Tag: Vladimir Putin

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War in Europe

Vladimir Putin has escalated the conflict in Eastern Ukraine with new incursions of tanks backed with artillery, anti-aircraft missile systems and up to 15,000 Russian troops. Intent on seizing as much territory as possible, he is banking on the US/European coalition responding with another slap on the wrist. Each weak response has only made Putin bolder. But where he may miscalculate is that the coalition is aware that its “stick-and-carrot” policy has failed and will be looking for a new approach.

Willingness of the Europeans to endure immediate economic pain in the belief that this will avert a long-term calamity is yet to be tested. Success will depend on France, Spain and Italy’s support for their Northern and Central European neighbours, who face a more immediate threat.

A significant step-up in sanctions is likely and the initial response from European markets will be negative. Sanctions are a two-edged sword and likely to hurt Europe almost as much as they do Russia. But NATO rearmament in the medium-term would somewhat offset the initial cost. Never underestimate the stimulus effect of war on local industry — provided the war is fought outside one’s borders

Germany’s DAX is running into stiff resistance as it approaches 9750. And 13-week Twiggs Money Flow below zero warns of selling pressure, threatening a reversal. Retreat below 9250 would strengthen the signal and failure of support at 8900/9000 would confirm a primary down-trend.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

Dow Jones Euro Stoxx 50 reversal below 3100 and 13-week Twiggs Money Flow below zero would add further weight to the (bear) signal.

Dow Jones Euro Stoxx 50

* Target calculation: 3000 – ( 3300 – 3000 ) = 2700

The S&P 500, unfazed by recent developments in Europe, broke resistance at 2000 to signal an advance to 2100*. A 21-Day Twiggs Money Flow trough above zero indicates rising (medium-term) buying pressure. Reversal below 1990 is unlikely, but would warn of another correction.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX), shown here on a ten-year chart, indicates low risk typical of a bull market.

S&P 500 VIX

Shanghai Composite Index, responding to PBOC stimulus, is testing resistance at 2250. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout would confirm a primary up-trend, signaling an advance to 2500*. Respect of resistance is less likely, but would suggest further consolidation.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

The ASX 200 is testing resistance at 5650. Continued strength in US and Chinese stocks would improve the chance of an ASX 200 breakout, suggesting an advance to 5850*. Bearish divergence on 13-week Twiggs Money Flow — shown here on a monthly chart — continues to warn of long-term selling pressure. But failure to cross below zero would negate this and completion of another trough above zero would indicate that buyers are back in control. Reversal below 5450 is unlikely, but would warn of a test of primary support.

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

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Euro, Yen plunge against Dollar

The Euro broke support at $1.33, signaling a further decline against the Dollar with a target of $1.30*. Falling 13-week Twiggs Momentum, below zero, warns of a strong down-trend. Recovery above $1.35 is most unlikely, but would suggest that the down-trend is slowing.

Euro/USD

* Target calculation: 1.35 – ( 1.40 – 1.35 ) = 1.30

The recent rally of the Euro against the Russian ruble has faltered. An economic contraction and rising tensions over Eastern Ukraine both contributed. The Euro remains in an up-trend and recovery above RUB 49 would suggest another attempt at the previous high of RUB 51. But failure of support at RUB 46 would signal a primary down-trend. 13-Week Twiggs Momentum oscillating close to zero reflects current uncertainty.

Euro/Rouble

Vladimir Putin is attempting to exploit fault lines in the US/European alliance, targeting the powerful European farming and motor industry lobbies. Unauthorized incursions into Ukrainian territory by his white-painted “aid convoy” are another example, where the infringement is so apparently inoffensive that Angela Merkel will find it difficult to convince her European allies to escalate sanctions further. Failure to react will merely embolden Putin to conduct further minor infringements in defiance of the EU, confident in their response, until the Ukraine suffers “death by a thousand cuts”.

Putin

Only if the US/EU adopt an aggressive escalation, as suggested here on Defence & Freedom, are they likely to contain Russian aggression.

“…a defensive and reactionary game plan makes one predictable. The very existence of a crisis should be understood as a hint that someone used this predictability to predict the outcome of a produced crisis — and arrived at the conclusion that it’s a good idea. Aka failure of deterrence.”

Japan

As with the Euro, the Japanese Yen is also weakening against the Dollar. The Greenback broke resistance at ¥103.50, signaling a rally to test the 2013 high. Follow-through above ¥104 would confirm. Rising 13-week Twiggs Momentum above zero strengthens the signal. Reversal below ¥103 is unlikely, but would warn of another test of primary support at ¥101.

USD/JPY

Australia

The Aussie Dollar, however, is holding its own — ranging between $0.92 and $0.95 against the US Dollar. The narrow band and 13-week Twiggs Momentum holding above zero both suggest continuation of the up-trend. Breakout above $0.95 would suggest a target of $0.97. Reversal below $0.92 is unlikely at present, but would warn of a decline to the band of support between $0.87 and $0.89.

Aussie Dollar

The ASX 200, retracing slightly from resistance at 5650, is also influenced by strong foreign investment flows. Indications are predominantly bullish, including 21-day Twiggs Money Flow forming troughs above zero. Follow-through above 5660 would signal another advance, with a medium-term target of 5850. Reversal above 5550 is unlikely, but would warn of another test of primary support.

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

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Putin antics fail to impress markets

For all his macho posturing, Vladimir Putin has demonstrated an inability to move financial markets with his antics in Eastern Ukraine. His latest incursion towards Luhansk, with white-painted military trucks bearing aid to the rebel-held city, unchecked by the Red Cross, passed barely noticed. Instead markets are intently focused on nuances from a 68-year old Jewish mum at Jackson Hole, who also happens to chair the Federal Reserve.

I would have loved to call Janet Yellen a “grandmother”, but son Robert Akerlof — himself a PhD in Economics — does not claim any offspring on his CV. The apple doesn’t fall far from the tree. Husband, George Akerlof, is a Nobel prize-winning economist and professor emeritus at University of California, Berkeley.

The image below highlights the differences between the Fed and the ECB:

Fed ECB

The Fed’s more stimulatory approach has paid dividends in terms of economic growth and employment while inflation expectations remain muted. The inflation breakeven rate — 10-year Treasury yield minus the yield on equivalent inflation-indexed securities — continues to range between 2.0% and 2.50%.

Inflation breakeven rate

The ECB’s more austere approach, on the other hand, has caused a world of pain.

Market update

  • S&P 500 tests 2000.
  • VIX continues to indicate a bull market.
  • DAX hesitant rally.
  • China bullish.
  • ASX 200 faces strong resistance.

The S&P 500 hesitated after making a new high on Thursday, but there was no dramatic fall in response to news from Eastern Ukraine. Expect retracement towards 1950, followed by another test of 2000. 21-Day Twiggs Money Flow is likely to re-test the zero line, but respect would indicate strong buying pressure. Breach of support at 1900, warning of a reversal, remains unlikely.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

Declining CBOE Volatility Index (VIX) indicates low risk, typical of a bull market.

S&P 500 VIX

Germany’s DAX rallied above 9300 on the weekly chart, but 13-week Twiggs Money Flow warns of continued selling pressure. Reversal below support at 8900/9000 would warn of a primary down-trend.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

Shanghai Composite Index is testing resistance at 2250. Breakout would confirm a primary up-trend, signaling an advance to 2500*. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Respect of resistance, however, would suggest further consolidation.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

Tall wicks on ASX 200 daily candles indicate strong resistance at 5650. Respect would suggest retracement to 5550, while follow-through would be a strong bull signal, suggesting an advance to 5850*. Another 21-day Twiggs Money Flow trough above zero would indicate long-term buying pressure. Reversal below 5450 is unlikely, but would warn of a test of primary support.

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

Posted on

Putin antics fail to impress markets

For all his macho posturing, Vladimir Putin has demonstrated an inability to move financial markets with his antics in Eastern Ukraine. His latest incursion towards Luhansk, with white-painted military trucks bearing aid to the rebel-held city, unchecked by the Red Cross, passed barely noticed. Instead markets are intently focused on nuances from a 68-year old Jewish mum at Jackson Hole, who also happens to chair the Federal Reserve.

I would have loved to call Janet Yellen a “grandmother”, but son Robert Akerlof — himself a PhD in Economics — does not claim any offspring on his CV. The apple doesn’t fall far from the tree. Husband, George Akerlof, is a Nobel prize-winning economist and professor emeritus at University of California, Berkeley.

The image below highlights the differences between the Fed and the ECB:

The Fed’s more stimulatory approach has paid dividends in terms of economic growth and employment while inflation expectations remain muted. The inflation breakeven rate — 10-year Treasury yield minus the yield on equivalent inflation-indexed securities — continues to range between 2.0% and 2.50%.

Inflation breakeven rate

The ECB’s more austere approach, on the other hand, has caused a world of pain.

Market update

  • S&P 500 tests 2000.
  • VIX continues to indicate a bull market.
  • DAX hesitant rally.
  • China bullish.
  • ASX 200 faces strong resistance.

The S&P 500 hesitated after making a new high on Thursday, but there was no dramatic fall in response to news from Eastern Ukraine. Expect retracement towards 1950, followed by another test of 2000. 21-Day Twiggs Money Flow is likely to re-test the zero line, but respect would indicate strong buying pressure. Breach of support at 1900, warning of a reversal, remains unlikely.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

Declining CBOE Volatility Index (VIX) indicates low risk, typical of a bull market.

S&P 500 VIX

Germany’s DAX rallied above 9300 on the weekly chart, but 13-week Twiggs Money Flow warns of continued selling pressure. Reversal below support at 8900/9000 would warn of a primary down-trend.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

Shanghai Composite Index is testing resistance at 2250. Breakout would confirm a primary up-trend, signaling an advance to 2500*. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Respect of resistance, however, would suggest further consolidation.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

Tall wicks on ASX 200 daily candles indicate strong resistance at 5650. Respect would suggest retracement to 5550, while follow-through would be a strong bull signal, suggesting an advance to 5850*. Another 21-day Twiggs Money Flow trough above zero would indicate long-term buying pressure. Reversal below 5450 is unlikely, but would warn of a test of primary support.

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

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Falling crude prices are good news

Crude oil prices are falling sharply. Nymex Light Crude broke support at $98/barrel and Brent Crude is testing support at $104. Breach of that support level would confirm a primary down-trend.

Nymex WTI Crude

The theory has been bandied about that lower crude prices are a Barack Obama strategy to deter Vladimir Putin in East Ukraine. But there are signs of an economic slow-down in Europe, especially Italy, that would hurt demand for Brent Crude. And the Baltic Dry Index, which reflects bulk commodity shipping rates, indicates global trade is at a low ebb. Whichever is correct, low crude prices are welcome — good for the medium-term outlook of the global economy.

Baltic Dry Index

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Europe leads markets lower

Summary:

  • Europe retreats as the Ukraine/Russia crisis escalates.
  • S&P 500 displays milder selling pressure and the primary trend remains intact.
  • VIX continues to indicate a bull market.
  • China’s Shanghai Composite is bullish in the medium-term.
  • ASX 200 may experience a secondary correction, but the primary trend displays buying support.

European leaders are waking up to the seriousness of the menace posed by Russia in the East, summed up in a recent Der Spiegel editorial:

Europe, and we Germans, will certainly have to pay a price for sanctions. But the price would be incomparably greater were Putin allowed to continue to violate international law. Peace and security in Europe would then be in serious danger.

Vladimir Putin will not alter course because of a light slap on the wrist. President Obama is going to have to find Teddy Roosevelt’s “big stick” — misplacement of which is largely responsible for Russia’s current flagrant disregard of national borders. And Europe is going to have to endure real pain in order to face down the Russian threat in the East. Delivery of French Mistral warships, for example, would show that Europe remains divided and will encourage the Russian bear to take even bolder steps.

Russian Deputy Prime Minister Dmitry Rogozin said, however, that he doubted France would cancel the deal, despite coming under pressure from other Western leaders: “This is billions of euros. The French are very pragmatic. I doubt it [that the deal will be canceled].”
— The Moscow Times

The whole of Europe is likely to have to share the cost of cancelling deals like this, but it is important to do so and present a united front.

Markets reacted negatively to the latest escalation, with Dow Jones Europe Index falling almost 6% over the last month. 13-Week Twiggs Momentum dipped below zero after several months of bearish divergence, warning not necessarily of a primary down-trend, but of a serious test of primary support at 315. Respect of 325 and the rising trendline would reassure that the primary trend is intact.

Dow Jones Europe Index

The S&P 500 displays milder selling pressure on 13-week Twiggs Money Flow and the correction is likely to test the rising trendline and support at 1850/1900, but not primary support at 1750. Respect of the zero line by 13-week Twiggs Money Flow would signal a buying opportunity for long-term investors. Recovery above 2000 is unlikely at present, but breakout would offer a (long-term) target of 2250*.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

CBOE Volatility Index (VIX) spiked upwards, but remains low by historical standards and continues to suggest a bull market.

S&P 500 VIX

China’s Shanghai Composite Index broke resistance at 2150, suggesting a primary up-trend, but I will wait for confirmation from a follow-through above 2250. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 2050 is unlikely at present but would warn of another test of primary support at 1990/2000. The PBOC is simply kicking the can down the road by injecting more liquidity into the banking system. That may defer the eventual day of reckoning by a year or two, but it cannot be avoided. And each time the problem is deferred, it grows bigger. So the medium-term outlook may be improving, but I still have doubts about the long-term.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 is likely to retrace to test the rising trendline around 5450, but 13-week Twiggs Money Flow holding above zero continues to indicate buying support. Recovery above 5600 is unlikely at present, but would present a target of 5800*. Reversal below 5050 would signal a trend change, but that is most unlikely despite current bearishness.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

Speak softly and carry a big stick.

~ President Theodore Roosevelt, describing his style of foreign policy which he later explained as “The exercise of intelligent forethought and of decisive action sufficiently far in advance of any likely crisis.”

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Europe leads markets lower

Summary:

  • Europe retreats as the Ukraine/Russia crisis escalates.
  • S&P 500 displays milder selling pressure and the primary trend remains intact.
  • VIX continues to indicate a bull market.
  • China’s Shanghai Composite is bullish in the medium-term.
  • ASX 200 may experience a secondary correction, but the primary trend displays buying support.

European leaders are waking up to the seriousness of the menace posed by Russia in the East, summed up in a recent Der Spiegel editorial:

Europe, and we Germans, will certainly have to pay a price for sanctions. But the price would be incomparably greater were Putin allowed to continue to violate international law. Peace and security in Europe would then be in serious danger.

Vladimir Putin will not alter course because of a light slap on the wrist. President Obama is going to have to find Teddy Roosevelt’s “big stick” — misplacement of which is largely responsible for Russia’s current flagrant disregard of national borders. And Europe is going to have to endure real pain in order to face down the Russian threat in the East. Delivery of French Mistral warships, for example, would show that Europe remains divided and will encourage the Russian bear to grow even bolder.

Russian Deputy Prime Minister Dmitry Rogozin said, however, that he doubted France would cancel the deal, despite coming under pressure from other Western leaders: “This is billions of euros. The French are very pragmatic. I doubt it [that the deal will be canceled].”
— The Moscow Times

The whole of Europe is likely to have to share the cost of cancelling deals like this, but it is important to do so and present a united front.

Markets reacted negatively to the latest escalation, with Dow Jones Europe Index falling almost 6% over the last month. 13-Week Twiggs Momentum dipped below zero after several months of bearish divergence, warning not necessarily of a primary down-trend, but of a serious test of primary support at 315. Respect of 325 and the rising trendline would reassure that the primary trend is intact.

Dow Jones Europe Index

The S&P 500 displays milder selling pressure on 13-week Twiggs Money Flow and the correction is likely to test the rising trendline and support at 1850/1900, but not primary support at 1750. Respect of the zero line by 13-week Twiggs Money Flow would signal a buying opportunity for long-term investors. Recovery above 2000 is unlikely at present, but breakout would offer a (long-term) target of 2250*.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

CBOE Volatility Index (VIX) spiked upwards, but remains low by historical standards and continues to suggest a bull market.

S&P 500 VIX

China’s Shanghai Composite Index broke resistance at 2150, suggesting a primary up-trend, but I will wait for confirmation from a follow-through above 2250. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 2050 is unlikely at present but would warn of another test of primary support at 1990/2000. The PBOC is simply kicking the can down the road by injecting more liquidity into the banking system. That may defer the eventual day of reckoning by a year or two, but it cannot be avoided. And each time the problem is deferred, it grows bigger. So the medium-term outlook may be improving, but I still have doubts about the long-term.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 is likely to retrace to test the rising trendline around 5450, but 13-week Twiggs Money Flow holding above zero continues to indicate buying support. Recovery above 5600 is unlikely at present, but would present a target of 5800*. Reversal below 5050 would signal a trend change, but that is most unlikely despite current bearishness.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

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Cold War Strategies Are Back in Russia’s Playbook | The Moscow Times

From Alexander Golts, deputy editor of the online newspaper Yezhednevny Zhurnal:

Russia is becoming a lonely pariah without alliances or military might, other than its nuclear weapons. And without any other easy means of achieving its objectives, I am afraid that the Kremlin will constantly try to prove it is just crazy enough to use its nuclear weapons. In short, Russia is turning into a second North Korea, only much, much larger, and far more dangerous.

Read more at Cold War Strategies Are Back in Russia's Playbook | Opinion | The Moscow Times.

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