– The VIX closed for a second week below its 40-week support at 16.47 after making a Master Cycle low last week. The rule of thumb in Master Cycles is that, once a bottom is achieved, there may be a 3-4 month surge that follows. That means that VIX is ready for a massive wave  surge to begin.
SPX is ready to begin its crash fractal.
– SPX bounced off the lower trendline of its Broadening Wedge formation at 1343.00 and has closed at its 10-week moving average on Friday. It could not meet the Bearish Wedge trendline again, as many analysts had hoped. On the weekly charts, the crash begins here (with regards to the Bearish Wedge), especially after meeting all the criteria for the crash in the daily chart. Further confirmation of the bearish outlook occurs at 1387.00 (the 40-week moving average) and at the trendline of the Broadening Wedge near 1345.00. My cycle’s model suggests that the decline may be over within the next two weeks, but with a panic low that may exceed most expectations.
(ZeroHedge) …the real story in today’s Personal Spending data was not the consumer weakness, but the unceremonious revision of historical data, which as the chart below mysteriously whacked away a whopping $40 billion in real (i.e., inflation adjusted) disposable income.
NDX may have met its Waterloo this week.
–The NDX stalled between its 10-week moving average at 2676.00 and its 40-week moving average at 2678.00. The failure to reach the lower trendline of its Bearish Wedge is quite apparent here. It becomes immediately bearish once it declines beneath its moving averages, which have made what is often called a death cross, as well. Final confirmation occurs at its mid-Cycle support and Broadening Wedge trigger at 2425.00 2429.00. What is more, there are no further supports beneath mid-Cycle support until it has reached its Broadening Wedge average target below Cycle Bottom support at 1964.61.
Yet another confirming formation with an even deeper potential target has now appeared, called the (inverted) Cup with Handle Formations (in black). It becomes active beneath 2494.00, its prior low.
The Euro stair-steps towards a nasty decline.
– This week the Euro has tested and re-tested its 10-week and 40-week moving averages while it prepares for the largest decline yet. This is the area from which flash crashes begin. My Cycles Model strongly suggests that an “accident” may happen this weekend in the Eurozone. I hope you will forgive me for repeating myself. You see, the prior crashes have started immediately after the index crossed the 10-week moving average. It is evident in the chart above. For some reason, the 40-week moving average may be the trigger, but I can assure you that the decline will be worse than any we have seen since 2008. In addition, the 10-week is about to cross beneath the 40-week moving average, making yet another death cross for the Euro.
The US Dollar takes a breather.
– USD took a breather and found support at its 10-week moving average at 80.15 this week. It has a waiting inverted Head & Shoulders neckline at 83.80. The potential right shoulder of the inverted Head & Shoulders appears finished. Because this pattern is not apparent in the daily charts, there is very little awareness of it and the ramifications of a powerful new trend in the Dollar.
Gold begins its crash fractal.
– Gold has resumed its decline by closing beneath its 10-week moving average at 1734.00. Further proof of a crash formation may be the cross below its 40-week moving average and the (crash) trigger point of its Orthodox Broadening Top at 1665.64. The next step in within the Orthodox Broadening Top pattern is that it goes into panic mode. The implications for gold are enormous. Investors are still looking up in gold, leaving them vulnerable to a panic, since there has been virtually no preparation for what may come. In addition, there is a Cup with Handle formation with an even deeper target. Could this be the start of something big???
The treasury rally appears to be a Bull Trap.
– USB failed to rally beyond the lower trendline of its 23-month old Ending Diagonal formation, which may be a bearish head-fake just prior to a plunge beneath it. This week’s activity could not overcome the November 16 high, which was a 68% retracement of the decline from the top. Ending Diagonals are usually completely retraced, suggesting a decline below its 31-year trendline and a target near Cycle Bottom support at 115.26. This forecasts a massive technical breakdown. A further decline may spark the first flash crash in bonds, which nobody is expecting.
Crude consolidated at its 10-week moving average again.
– Investors may infer that West Texas Intermediate Crude may be consolidating, preparing for a rally. This is especially the case if one looks at the Middle East situation. Not so with the technicals. WTIC has consistently remained beneath its 10-week moving averagefor the past 3 months and the 10-week, in turn has remained beneath the 40-week moving average since April. Despite the attempts at a rally, there appe3ars to be more downside ahead.
China stocks still testing the Bullish Wedge.
–The Shanghai index has made a very deep wave [B] of a retracement rally. The Bullish Wedge is acting as the base for this retracement. It has fallen beneath its 10-week moving average at 2082.06. I am neutral unti it rises above that level. Once accomplished, it may be ready for a very strong Primary Wave [C], possibly to the top of the Cyclical band.
The India Nifty has made a new Wave I high.
The India Nifty has now extended its Cycle Wave II high. The most prominent formation is the Cup eith Handle formation, which is now evident. A decline from here would be caastrophic.
The Bank Index broke the 40-week support.
– BKX is being squeezed between its 10-week moving average at 49.38 and its 40-week moving av3rage at 47.40. A break of the 40-week will send BKX toward mid-Cycle support at 46.28 and its Broadening Wedge trip-line very quickly. This is where the panic begins. 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 Fiscal Cliff is the name given for the 2013 increase of Federal Government taxes and budget cuts. The Bush-era tax cuts expire and the 2013 “Budget Control Act” kicks in, among other budget cuts & new taxes. The Fiscal Cliff is set to reduce the 2013 US Government budget deficit by roughly half; will remove $607 Billion from economy (GDP), resulting in 4% drop, pushing it back into recession; it can NOT be avoided.
We end on that note.
Anthony M. Cherniawski
The Practical Investor, LLC
P.O. Box 129, Holt, MI 48842
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.