— The VIX rallied above the top trendline of its Ending Diagonal formation, also closing above intermediate-term trend support/resistance at 16.56. This confirms the buy signal from its March 16 Master Cycle low. In addition, the 17-day and 60-day pivot lows (two different cycles) occurred this week, giving the “all clear” for a dramatic rally through the end of April.
The 50-day moving average at 17.29 is the last bastion of resistance to the new trend. Cyclically, the VIX has the same alignment as it did in early July of 2011. Structurally, that makes this cycle possibly much more volatile than normal.
— SPY closed below short-term trend support/resistance at 140.42. My model indicates a need to break through intermediate-term trend support at 138.40 to confirm the decline. Below that is the 50-day moving average at 136.75, which traders often refer to as the “point of recognition.” The crash trigger is at 132.50.
(ZeroHedge)(http://www.zerohedge.com/news/nyse-margin-debt-highest-july-means-threat-margin-calls-high) “…Every time there is a ramp in the stock market, especially one which is not accompanied by retail buying, those who are buying, are forced to do so on increasingly more margin, as there is only so much cash in the market without booking actual profits. Sure enough, as of the end of February, margin debt was $289 billion, the highest since July 2011, while Net Free Credit of negative $33 billion (meaning investors have negative net worth) was the lowest also since July.”
–UUP completed a ½ Trading Cycle low on April 3 as it vaulted from its mid-cycle support at 21.85. By Wednesday it crossed above the cluster of resistances at 22.07. This is a strong beginning for nearly a month of rally that the cycles project through the end of April. It appears that the inverted Head & Shoulders pattern directly overhead may be invoked, as UUP appears to be completing the final stage of the right shoulder.
— FXE is fast approaching the lower trendline of its Orthodox Broadening Top near 129.00. Currently it is due for a Primary Cycle low by the end of next week, which may induce a flash crash in FXE. Primary Cycles are closely associated with Elliott wave threes and this one is no exception. After all this delay, it appears that both the Orthodox Broadening Top (a pre-crash formation) and the Head & Shoulders are aligned for a powerful down-stroke in FXE.
FXE was ripe for a decline since its high in early February. However, the Broadening formation implies that efforts were made to avoid the crash, only to make matters worse. What could have transpired over three months will now take place in three weeks.
— TLT completed an impulse from its Master Cycle low on March 19. On Tuesday it made a deep 75% retracement before resuming its advance. It is currently due for its next cycle top between April 25 and May 1. A surge above intermediate-term trend resistance at 114.02 and the 50-day moving average at 114.99 will confirm the uptrend.
TLT may also continue its rally through the month of April.
— GLD violated its minor Head & Shoulders at 158.70 and bounced back on a retest. A resumption of the decline on Monday may invoke the larger Head & Shoulders pattern in the subsequent decline. A decline below the massive Head & Shoulders neckline at 150.00 may have enormous consequences for the owners of GLD.
Notice that the short-term and intermediate-term trend resistances have both crossed below the 50-day moving average (magenta). The double Head & Shoulders patterns remind me of a layer cake ready to collapse.
— USO had its Trading Cycle low on April 4. In the decline it crossed below the 50-day moving average at 39.76 and appears to have mounted a retest today. It is uncertain whether USO will finish the retest at 39.76 or reverse lower at the open on Monday. USO is facing a month of decline in April.
— FXI had a combined Primary/Trading Cycle low on March 28. The corrective bounce from that low may be nearly complete. It may finish its retracement near its short-term resistance at 37.35 or slightly higher tomorrow, its cycle pivot date. From there it appears ready to resume its decline in what may be a “third of a third” wave. FXI will then be back in free-fall territory with a target very near Cycle bottom Support at 31.60. China may be leading the U.S. market in this decline and may have a similar trajectory to USO.
— INDY has been retesting its short-term resistance at and mid-cycle resistance at 23.79 and 23.76, respectively. Since it has closed beneath both, we may now surmise that it is entering a “third of a third” wave which may be very powerful and has an expected Trading Cycle low due on or near April 17. Its coming cycle low may revisit the December lows…or possibly lower.
XLF turned down from its Cycle Top Resistance at 15.90 and closed below its short-term trend resistance at 15.74. Below it are intermediate-term trend support at 15.24 and the 50-day moving average at 14.98. A violation of the 50-day support also approaches the trendline of the Broadening Wedge formation, a crash pattern that cannot be ignored. The initial decline should take XLF to or beneath the massive neckline at the bottom of the chart.
A major potential negative catalyst(http://www.zerohedge.com/news/bank-downgrade-forward-calendar) for financials globally is rapidly approaching as 114 banks are on review-for-downgrade by Moody’s across 16 countries.
The New York Fed’s Brian Sack, better known by everyone as the head of the Plunge Protection Team(http://www.zerohedge.com/article/worlds-most-important-trading-desk-not-goldman-9th-floor-33-liberty-street), is gone. Is he quitting, or did he get sacked (http://www.zerohedge.com/news/brian-sack-out)? Art Cashin(http://www.zerohedge.com/news/art-cashin-bernankes-secret-banker-meeting-keep-europe-afloat) observed that Bernanke is trying very hard to keep Europe afloat. Is there something more than meets the eye?
Anthony M. Cherniawski
The Practical Investor, LLC
P.O. Box 129, Holt, MI 48842
Office: (517) 699.1554
Fax: (517) 699.1558
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