SCHEDULED GUESTS FOR TUESDAY, November 20, 2012
Segment 4 – Anthony Cherniawski, Chief Investment Officer – www.thepracticalinvestor.com
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This afternoon I wish to begin by suggestion that the rally in stocks may be over. Usually bear market rallies can appear strong, but the highest buying volume happened on Friday. Since then the buyers have tapered off, which is not a good sign for the bulls.
It appears that SPX has bounced from the trendline of a Broadening Wedge formation (blue) and is meeting up with resistance at its Orthodox Broadening Top formation (red). Also involved are the 200-day moving average at 1385.06 and mid-cycle resistance at 1382.70. A drop beneath this cluster of resistances turns the SPX very bearish, since we now have three formations all pointing to a minimum decline to the October 2011 low at 1074.77.
Also of note is that the flash crashes in 2010 and 2011 both began beneath the 50-day moving average. This time it appears that the potential panic may be more virulent, since the SPX may soon fall beneath its 200-day moving average.
The VIX has made another low, which corresponds with a Master Cycle low which is due at this time. This may be a partial answer to the reason for the unusually low VIX readings during this decline. Another reason appears to be that the commercial hedgers have bought their largest put options in February, March and June. This explains why they are operating under the radar, since the VIX is a measure of the out-of-the- money options purchased in the following two months.
$USB has made two attempts to move back above its Bearish Wedge formation, and failed. You may recall that last week I warned that the Treasury Bond market may be a bull trap. $USB has fallen another 75 ticks today, making it more apparent that there may be more weakness ahead. A decline beneath 144.00 will bring even more bearish consequences, since it will trigger the two potential bearish formations in the chart.
Gold tested its 200-day moving average at 1715.51and bounced back to its short-term resistance at 1731.00. The bounce has not exceeded its prior high and gold is due for a major turn down today.
The Euro has also tested its 200-day moving average at 128.19 and failed today. Time is running out for the Euro and it may be ready to resume its decline as its oversold condition is now relieved.
Good luck and good trading!
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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