The Next Wave
By Colin Twiggs
April 28, 2009 8:30 p.m. ET (10:30 a.m. AET)
Japan: Nikkei 225
The Nikkei 225 turned down below short-term support at 8600, signaling another test of primary support at 7000. Twiggs Money Flow (21-Day) crossed to below zero, indicating selling pressure. The Japanese market has been living precariously, ignoring the sharp contraction in its export-led economy, and a down-turn would signal a wave of realism.
US: Dow Industrials
An impending sharp contraction in manufacturing, caused by collapse of the auto industry, is likely to result in massive layoffs — sending shockwaves through the entire economy. Even the bouyant tech sector will not be immune.
The Dow so far appears to be ignoring the risk, forming a narrow consolidation which is normally a continuation pattern. But reversal below 7800 would warn of a down-swing to test primary support at 6500. And a fall below 7500 would confirm.
The Debt Bubble
Attempts to rescue consumers from the current credit contraction by stimulating a new debt bubble have so far proved ineffectual. We should be thankful: if successful they risk leading to an even greater contraction in the next cycle, with disastrous consequences for the entire system.
We spent our way into this mess — now we are being asked to spend our way out of it!
~ Lionel Barber, FT editor on the Future of Capitalism
Note to readers:
I will be taking a break next week. Newsletters will resume on Monday, May 11th. Regards, Colin