— The VIX doesn’t appear to have made much progress since it made its Master Cycle low a week ago. The fact is, it may have already emerged from its Ending Diagonal formation, and it has made a valid reversal pattern from its low. The VIX appears to be on a 43-day cycle that may end dramatically at a high near the end of April. The 10-week moving average has come down to 17.35. A surge above that will confirm the Ending Diagonal and give us a buy signal at the same time.
You may be wondering why TVIX experienced a 50% decline (http://www.zerohedge.com/news/credit-suisse-publicly-announces-reopening-tvix-share-issuance-hours-after-private-leak-crushes) on Thursday. VXX also closed at new lows today, one week after volatility index made its cycle low. A little hanky-panky, perhaps?
SPX experienced its first negative weekly close.
— The SPX reversed below weekly Cycle Top resistance at 1412.44 this week. This is the first negative weekly close for the year. There is a lot of chatter about Goldman Sachs skewering the muppets (http://www.zerohedge.com/news/goldman-skewers-muppets-again-worst-week-stocks-best-long-end-bonds) this week with their long equities call. The 43-day cycle schedule remains, giving the SPX until the end of April for a Master Cycle low. A move below the 10-week moving average at 1358.80 not only confirms the reversal into a downtrend, but is just above a Flash Crash trigger at 1342.50 indicated by the small red Broadening Top pattern at the highs.
Charles Biderman(http://www.zerohedge.com/news/bidermans-back-and-hes-not-bullish) reflects on his recent trip to NYC with the same incredulity as we do with our many and varied conversations with equity fund managers – they’re long and terrified. The recognition of total dependency on Central Bank manipulation leaves an investing public seemingly believing in miracles.
NDX closed positive, leaves a weekly doji.
— The NDX went flat on Wednesday after giving back some of the gains made on Monday and Tuesday. The loss of upward momentum left a (candlestick) doji in the weekly chart, a sign of uncertainty. Could it be that it hit its head against the Broadening Wedge (red) at the peak? Once NDX drops below Cycle Top resistance, the initial decline appears ready to decline to mid-cycle support at 2177.01 as a minimum. If it goes lower, last year’s lows may be challenged.
The Euro may have completed a retracement.
— The Euro managed to close above 10-week support at 131.87, but may have completed a 57.5% retracement from its new decline. This is a signal to sell on the bounce, as the decline below the 10-week line will confirm the resumption of the downtrend. There is a new, down-sloping Head & Shoulders neckline approaching 125.00 with a minimum target near parity for the Euro. Not shown in the weekly chart is an Orthodox Broadening Top formation with the trigger point at 128.50. This is a crash formation with an average target below 100.00.
(ZeroHedge)(http://www.zerohedge.com/news/3-charts-why-eurosis-never-really-went-away) “While (Eurobond) yields have indeed dropped, the reflexive response that ergo – Europe is fixed – is simply nonsense as nothing has changed and in fact the concentration and contagion stress is worse than it ever was. This time may be different as this time, the ECB is really in a box to fix the next risk flare without outright money-printing…”
The US Dollar closed above 10-week support.
— The US Dollar had its second weekly negative close, but remained above 10-week support at 79.34 and weekly mid-cycle support at 78.85. The minor retracement may be complete. Directly overhead is an inverted Head & Shoulders which may not only take the dollar out of the triangle, but in all likelihood may also breakout to a new five-year high.
The European Union is simmering as other PIIGS countries consider their options after the Greek default.
Gold bounced, but couldn’t regain its 10-week support.
— Gold’s meager bounce closed below its 10-week moving average at 1710.42. It may have been retesting a small Head & Shoulders neckline at 1663.00. Should it reverse from here, the minimum target is 1534, below its massive Head & Shoulders pattern seen in the chart. This could trigger yet another cataclysmic decline toward the Cycle Bottom show in the chart.
Keith Weiner(http://keithweiner.posterous.com/) writes, “The April gold future just entered backwardation today. We shall see what the coming days bring for the April gold future, but the fact that backwardation has occurred at all is significant. The fact that it is now a “normal” occurrence since fall 2008 indicates a deep pathology.” Oops.
U.S. Bonds recover from a decline at the Master Cycle low.
— USB confirmed its Master Cycle low on Monday, then closed positive for the week. USB completed its decline out of a small triangle formation. These declines often provide a fake-out to investors who are not familiar with triangles. What appears to follow is a rally beyond Cycle Top resistance at 146.50 in a parabolic blow-off.
The reason I may turn temporarily bullish in Treasury bonds is that USB has a higher low at its Master Cycle bottom than the October 27 low. This is bullish, since all ETFs and indices have a tendency to experience a 60 to 90 day rally when the Master Cycle low remains above mid-cycle support and close at a higher low.
Crude remains above 10-week support.
— West Texas Crude is still testing support at the 10-week moving average at 103.65. Once beneath that support, West Texas Crude is destined to fall as far as Cycle Bottom support at 67.42…possibly in a flash crash in the coming weeks. This may well trigger the Head & Shoulders pattern near 79.00, which may cut oil prices to one-third today’s price.
Brandon Smith of alt-market.com(http://www.alt-market.com/articles/650-the-oil-conundrum-explained) writes, “The most prominent but false conclusions on the expanding value of oil are centered on assertions that supply is decreasing dramatically, while demand is increasing dramatically. Neither of these claims is true…
The supply side of the oil equation is the absolute last factor that we should be worried about at this point. In fact, global oil use since the credit crisis of 2008 has tumbled dramatically. This decline accelerated at the end of 2011 and the beginning of 2012 all while oil prices rose.”
China stocks reversed below their 10-week moving average.
In a reversal from a retracement high, the Shanghai index closed beneath 10-week moving average at 2369.73 this week in a sharp sell-off. Just beneath it is Cycle Bottom support at 2210.85 and the Head & Shoulders neckline at 2130.00. This may put the Shanghai in the position of losing about half of its value in the next decline. This index is very overbought and appears that it can go the distance to its next target.
The India Nifty slipped beneath its 10-week moving average.
The India Nifty slipped beneath its 10-week moving average at 5324.33. This may be a preamble to challenging mid-cycle support at 5077.75. The Head & Shoulders neckline is next and may bring acceleration to the India 50 index. Normally when the right shoulder of a Head & Shoulders pattern is complete, it doesn’t pause very long at the neckline.
It appears that CNX had an early Primary Cycle low on March 7. Since then, it has experienced an extremely left-translated cycle that calls for a lengthy decline.
The banking index may be developing acrophobia.
— BKX may have done its dirty work by bringing in retail investors while those in the know have been selling their shares in droves. The technical term for what we see is a throw-over above a Bearish Wedge formation. Bearish Wedges are always completely retraced.
Right beneath the Bearish Wedge formation is an enormous Head & Shoulders pattern. The intial decline to or beneath the Head & Shoulders neckline may take place no later than the end of April. Once the 10-week moving average has been crossed, the risk of a flash crash also rises.
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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