asian financial crisis destroyed fast-growing economies — with Thailand, South Korea and Indonesia experiencing 40%, 34% and 83% falls in (1998) GNP respectively — and eventually led to the 1998 Russian default and break up of the Soviet Union. Earlier, rapidly growing exports with currencies pegged to the Dollar brought a flood of offshore investment and easy credit into the Asian tigers. Attempts by the IMF to impose discipline and a string of bankruptcies spooked investors into a stampede for the exits. Falling exchange rates caused by the stampede led to a further spate of bankruptcies as domestic values of dollar-denominated debt skyrocketed. Attempts by central banks to shore up their currencies through raising interest rates failed to stem the outflow and further exacerbated the disaster, causing even more bankruptcies, with borrowers unable to meet higher interest charges.

What we are witnessing is a repeat of the nineties. This time it was China that attempted to ride the dragon, pegging its currency against the Dollar and amassing vast foreign reserves in order to suppress appreciation of the Yuan and boost exports. The Chinese economy benefited enormously from the vast trade surplus with the US, but those who live by the dragon die by the dragon. Restrictions on capital inflows into China may dampen the reaction, compared to the 1997 crisis, but are unlikely to negate it. The market will have its way.

Financial markets in the West are cushioned by floating exchange rates which act as an important shock-absorber against fluctuations in financial markets. The S&P 500 fell 13.5% in 1990 but only 3.5% in October 1997. The ensuing collapse of the ruble and failure of LTCM, however, caused another fall of 9.0% a year later. Not exactly a crisis, but unpleasant all the same.

North America

The domestic US economy slowed in the past few months but increased spending on light motor vehicles and housing suggested that robust employment growth would continue. Upheaval in financial markets (and exports) now appears likely to negate this, leading to a global market down-turn.

The S&P 500 breached primary support at 1980, signaling a primary down-trend. The index has fallen 4.5% from its earlier high and presents a medium-term target of 1830*. Decline of 13-week Twiggs Money Flow below zero would confirm the signal but descent has been gradual, suggesting medium-rather than long-term selling pressure.

S&P 500 Index

* Target calculation: 1980 + ( 2130 – 1980 ) = 1830

The CBOE Volatility Index (VIX) spiked upwards indicating rising market risk.

S&P 500 VIX

Bellwether transport stock Fedex broke primary support at $164, confirming the primary down-trend signaled by 13-week Twiggs Money Flow reversal below zero. The fall warns of declining economic activity.

Fedex

Canada’s TSX 60 broke primary support at 800, confirming the earlier bear signal from 13-week Twiggs Momentum reversal below zero. Target for a decline is 700*.

TSX 60 Index

* Target calculation: 800 – ( 900 – 800 ) = 700

Europe selling

Germany’s DAX broke medium-term support at 10700. Expect further medium-term support at 10000 but reversal of 13-week Twiggs Money Flow below zero warns of selling pressure. Breach of 10000 would indicate a test of primary support at 9000.

DAX

* Target calculation: 10700 – ( 11800 – 10700 ) = 9600

The Footsie broke 6450, signaling a test of primary support at 6100. Reversal of 13-week Twiggs Money Flow below zero warns of (long-term) selling pressure. Breach of 6100 would offer a target of 5000**.

FTSE 100

* Target calculation: 6450 – ( 6800 – 6450 ) = 6100 **Long-term: 6000 – ( 7000 – 6000 ) = 5000

Asia

The Shanghai Composite reflects artificial, state-backed support at 3500. Declining 13-week Twiggs Money Flow warns of long-term selling pressure. Withdrawal of government support is unlikely, but breach of 3400/3500 would cause a nineties-style collapse in stock prices.

Shanghai Composite Index

* Target calculation: 4000 – ( 5000 – 4000 ) = 3000

Japan’s Nikkei 225 appears headed for a test of 19000. Breach would test primary support at 17000 but, given the scale of BOJ easing, respect is as likely and would indicate further consolidation between 19000 and 21000. Gradual decline of 13-week Twiggs Money Flow suggests medium-term selling pressure.

Nikkei 225 Index

* Target calculation: 21000 + ( 21000 – 19000 ) = 23000

India’s Sensex is holding up well, with rising 13-week Twiggs Money Flow signaling medium-term buying pressure. Breakout above 28500 is unlikely but would indicate another test of 30000. Decline below 27000 would warn of a primary down-trend; confirmed if there is follow-through below 26500.

SENSEX

Australia

Commodity-rich Australian stocks are exposed to China and emerging markets. The only protection is the floating exchange rate which is likely to adjust downward to absorb the shock — as it did during the 1997 Asian crisis. 13-Week Twiggs Money Flow below zero warns of (long-term) selling pressure on the ASX 200. Breach of support at 5150 is likely and would confirm a primary down-trend. Long-term target for the decline is 4400*. Respect of primary support is unlikely, but would indicate consolidation above the support level rather than a rally.

ASX 200

August 23, 2015

A bad case of the ‘nineties

The 1990s featured two significant upheavals in global financial markets. First, 1990 saw the Nikkei collapse from its high of 39000, reaching an eventual low of 7000 in 2008.

Nikkei 225 Index

North America

S&P 500 Index

* Target calculation: 1980 + ( 2130 – 1980 ) = 1830

The CBOE Volatility Index (VIX) spiked upwards indicating rising market risk.

S&P 500 VIX

Fedex

Canada’s TSX 60 broke primary support at 800, confirming the earlier bear signal from 13-week Twiggs Momentum reversal below zero. Target for a decline is 700*.

TSX 60 Index

* Target calculation: 800 – ( 900 – 800 ) = 700

Europe selling

DAX

* Target calculation: 10700 – ( 11800 – 10700 ) = 9600

FTSE 100

* Target calculation: 6450 – ( 6800 – 6450 ) = 6100 **Long-term: 6000 – ( 7000 – 6000 ) = 5000

Asia

Shanghai Composite Index

* Target calculation: 4000 – ( 5000 – 4000 ) = 3000

Nikkei 225 Index

* Target calculation: 21000 + ( 21000 – 19000 ) = 23000

SENSEX

Australia

ASX 200

September 23, 2014

Canada: TSX 60 correction

Canada’s TSX 60 broke short-term support at 890, warning of a correction. Respect of support at 865 would confirm that the primary trend is intact, while failure would indicate weakness. Reversal of 13-week Twiggs Momentum below zero is unlikely, but would warn of reversal to a (primary) down-trend.

TSX 60

* Target calculation: 900 + ( 900 – 865 ) = 935

September 16, 2014

Canada: TSX threatens breakout

Canada’s TSX 60 consolidating in a narrow range below resistance at the 2008 high of 900 is a bullish sign. Breakout would offer a medium-term target of 935*. 13-Week Twiggs Money Flow oscillating high above zero indicates healthy buying pressure. Reversal below 890 would warn of a test of support at 865/870, but penetration of the rising trendline is unlikely.

TSX 60

* Target calculation: 900 + ( 900 – 865 ) = 935

August 11, 2014

Canada: TSX 60

Canada’s TSX 60 continues to test support at 865/870. Rising 13-week Twiggs Money Flow indicates strong buying pressure. Respect of the primary trendline would suggest another primary advance. Breakout above the 2008 high of 900 would confirm. Penetration of the rising trendline is unlikely, but would warn of trend weakness and a correction to 800/820.

TSX 60

August 5, 2014

Canada: TSX 60 primary up-trend

Canada’s TSX 60 retreated from its 2008 high at 900 and is testing short-term support at 870. Rising 13-week Twiggs Momentum indicates a strong primary up-trend. Respect of the primary trendline would suggest another primary advance, while penetration of the line would warn of trend weakness — and a correction to 800/820.

TSX 60

July 29, 2014

Canada: TSX 60 at 2008 high

Canada’s TSX 60 is testing its 2008 high at 900. Rising 13-week Twiggs Money Flow troughs above zero indicate strong buying pressure. Expect resistance at 900, but this is unlikely to hold. Reversal below the rising (secondary) trendline is not expected, but would warn of a correction to 800/820.

TSX 60