SCHEDULED GUESTS FOR TUESDAY, December 4, 2012
Segment 4 – Anthony Cherniawski, Chief Investment Officer – www.thepracticalinvestor.com
CLEAR CHANNEL DALLAS – KFXR/1190-AM And Streaming Live @ www.yorbamedia.com
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!
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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