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SCHEDULED GUESTS FOR TUESDAY, December 4, 2012

3:45pm Central:

Segment 4 – Anthony Cherniawski, Chief Investment Officer – www.thepracticalinvestor.com

CLEAR CHANNEL DALLAS – KFXR/1190-AM And Streaming Live @ www.yorbamedia.com

Good afternoon!

The SPX finished its rally with a key reversal at the 50-day moving average, which coincided with its 61.8 Fibonacci resistance yesterday. The Orthodox Broadening Top calls for a 50% retracement, so I was a bit early last week by suggesting a reversal was at hand. This morning it paused its decline at Intermediate-term support at 1407.00 before breaking through. A decline beneath the Orthodox Broadening Top at 1390,00 may trigger a decline with a 96% probabitity of reaching its intended target of 1074.00. In addition, the Ending Diagonal has also been violated, also targeting 1074.00. That’s two formations indicating a minimum decline to the October 2011 low. Once the SPX declines back below 1340.00, it will have triggered a third formation with an almost identical target at 1072.00.

SPX has also formed a potential Cup with Handle formation also at 1340.00 that has an even deeper target at 900.00 or below. A Cup with Handle formation has a 75% probability of success, but it complements the other formations, so it is not to be ignored.

 

The VIX has risen above its Model resistances and is ready to challenge its mid-cycle resistance at 17.54. Most analysts use a “rule of thumb” that, once the VIX is above 25.00, it is signaling danger to US equities. That is inaccurate. The VIX measures the threat to US equities once it moves above its mid-Cycle support/resistance. I am surprised that it is not higher already, since the out-of-the money puts in SPX options has increased enormously.

 

Gold dropped below all supports yesterday and has dropped below 1700 in today’s action so far. A decline below 1650.00 triggers the Orthodox Broadening Top. While the Orthodox Broadening Top has a target above 1300, there is a massive Cup with Handle formation just below that projects a much deeper low. With a 96% success rate, the Orthodox Broadening Top is one of the most reliable (but rare) chart formations. The Head & Shoulders pattern and Cup with Handle formation merely confirm the pattern and gives it more urgency.

 

The Euro may have made its print high today, a day earlier than my Cycles Model suggests. I find it an act of sheer political hubris to keep the Euro at 130.00 when a 40-50% devaluation would make European goods more competitive in the world markets and help the European economy dig itself out of its hole. The reason is that the politicians are attempting to placate the banks, many of which might fail in a Euro devaluation due to the sovereign debt that they hold as collateral for lending purposes.

Good luck and good trading!

Tony

Anthony M. Cherniawski

The Practical Investor, LLC

P.O. Box 129, Holt, MI 48842

www.thepracticalinvestor.com

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.

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