— The VIX made a deep 73.7% retracement of wave [1] today and appears to have made a reversal pattern as well. Today was the double pivot day that was discussed earlier. The prior inverted Head & Shoulders pattern had fallen short, but was not a complete failure. There are two new patterns. The weaker is the Cup with Handle, with a new target of 38.27. The saving grace is that cups with a higher right lip perform better. This could also be viewed as an inverted Head & Shoulders pattern with a minimum target of 41.18. The average Fibonacci target falls between. I will discuss that concept later.


— SPY may have peaked a day later than its double pivot day, but nonetheless was 8.6 days from its June 11 peak. It appears that the VIX (probable) Master Cycle low had something to do with it. SPY also takes on the shape of an inverted Cup with Handle pattern as well as the Head & Shoulders pattern. It appears that the Cup with Handle formation is the stronger one here, but it may be pointing to the ultimate wave [5] target while all the rest point to the wave [3] target. In the 2008 [wave (a)] decline, I consistently found that wave [3]s were 1.5 times the size of wave [1]s. Since wave (c) is generally stronger than wave (a), I calculated that the wave [3]s will be at least 1.62 times the size of wave [a]s. They could be considerably stronger, so I am observing the pattern this time to see what the size relationship turns out to be.



–UUP has finally tested its 50-day moving average while making a 50.8% Fibonacci retracement. AS with the VIX, UUP may have made a Master Cycle low on day 236. UUP and VIX are now “in sync.” As with the VIX, there is also a Cup with Handle formation with an average target of 31.74. My interpretation is that the Cup with Handle formation is targeting the wave III high. The 2.62X wave relationship between wave (1) and wave (3) is 25.68, about 2% above its minimum Head & Shoulders target.


— FXE may have finished its 33.45% retracement rally today. As you see, the retracement is an A-B-C pattern. The Cup with Handle formation projects a rare Fibonacci 4.38 times wave (1), if that is the real wave (3) target. Remember, wave (3) has just a little over two weeks to make its downside goal. On the other hand, the higher degree wave [3] may hit this target by early August.

(ZeroHedge) …Nationalism, like any political idea, is a spectrum of views not an absolute. As UBS notes in an interesting article today, the policies of Golden Dawn are not the policies of the True Finns of Finland, or the Freedom Party of Austria. However, there is undoubtedly a trend within the Euro area in favour of those parties that promote nationalistic policies (perhaps defined as the aggressive pursuit of domestic or indigenous interests over regional interests) and this trend raises considerable questions over the future of the Euro.

— It is now obvious that TLT is no longer “in sync” with the VIX or UUP. Therefore, it may be about to lose its “safe haven” status as it may drop below its trendline and Cycle Top support at 125.30. If that is so, its next Model target may be mid-Cycle support at 117.07. The most recent pattern appears to be a 49.4% retracement of the initial decline from the top. The retracement now appears over and loss of trend support is imminent.


— GLD failed at its third attempt at the upper Head & Shoulders neckline at 157.75. The correction appears to be over as GLD reversed from a double pivot high. What seems to be happening now is that GLD may be setting up for a massive wave (3) of [3] as it falls away from the neckline. The Cycles Model now suggests a decline through July 20 is probable.

ZeroHedge writes…“credit markets do not agree that QE is coming anytime soon and today’s Gold deterioration suggests expectations for anything more than a twist extension are overblown…”

The VIX/gold divergence is becoming notable. Again, it appears that Tyler Durden is on the wrong track.


— USO appears to be making a rare, sideways consolidation. The reason I suggest this is because USO follows the liquidity cycle, which is now coming to a pivot high. I have re-drawn the Head & Shoulders neckline to reflect the current lows in oil. There’s not much in the way of a right shoulder, but it may be wise to leave the pattern on display until something better comes along.


— FXI appears to have completed a 45.4% retracement of its prior decline. I am hesitant to put a Cup with Handle label on FXI because its Head & Shoulders pattern is so well proportioned. FYI, the Cup with Handle target is 20.08. Fibonacci relationships also suggest a decline of the same magnitude as suggested by the Cup with Handle pattern.


— INDY appears to have completed a 40.5% retracement last Friday. The bounce from the neckline is over and a reversal pattern is in place. The Master Cycle low has come and gone in late May. There appears to a be a very extended third wave just ahead. The cycles suggest a decline through the end of July.

— XLF is set up to meet one or more of the targets listed on the chart over the next month. Since UUP appears to be having its reversal today, XLF and the rest of the liquidity cycle should follow. I have added a couple of other potential measures for upcoming targets.  The new decline should be the largest and strongest ever.

(ZeroHedge) In a somewhat inspired line of questioning by Rep. Gary Ackerman on the differences between ‘investing’ and ‘gambling’, the JPMorgan CEO diligently notes that “on average Gamblers lose” implicitly stating, we assume, that ‘investors on average win.’

As expected, absolutely nothing new was disclosed in today’s latest Jamie Dimon dog and pony show. To summarize what we did learn:

“JPM is not too big to fail, but it is not at risk of failing unless the earth is hit by the moon”

“We make CDS for the benefit of veterans, retirees, orphans and widows”

• “We only bought Bear’s assets in a firesale while the Fed backstopped its liabilities, because the US government made us”

• “VaR can be made to show anything. We have a closet full of models”

• “Gambling is not investing”


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.

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