— The VIX rallied to Mid-Cycle resistance at 24.49 today. A very strong third of a third wave has begun. Last Friday’s minor low qualified as an early Trading Cycle pivot. It appears that the next significant pivot for the VIX may be next Thursday, May 24. At that time it should have met or exceeded its inverted Head & Shoulders target and its wave (iii) of wave 1 of (C) in Elliott Wave jargon.



— SPY is beginning to have acceleration beneath its Head & Shoulders neckline that also doubles as the trendline of its smaller Orthodox Broadening Top. There has been a considerable amount of buying by large hedge funds trying to protect their investment (selling put options) until today. Now we see a reversal and they have quit “doubling down.” It may be that tomorrow they will throw in the towel and join the selling, which may allow SPY to meet its Head & Shoulders target tomorrow.

 There may be another bump or two along the way, but the near-term trend is still down. The Cycles are not anticipating a low until Thursday, May 24.

–UUP consolidated today after triggering a small Head & Shoulders neckline with a minimum target of 22.72. Since 22.72 is a minimum, it appears that it may rise above its Cycle Top resistance. It is due for a Primary Cycle high (a very powerful move) by May 25. During this cycle, UUP may also be due to break above its neckline at 22.85. In the meantime, it may correct yet another day before moving higher.

— FXE paused in its decline toward its Cycle Bottom at 125.68 and a Massive Head & Shoulders neckline at 125.00. The probability of a waterfall decline is extraordinarily high. The consolidation that we are seeing yesterday and today may be a failed Trading Cycle low that was due this week. Another possibility may be a one-day bounce that reverses back down on Monday, its next pivot day. The Orthodox Broadening Top agrees with the target for the massive Head & Shoulders at 125, which portends a decline to parity.

(ZeroHedge) Ya Can’t Make This Stuff Up – An interesting example of the problems in Greece may be seen in one of its recent attempts to collect taxes.

Property taxes were notoriously unpaid. The government decided to combine those taxes with your electric bill. The concept was simple. Pay your property taxes or your lights will be shut off.

— TLT surged above the Cycle Top high at 122.16 as it aims for its Trading Cycle high as early as tomorrow or Monday. This appears to be the most powerful thrust of all of wave (5), so far. I expect the final thrust of this pattern may terminate on or near June 12. Keep this in mind, since it will be all downhill from there.

— GLD bounced from a major Head & Shoulders neckline today, giving us an early Trading Cycle low that took me off guard. It made a 35% retracement of its most recent decline so far. The low was anticipated on Monday, the 21st or Friday, the 25th. What seems to be happening now is that GLD may be setting up for a massive wave (iii) of 1 once it falls through the neckline. This gives GLD nearly a month to decline into a Primary Cycle low expecting a bottom in mid-June.

(ZeroHedge)   Now it’s getting interesting. 30Y yields fell the most in 5 months today back to 5 month lows, 10Y yields crashed to all-time closing lows, and Gold surged by its most in 4 months (and 2nd most in 7 months) as stocks started to accelerate lower. No Tyler, it’s just a bounce.


— USO continued its slow motion crash, impulsing toward its Head & Shoulders target. If this is wave [3] of iii, it may likely test Cycle Bottom support at 31.91 and beyond. It may be that the decline is being stalled for options expiration.

— FXI is picking up the pace of its third wave decline. It appears that we may see the decline continue through the first or second week of June, when a Master Cycle low is due. It has some subdividing yet to do and its minimum target is 30.36. China appears to be leading the U.S. market in this decline and may play a role in extending the decline in the U.S. equity markets.

(ZeroHedge)  …PBOC finally succumbed and joined every other bank in an attempt to reflate, even as pockets of inflation are still prevalent across the country, although the recent disappointing economic data was just too much. Overnight, the Chinese central bank announced  ( it was cutting the Reserve Requirement Ratio by 50 bps, from 20.5% to 20.0%, effective May 18. The move is expected to free up “an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world’s second-largest economy” as estimated by Reuters.


— INDY accelerated its decline today as it approaches the minimum target of its minor Head & Shoulders pattern. It now appears that the decline may go through the larger neckline at 19.48 before finishing its Master Cycle low in early June. Usually Head & Shoulders patterns launch wave threes. This pattern may be an interesting one to watch unfold.

XLF accelerated its decline after retesting its complex Head & Shoulders neckline. The Broadening Wedge still has the deeper target, but it is good to have a “second opinion” on the extent of the decline. The current decline should take XLF to its November low or possibly to the massive neckline at the bottom of the chart. It appears now that XLF shares a virtually identical cycle with FXE. Both are expected to reach their respective Master Cycle lows in mid-June.

(ZeroHedge) ( Things are getting dicier for JPM. “IG9 10Y spreads re-surged today and were very choppy into the close as they broke back above 155bps (at 155.5/157.5bps now) for the first time since Mid-December with a 31% rip in the last two weeks. This fits perfectly with our ongoing thesis of this being a tail-risk hedge (not a simple ‘spread’ as other ignorant commentators presume) whose risk management has exploded in their face.”

Have a good evening!


Anthony M. Cherniawski

The Practical Investor, LLC

P.O. Box 129, Holt, MI 48842

Office: (517) 699.1554

Fax: (517) 699.1558

Disclaimer: Nothing in this email should be construed as a personal recommendation to buy, hold or sell short any security. The Practical Investor, LLC (TPI) may provide a status report of certain indexes or their proxies using a proprietary model. At no time shall a reader be justified in inferring that personal investment advice is intended. Investing carries certain risks of losses and leveraged products and futures may be especially volatile. Information provided by TPI is expressed in good faith, but is not guaranteed. A perfect market service does not exist. Long-term success in the market demands recognition that error and uncertainty are a part of any effort to assess the probable outcome of any given investment. Please consult your financial advisor to explain all risks before making any investment decision. It is not possible to invest in any index.

The use of web-linked articles is meant to be informational in nature. It is not intended as an endorsement of their content and does not necessarily reflect the opinion of Anthony M. Cherniawski or The Practical Investor, LLC.


Leave a Reply