Last week I made the point that, if certain levels are violated in the markets, they would reach a point of no return.  Today is such a day.  Let’s review the various stock indexes to assess the damages and forecast what may happen next.

 

SPX crossed its Head & Shoulders neckline at 1112.00 today, confirming a minimum target of 997.00 for the next declining wave. Compare that to the 2010 low at 1010 in SPX and you will see that we are challenging the entire uptrend for the past 15 months. This is in agreement with the Broadening Top formation, which originally forecast an average decline near 974.00. A new Broadening Formation projects a top below 900.00.

In Elliott Wave terms, this will only be the third wave of (i) of 3 of (C). This is also where the decline may get interesting, since this wave is the one most likely to extend. If that were to happen, the ultimate target of this week’s decline could be below 900.

The NDX has a small Head & Shoulders pattern within its last rally to 2337.00.  This raises the probability of declining below its prior low at 2034.92 to 94%. In doing so, it will invoke a much larger Head and Shoulders pattern with the target near 1631.00. This agrees with the Orthodox broadening top average target of 40.81. All of this may happen within the next five days, since the cycles suggest a substantial new low by this weekend.

I’ve been watching this broadening top formation since June. Broadening tops have a 96% probability of fulfillment, but with an apparent longer time span than a Head and Shoulders pattern. It appears that both patterns will converge in the mid-1600s in a very short time span, most likely in the next week.

 

The US Dollar reached escape velocity as it broke above the neckline of a new Head & Shoulders pattern.  The Minimum target is 85.02, nearly 8% higher than the neckline.  Don’t ignore the Broadening Formation average target of 96.60, which is nearly a 50% retracement from the Dollar highs in 2001. Contrary to claims of an imminent dollar collapse, it appears to be strengthening by the day, forcing many who have loaned/shorted the dollar to rethink their strategy in the face of increasing losses.

 

The Euro is the inverse of the dollar.  it previously broke down from a Head & Shoulders formation that targets a minimum decline to 128.60.  Should it reach that target before a bounce, we may be seeing the Euro reaching parity with the dollar sometime in the next 6 months.

 

 

Gold has climbed back into its Orthodox Broadening Top formation.  This may temporarily postpone the next decline (possibly to 1270).  However, once the lower trendline is re-crossed, the probability of a successful decline to 1270 rises to 96%.  I wouldn’t try to fight those odds by being long.

 

 

 

The long (US Treasury) bond attempted to make new highs on weakening momentum, but failed.  This is not yet a time to place a new position in the $USB, long or short.  A rise above 146.74 tells us that the rally will continue, while a decline below 141.69 suggests that the 30-year long rally in US Treasury Bonds is over.

Regards,

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.

 

 

 

 

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