The FTSE 100 is testing long-term resistance at 7000/7100. Declining Twiggs Money warns of selling pressure. Retreat below 6950 would warn of a correction to test 6500.
The quarterly chart below shows the FTSE 100 first tested 7000 resistance in December 1999, reaching a high of 6950, and has struggled to break clear of this level ever since.
With the pound approaching record lows from 1985, and exports expected to rise, the Footsie finally has a decent chance of breaking clear.
Germany’s DAX is consolidating between 10200 and 10800. Declining Twiggs Money Flow has leveled off above zero. Recovery above 10800 would signal a primary advance with a target of 11500*.
* Target calculation: 10500 + ( 10500 – 9500 ) = 11500
Hong Kong’s Hang Seng Index is consolidating between 23000 and 24000. Decline of Twiggs Money Flow has slowed and a trough above zero would indicate long-term buying pressure. Breakout above 24000 would signal a fresh advance. Breach of support at 23000 is less likely but would warn of a correction to test the long-term rising trendline.
The Shanghai Composite Index made a flat saucer-shaped correction before again testing resistance at 3100. Breakout is now likely and would signal a fresh advance.
India’s Sensex is consolidating above support at 27600 after breaking below its trend channel. Bearish divergence on Twiggs Money Flow warns of long-term selling pressure. Breach of 27600 is likely and would signal a correction to 26000.
Harold Mitchell wishes that politicians would stop throwing mud at each other:
…..The great Sir Robert Menzies never mentioned Labor leader Arthur Calwell by name with that wonderful plummy accent of his. He would occasionally refer to the “leader of the opposition” but only if he really had too.
But now leaders everywhere end up making us wonder if any of them are up to it because they don’t stop deriding each other. That’s about all that Trump and Clinton do. The net effect on much of the population is to blank out policy discussion with negativity that they think is hurting the other, but in the end discredits them all. The debates start low and go lower.
My experience in London was similar. The English elite, as they thought of themselves, attacked everyone: Germans, French, Scottish, Irish and everybody south of the equator. Any wonder that they lost the Brexit vote because they’d convinced the people that the rest of the world was no good.
….Waleed Aly, at a brilliant Andrew Olle lecture last Friday, said that you never hear McDonald’s and Burger King in America run down each other. They just want people to [buy] hamburgers. So if you’re trying to build public trust, ….stop attacking each other. No one appreciates negativity. You use a lot of energy and important things don’t get the elevation they really need…..
Voters need to wise up. He/she who throws the most mud is normally the dirtiest.
Source: The way of the magpie: Know your enemy, don’t bother fighting them
Given the size of its economy – and the high stock of debt for a country at its stage of development – China’s leverage will be a global issue in the future, not just a China issue.
Total debt to GDP in China was around 250% at the end of 2015, the highest among emerging economies…. Over the medium term, we expect more debt creation in China: Leverage is unavoidable for China to achieve its growth targets.
Corporate debt – at more than 120% of GDP – remains the key cause for concern in China….
What will China do in dealing with its mounting leverage? Policymakers appear to have two options.
Option 1: China moves more aggressively to remove the moral hazard in its financial system. That would be the prudent thing to do but would release pent-up perils; defaults would climb, and banks would rack up losses.
Option 2: China postpones reform and instead tries to patch the current system (“kick the can down the road”). That would be safer in the short term, but the inexorable accumulation of debt would slow the economy over the secular horizon and raise the odds of a hard landing in the future.
In our base case, China will take Option 2 and move only temporarily to Option 1 in good, calm times, resulting in a slow-moving process that shifts between the two approaches……
China faces similar challenges today as Japan did in the past:
- The need to rebalance from investment to consumption (which Japan experienced in the 1970s)
- Credit- and asset-bubble risk (Japan in the 1980s)
- A rapidly aging population (Japan since the mid-1990s)
In dealing with their debt problems, China and Japan share an important advantage – they are external creditors. They also have important differences, however, which should make China’s deleveraging process (when it finally happens) more complicated for the rest of the world: China’s global spillover effect should be larger than Japan’s due to China’s size, its commodity and emerging market linkages and its still-evolving exchange rate regime. China has an uncertain and complex political trajectory. The rest of the world, particularly developed countries, still faces the challenge of stimulating growth following the global financial crisis. China today is facing all three of these challenges simultaneously, while Japan had the opportunity to deal with each one of them sequentially.
China seems likely to continue kicking the can down the road, digging itself into an even bigger hole.
Source: Rising Leverage in Emerging Asia Where Is It Headed | PIMCO
From Bob Doll:
Equities may struggle until corporate earnings improve.
For the past 18 months, equities have been able to make modest gains despite declining corporate profits. This has largely been due to highly accommodative monetary policy and central banks’ willingness to engage in new easing measures. Additionally, investors have been willing to look past the earnings recession since we have not seen a corresponding economic recession. Looking ahead, we believe earnings must advance for equity markets to make meaningful gains. It is early in the third quarter reporting season, but so far the news hasn’t been favorable.
It may take another quarter before corporate earnings accelerate.
At present, consensus expectations are that earnings will decline 3% in the third quarter while revenues rise 3%. Excluding energy, earnings would be up 1% with revenues advancing 4%. Conditions should improve in the fourth quarter, with consensus expectations pointing to a 6% earnings increase…..
Source: Weekly Investment Commentary from Bob Doll | Nuveen
Steep decline on Twiggs Money Flow warns of strong selling pressure on Hong Kong’s Hang Seng Index. Breach of support at 23000 would warn of a correction to test the long-term rising trendline.
The Shanghai Composite Index continues to consolidate between 2800 and 3100.
The FTSE 100 has run into stubborn long-term resistance at 7000/7100. Declining Twiggs Money warns of selling pressure. Follow-through below the last two weeks’ lows would warn of a correction to test 6500.
Germany’s DAX is testing support at 10500. Declining Twiggs Money Flow warns of selling pressure. Follow-through below recent lows would warn of a correction to the rising long-term trendline.
* Target calculation: 10500 + ( 10500 – 9500 ) = 11500
India’s Sensex broke below its trend channel, and is testing support at 27600. Breach would signal a correction. Bearish divergence on Twiggs Money Flow warns of long-term selling pressure. Breakout below 27600 is likely and would warn of a test of 26000.
Amazon.com is pushing deeper into the grocery business with plans to introduce convenience stores as well as curbside pickup locations, say people familiar with the matter.
The company aims to build small brick-and-mortar stores that would sell produce, milk, and other perishable items that customers can take home, these people say. Primarily using their mobile phones or, possibly, touch screens around the store, customers could also order goods with longer shelf lives for same-day delivery. Amazon will soon begin rolling out designated drive-in locations where online grocery orders will be brought to the car….
Source: Amazon to Expand Grocery Business With New Convenience Stores – WSJ
From John Fernald at the San Francisco Fed:
Estimates suggest the new normal for U.S. GDP growth has dropped to between 1½ and 1¾%, noticeably slower than the typical postwar pace. The slowdown stems mainly from demographics and educational attainment. As baby boomers retire, employment growth shrinks. And educational attainment of the workforce has plateaued, reducing its contribution to productivity growth through labor quality….
Slowing growth in working-age population and labor force
Variation in productivity growth by trend period
There is one other factor that I believe is a major determinant of low productivity gains and hence GDP growth. Private investment — a major contributor to productivity improvement — is declining as a percentage of GDP.
Source: Economic Research | What Is the New Normal for U.S. Growth?
Hong Kong’s Hang Seng Index respected its new support level at 23000, confirming the primary up-trend. Follow-through above 24000 would offer a target of 26000*.
The Shanghai Composite Index, on the other hand, continues to wander aimlessly between 2800 and 3100.
With China’s one-country-two-systems we have a clear long-term comparison between the two systems: a centrally-planned, authoritarian and increasingly nationalistic Goliath and a more democratic, outward-looking, free-market David in Hong Kong. My money is on the little guy.
India’s Sensex broke below its trend channel, warning of a correction. The short inverted hammer (or gravestone) signals indecision. But bearish divergence on Twiggs Money Flow warns of long-term selling pressure. Breakout below 27600 is expected and would warn of a test of 26000.
Two short weekly candlesticks suggest the ASX 200 rally has stalled at 5500. Bearish divergence on Twiggs Money Flow warns of selling pressure. Reversal below the lower trend channel would warn of a test of primary support at 5000/5100. Breakout above 5600 is unlikely.
The ASX 300 Banks Index is testing resistance at 8000. Declining Twiggs Money Flow still warns of selling pressure. Breakout above 8000 would signal a primary up-trend but I would be cautious and wait for retracement to respect the new support level. There are some good fundamental reasons, like the real estate/apartment bubble, that suggest a reversal would be premature.
Germany’s DAX is testing support at 10500. Respect would confirm the primary up-trend. This week’s long tail and a Twiggs Money Flow trough above zero indicate buying pressure. Follow-through above 10800 would complete a bear trap — a bullish signal with a target of 11500*.
* Target calculation: 10500 + ( 10500 – 9500 ) = 11500
The FTSE 100 is also rallying, to test long-term resistance at 7000/7100. Rising troughs on Twiggs Money flow signal long-term buying pressure.
India’s Sensex broke below its trend channel, warning of a correction. Expect a test of support at 26000.