Home > Uncategorized > 2013/01/03: Quick Post: Fresh Tech available & ironic ‘creeping’ tax view

2013/01/03: Quick Post: Fresh Tech available & ironic ‘creeping’ tax view

© 2012 ROHR International, Inc. All International rights reserved.

A fresh set of Technical Projections and Select Comments are already available via the link in the right hand column. They incorporate the sharp swings from the top of the year response to the US Fiscal Cliff avoidance effort. While that was characterized as a tax hike on ‘the rich’, it is important to note this was only insofar as the income tax rate is concerned.

And that is not the true sum of the real impact


…as the bulk of Americans are going to suffer under a modest yet telling increase: the end of the Payroll Tax Holiday. And that may be at least as important (and possibly quite a bit more so) compared to any lack of investor/owner capital expenditure on business formation or expansion in 2013. After all, while ‘the rich’ can literally afford to sit back and pick their spots for investment and trading, the average American is the one who spends the bulk of their paycheck each week.

So while the incremental individual payroll tax increase may seem small, it will likely have a full impact on the economy via less spending by the spending class. Anyone who might scoff at the notion $50 per month less for a family earning $30,000 per year (or $190 less for those making $115,000 per year) should consider what the Financial Times LEX (as in those who explain the meaning of words) column had to say today based on JP Morgan’s economics team’s projections. The online version also has interesting links to other US fiscal issue articles.

And the irony is that there was every political incentive on both sides of the US political aisle to extend this tax break. The additional irony lays in the ostensible victory of limiting the headline increase of capital gains and dividend taxes to 20% from 15% at present… except for the fact that Obamacare taxes just came into force at the top of the year, adding a 3.8% surtax to those two levies.

So in fact while the higher income tax is allegedly only on ‘the rich’, payroll taxes based on income are going to hit all of those average families. This is the big triumph for the Left in the Fiscal Cliff deal? And greater disincentives to capital formation and investment are on track right along with that in the form of higher than advertised taxes on investment.

That’s how Taxulationism1 works… creep, creep, creep… until the incentives are all gone. It seems to us that the Obama administration is doing a great job of neutering any Republican efforts to counter their overall program (Obamacare, aggressive environmental regulatory enforcement, etc.) by aggressively engaging on the fiscal issues. Excellent tactical approach to guaranteeing success…

…depending on your definition of ‘success’.

1Taxulationism © 2010 Alan Rohrbach & Jack Bouroudjian. All rights reserved unless explicitly waived

Def.: Combined impact of taxation, regulation and protectionism to an oppressive degree as official policy

General Market Observations

All of those potential drags on the US economy notwithstanding, the near-term decision is going to rest with Friday morning’s US Employment report. After a modest selloff today (compared to the dramatic surge on Wednesday) it will be most interesting to see whether the March S&P 500 future falls back below the 1,440-45 lead contract resistance range. And there is a lot more at stake than whether it simply respects Wednesday’s 1,444.00 low at the top of the major gap higher opening. There is also the issue of whether it holds low end of that 1,440-45 to respect the December 20 close from which it had gap down so sharply just before the Christmas holiday break. If not, then it might just quickly fill the gap back down to the 1425 lead contract pre-election Close, along with other support in that area.

On the other hand, if the Employment report is its strong as might be inferred from today’s ADP number, there will be a question of whether it can push above the high post lead contract weekly Close at 1,465.80 from back during the QE surge into mid-September. As that is also the area of some subsequent weekly highs and current weekly Oscillator resistance, any sustained activity above it would indicate a likely push up to extended resistances in the upper 1,400 area or higher. So while we sometimes disparage those placing too much importance on the US employment report, this one actually is more critical than most based upon the sharp swing earlier this week.


That is most prominent in primary government bond markets, and especially the March Bund and March Gilt future that has sunk below its important 117.00 support. That puts the latter back into an entire lower range, with next major supports not until the mid-114.00 and mid-113.00 areas. That makes it even more important than the late trading in the March Bund future on the back of the slightly more hawkish than expected FOMC minutes left it below key support at 143.75-.50. While it remains the overall strong sister within the broader technical structure, unless it recovers timely tomorrow that will leave a weekly Close failure for a swing down to it least the mid-142.00 support or lower. In that case, it is not hard to imagine weak sister Gilt dropping the better part of another couple of points as well.

The outlier is the March T-note future that only just barely reached its critical 131-16/-12 support. This was also holding up much better today prior to the somewhat less accommodative quantitative easing aspect of the FOMC minutes. Much as was the case with the 117.00 support in the Gilt, that area is the meat of the congestion at the high-end of the significant late 2011 through April 2012 trading range. And any significant weekly Close failure back into that range would leave the T-note as damaged as the Gilt below some significant Fibonacci levels along with the congestion. While there is some interim support as nearby as 130-20 (the December 2008 spike high), more major support does not occur once again until the upper 129-00 and 129-00/128-14 areas. So quite a bit more than just the equities fate rests with the response to tomorrow’s US Employment report.

It is also of note that the US Dollar Index fared so well prior to the FOMC minutes released today. Along with that it was very odd that the euro and British pound should have both done so poorly overall yesterday in what was perceived to be a fresh ‘risk on’ environment. That was already a sign that the sheer weight of European recessionary tendencies was not going to favor capital flows in Europe. Even back above 1.3000 and 1.3150-70 major Fibonacci retracement EUR/USD stalled and failed into next real resistance in 1.3250-80 range. All the more telling with weekly MACD UP, but daily MACD just turning back DOWN.

Same goes for the GBP/USD very temporary extension above 1.6300 serial highs only to fail back below it by yesterday’s Close. That said there is still good support as nearby as 1.6000-1.5950, and Sterling does seem to be firming against the euro again as well.

But the really aggressive trend in foreign exchange remains with the sharp weakening of the Japanese yen.  After the USD/JPY February rally above key resistances at 78.35 and 79.50 were UP Breaks, 84.00-.50 was key resistance. The March failure back below 82.00 area led to a prolonged test of those UP Breaks once again. Yet holding there has led to a much more major confirmation of the overall UPturn. Now back above 82.85-83.30, 84.00-.50 and 85.54-.94 leaves it into far more critical 87.50-.00 area. Much above it there is no additional significant resistance until the 91.00 area, and our intermediate term Objectives remain 94.00-95.00 and the 105.00 area.

Love these ‘politico’-economic and heavy central bank influenced markets!! And they make a clear technical perspective that much more necessary.

Thanks for your interest.


  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: