– The VIX remained above its Bullish Wedge trendline for a second week. The trendline now acts as a base of support for a move higher. What is noteworthy is the net non-commercial spec position in VIX futures just plunged by 16,222 contracts to 104,284. This was just shy of the all-time low net VIX spec position hit in early December. The inference is that the VIX may go lower, but non-commercial speculators are often quite wrong at market tops and bottoms.

 

 

 

 

 

SPX bumps its Bearish Wedge trendline.

 

 

– SPX collided with the upper trendline of its bearish Ending Diagonal. 100% of the Fibonacci time and wave relationships will be complete as of Monday, February 4. This may be the largest Ending Diagonal (Bearish Wedge) in history, spanning 13.5 months, a number divisible by pi and the Cycle Divisor. The Broadening Top (Megaphone) formation both in the hourly and daily charts warn of an imminent sharp and potentially severe reversal. Monday is the next cycle turn date for SPX.

(ZeroHedge) We previously explained the obvious similarities (with stocks, bonds, and leveraged positions) with the current period in the market and the end of 2010 and start of 2011 period. Much is once again being made of the ‘flows’ as $18.8bn (the 3rd largest on record – since 1992) pushed into equities. Retail also bought long-only equities for the fourth straight week ($2.7bn), and $12.2bn was added via ETFs, but the significance of the flows has triggered a “sell” signal for the traders at BofAML.

NDX diverges from other indexes.

 

 

 

–The NDX remained divergent from the other indices by not making a new weekly high. Its Ending Diagonal pattern was complete on September 21. The decline into November 16 was the beginning of a new downtrend. As a result, NDX warns of an imminent and nasty decline.

Over one-half of the companies have reported their fourth quarter earnings so far. The results are dismal, with a 1% decline in year-over-year earnings from Q4 2011.

 

 

 

 

 

 

 The Euro leaps above Mid-Cycle Resistance.

 

 

 

– This week the Euro surged above its mid-Cycle resistance at 133.92. In doing so, it has made a 57.6% retracement of its Cycle Wave I decline ending last June. The uptrend is very long in the tooth. Monday may be a candidate for a Primary Cycle high and/or reversal.

(ZeroHedge) …Today, however, the second the EURUSD touched above 1.3700 the Goldman strategist decided to get the hell out of dodge and has picked up his 400 pips since putting on the long EURUSD reco several weeks ago. With that last reco, Stolper has modestly redeemed himself, and all those who had listened to his previous recos have made some 400 pips, which hopefully should compensate for some 5000+ pips in cumulative downside to date.

Morgan Stanley’s Laurence Mutkin is “getting worried” that investors expect the second half of this year to be different (and consistently bullish). Much of the current risk-on rally around the world was sparked by Draghi’s “whatever it takes” moment theoretically reducing the downside tail-risk in Europe. Well, systemic risk in Europe is now at recent lows…Time for a change?

 The US Dollar breaks trendline support.

 

 

 

 

– USD has declined beneath the massive Triangle trendline near 79.25. While trendlines are potent indicators of support, the Triangle formation itself is finished and a new formation has begun, lessening the importance of the Triangle trendline. There are alternate views of this event. The first is to look at the September 14 low at 78.60 for support. Should it hold, then a new rally should follow, since it represents a 48.25% retracement of the prior year-long rally. The second is a decline below that level to a minimum of 76.50, as indicated by a small Head & Shoulders pattern in the daily chart. This represents a 66.7% retracement that may be required by this cycle before the dollar proceeds higher.

 Gold remains below 10-week resistance.

 

 

– Gold closed modestly above its 40-week moving average at 1666.64 and below its 40-week resistance at 1676.93. It may be ready to challenge its mid-Cycle and trendline support at 1619.38. A drop beneath that level may also activate the Cup with Handle formation, with very bearish consequences. So far the decline has been modest. The next step could be very painful for owners of gold.

(ZeroHedge) Assume that there is already a large ownership of physical gold by the dirty money crowd (There is). Assume further that this ownership trend is increasing as global banks get squeezed by money laundering investigations and fines (think HSBC). Do the “deciders” in the globe want to enrich those that are now parking hot money in gold? “No” is the answer. This set-up is another reason why suppressing the price of gold would be “helpful”. It certainly argues against gold backed money. That would make the bad guys rich.

Treasuries continue their decline.

 

 

– USB is now without any support until it reaches its mid-Cycle at 137.80. The decline may start accelerating here, but an alternate view is that USB is due for a bounce. The primary pattern is the Ending Diagonals which is usually completely retraced, suggesting a decline below its 31-year trendline and a target beneath Cycle Bottom support at 116.28. Caution: the crowd is very bearish here.

David Kemper, CEO of Commerce Bankshare, and more importantly, a former president of the Federal Advisory Council of the Federal Reserve made this statement in Businessweek, “Why not expand the Fed balance sheet exponentially, from its current $3 trillion to $33 trillion… Would $30 trillion in extra buying power be inflationary when our entire current GDP is only about $15 trillion? Maybe, maybe not—but we need a game-changer here.”

For some color on this opinion, you may wish to read the commentary in ZeroHedge.

Crude still above mid-Cycle resistance.

 

 

– West Texas Intermediate Crude appears to be completing a 98% retracement of ita April to June decline made last year. The retracement appears to be driven by excess liquidity, thanks to the regular Fed POMOs. WTIC is in overbought territory again and is due for a Primary Cycle High on Monday.

(ZeroHedge) Between Hess’ plant closing and scheduled maintenance, the squeeze appears to be on the refining space and wholesale gasoline prices are smashing higher. Along with flares in geopolitical risk (Ankara today and Israel/Syria earlier in the week) driving underlying crude prices, Gas prices (at the pump) are surging – to record highs for the first week of February as per AAA, hitting an all-time high of $3.465 for this day and just surpassing last year’s price of $3.455; and based on where wholesale prices are (given the lag), we could be seeing $4.00 gas at the pump in the next few weeks. Maybe. Maybe not.

China stocks are approaching resistance.

 

–Tthe Shanghai index appears to approaching mid-Cycle resistance at 2465.52 and possibly even the 50% Fib retracement at 2505.00. I had suggested that a realistic target for this rally may be weekly mid-Cycle resistance, but retracement rallies can run out of steam quite unexpectedly. The Cycle Model suggests that rally may fulfill its time component early next week.

(ZeroHedge) Analysts who’ve only started paying attention to the country in the last decade often seem convinced that China has no real business cycle, or a very mild one, that because its economy is centrally planned, it’s free from the fluctuations in investment that cause booms and recessions in countries that lack the scientific guidance of a Leninist single-party state. This convenient belief, however, is mostly an artifact of the period over which they’ve been observing its economy.

The India Nifty challenges 10-week support.

 

 

The India Nifty has made enough of a decline to challenge 10-week support at 5952.83. This is the first step in a bona-fide reversal. Not far away is mid-Cycle support at 5813.94. The most prominent formation is the Cup with Handle formation, which is now evident. A decline beneath the Cup with Handle formation would be castrophic, since there is virtually no support until it reaches its March 2009 low.

 

 

 

 

 

 

 

The Bank Index reaches the top of a diagonal formation.

 

– BKX made a throw-over above its Ending Diagonal formation on Friday. It is probable that the rally has ended on Friday, since the Liquidity Cycle has made an early Primary Cycle high and a major turn date comes on Monday. This formation calls for a rapid decline to its October 2011 low at 32.56. This rally has been pushed to its outer limits due to the QE feeding frenzy by the banks. However, the internals haven’t been cleaned up, so the slightest push could topple this formation.

The extended correction now puts an even more bearish Cup with Handle in play. The uptrend appears to be over in BKX. Now for a nosedive below supports and a downward acceleration into a full-fledged panic.

(ZeroHedge) The Linchpin Lie: How Global Collapse Will Be Sold To The Masses

The globalists have stretched the whole of the world thin. They have removed almost every pillar of support from the edifice around us, and like a giant game of Jenga, are waiting for the final piece to be removed, causing the teetering structure to crumble. Once this calamity occurs, they will call it a random act of fate, or a mathematical inevitability of an overly complex system. They will say that they are not to blame. That we were in the midst of “recovery”. That they could not have seen it coming.

Their solution will be predictable. They will state that in order to avoid such future destruction, the global framework must be “simplified”, and what better way to simplify the world than to end national sovereignty, dissolve all borders, and centralize nation states under a single economic and political ideal?

We end on that note.

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.

 

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.

 

Related posts:

1. Weekend Update February 3, 2012
2. Weekend Update-A Possible Cycle Turn. February 17, 2012
3. Weekend Update-Crude at Its Cycle Top? February 24, 2012
4. Weekend Update-Gold Makes a Cycle Turn. February 10, 2012
5. Weekend Update January 11, 2013