By www.thepracticalinvestor.com
Weekend Update
November 1, 2013
— VIX appears to have completed the second right shoulder of a very complex inverted Head & Shoulders pattern over a year and a half in duration. On Wednesday, VIX spiked several times as high as 21.26, then the spikes were erased. Was that a trial run for next week?
SPX pulled back from Cycle Top resistance.
— SPX jammed up against its Weekly Cycle Top resistance and trendline at 1763.64 at the beginning of the week, then retreated beneath it at the close on Friday. Trendline resistance held as the SPX finally ramped the close to get a positive reading for the week.
(ZeroHedge) Thus the taper trade continued for the second day in a row in all asset classes, except stocks of course. Despite breifly dipping into the red shortly after today’s conflicting manufacturing reports, the late day ramp was once again on location, and helped push ES nearly to a new intraday high in the minutes before the close, before a shakedown took place just after the close, sending ES sliding after hours, and wiping out the entire 3:30 pm ramp in seconds.
NDX retreated from its the Broadening Top trendline.
–NDX pulled away from its Broadening Wedge trendline after completing the formation. The Broadening Wedge formation has the same lower trendline as the Ending Diagonal, suggesting an average decline to 2344.00 once it declines beneath 3100.00. A decline beneath the Diagonal formation may quickly lead to a break of the formation as well, triggering multiple bearish formations.
(ZeroHedge) Just when you thought Healthcare.gov was the worst designed system and that nothing could match government incompetence, here comes Nasdaq, and adding insult to repeated shutdown injury from over the past several months, has just announced it will not unhalt the Options Market before the weekend, and will cancel all open orders. As for the scapegoat: “a significant increase in order entries.” In other words, a blast of HFT quote churn again – just like the flash crash.
The Euro retreats from its Cycle Top.
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— The Euro sold off from its Cycle Top resistance at 138.55. The amazing uptrend in the Euro finally came to an end. Last week I opined, “The Cycles suggest a change in trend may happen over the weekend.” Check.
(ZeroHedge) Those following the Euro FX pairs saw a plunge at 6 am Eastern, when Eurostat released the latest Eurozone unemployment and inflation statistics. They were, in a word, abysmal. After the August unemployment data finally saw a modest drop forcing many to announce the end of the European depression, not only did the the September number revise the August print from 12.0% to 12.2%, a new record high as 73,000 thousand people became unemployed, but more importantly made the September unemployment rate 12.2% as well following another 60,000 Eurozoneans losing their jobs, effectively meaning that for all the talk of a European recovery, its unemployment rate keeps hitting new all time record highs every single month.
The Yen is beginning its breakdown.
–The Yen finished its Triangle formation and broke beneath all of its support lines. The Cycles Model suggests an imminent sharp decline that may challenge the Head & Shoulders neckline at 96.00. As the Yen loses its supports, the decline may shortly resume beneath the neckline in a Cycle Wave V, carrying it to new lows.
(ZeroHedge) This morning, as part of the US Treasury’s report on global currencies, Secretary Lew made the following remark:
*LEW SAYS JAPAN ‘APPEARS TO BE TURNING AN ECONOMIC CORNER’ Which got us thinking… when have we heard the US Treasury say exactly the same thing… (for exactly the same “policy-based” reason)…
The US Dollar breaks above its Falling Wedge.
— In just a week’s time, the USD emerged from beneath its Falling Wedge to breaking above it. It also rose above weekly Short-term resistance at 80.56 and its mid-Cycle resistance at 80.67. The long-term uptrend has regained the upper hand in a very negative environment. Dollar shorts have gone from “taking profits” to taking cover.
(Reuters) – Currency speculators raised their bets against the U.S. dollar, according to data from the Commodity Futures Trading Commission released on Friday and Reuters calculation.
The value of the dollar’s net short position was $3.64 billion in the week ended Oct. 22 compared with a net short position of $1.24 billion the previous week. The week of Oct. 8 was the first net short position since the week of Feb. 12.
Gold is deflected at its trendline.
— Gold appears to be deflected from trendline resistance near 1360.00. Gold still holds considerable attraction for investors as it appears provide a temporary “safe haven” for hot money. However, it has broken beneath weekly Intermediate-term support at 1332.51, leaving the Cycle Bottom at1276.94 as the last support. Gold may make a lot of people look foolish.
(Kitco News) – Gold prices are expected to fall next week, a majority of participants in the weekly Kitco News Gold Survey said.
In the Kitco News Gold Survey, out of 34 participants, 19 responded this week. Of these, three see prices up, while 13 see prices down and three see prices sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.Last week, a majority number of survey participants were bullish. As of noon EDT Friday, December gold on the Comex division of the New York Mercantile Exchange was down about $44 an ounce for the week.
Treasuries also reverse at the trendline.
— USB appears to have been deflected at the top of its trend channel. If so, it may be due for a reversal beneath its Broadening Wedge and Ending Diagonal formations. USB has an appointment with an important low in mid-November.
(Bloomberg) Treasury 10-year note yields (USGG10YR) rose to the highest levels in three weeks after a gauge of U.S. manufacturing expanded at a faster pace than forecast, weakening the case for the Federal Reserve to maintain stimulus.
The benchmark securities extended the first five-day drop in three weeks as Fed Bank of St. Louis President James Bullard said labor market gains in the past year could warrant a cut in the bond buying. Fed policy makers said Oct. 30 that the economy showed signs of “underlying strength” even as they maintained their $85 billion of monthly asset purchases.
Crude declined beneath mid-Cycle support.
— Crude declined beneath weekly mid-Cycle support this week, but may have ended a very powerful Primary Cycle decline on Friday. Should it gain ground next week above its Long-term support/resistance at 98.62, it may be able to complete the formation suggested on the chart. The Cycles Model suggests that, should it rally above critical support, it may continue to rise into early December. If so, we could see crude priced near $125.00-130.00 by the end of the year.
China stocks bounced at Intermediate-term support.
–The Shanghai Index bounced at its weekly Intermediate-term support at 2115.07, but has a double resistance directly overhead. It appears that the rally attempt may fail. The Cycles Model suggests the decline may extend through mid-November.
(Bloomberg) Manufacturing strengthened from China to South Korea last month in a sign that growth risks are abating in Asia and expansion may pick up this quarter.
China’s official manufacturing Purchasing Managers’ Index (CPMINMAN) rose more than estimated to an 18-month high and a measure from HSBC Holdings Plc and Markit Economics topped projections. HSBC’s reading for South Korea was above the expansion-contraction dividing line of 50 for the first time since May and Taiwan’s PMI rose to 53 from 52. Australian and U.K. indexes also showed growth.
The India Nifty makes a final surge to its Cycle Top.
— The India Nifty index may be making a very fast decline to its Cycle Bottom in short order. It has completed its final reversal and the trigger to activate the Orthodox Broadening Top formation lies at the bottom trendline at 5400.00 The probable target for Intermediate Wave (C) appears to be the Lip of the Cup with Handle near 4550.00. The decline from this top may be very fast.
(BBCNews) India’s main stock index, the Sensex, has hit a record high, propelled by an increased inflow of foreign capital. The index reached 21,293.88 early on Friday, surpassing its previous high of 21,206 set during the stock market boom of 2008, before closing at 21,196.81. The rise marks a remarkable turn around from two months earlier, when foreign investors were pulling out money from the country amid worries over growth.
The Bank Index slipped below the trendline.
— BKX has hast lost the month-long battle to stay above its trendline. In addition, it did not make a new high as most other indexes did this week, as it also slipped bneneath weekly Intermediate-term support at 64.40. Aside from Long-term support at 60.12, there is little to keep it from a 50% decline to its Cycle Bottom.
(ZeroHedge) Back in January, we highlighted the main problem plaguing the Greek financial system, and why a bailout (at least third, but likely fourth and fifth, and so on) is inevitable because “the amount of non-performing loans has exploded by a laughable amount, rising some 50% from December 2011, when it was “only” 16% and stood at a gargantuan 24% last month (indicatively, in the US this would mean that some $1.7 trillion in loans was nonperforming). And therein lies the rub, because as Kathimerini prudently notes, the “bad loans come to a considerable 55 billion euros. This means that the sum of NPLs already exceeds the total funds set aside for the recapitalization of the local credit system, which amounts to €50 billion.”
(ABCNews) The taxpayer-owned Royal Bank of Scotland said Friday it will segregate about 38 billion pounds ($62 billion) of soured investments to clean up its balance sheet in the aftermath of the financial crisis.
The move is part of a plan to get the bank in shape so the government can eventually sell its majority stake. But it will come at a cost — Friday’s move will result in a charge of 4 billion pounds to 4.5 billion pounds in the fourth quarter. Shares slumped 5.4 percent to 346.7 pence on the news.
(ZeroHedge) When even Bank of America’s Michael Hartnett has a note titled “It’s getting frothy, man”, and joins such other bubble-warners as JPM, Bill Gross, Larry Fink, and David Einhorn, one can be absolutely positive that the Fed will do… absolutely nothing.
Regards,
Tony
Anthony M. Cherniawski
The Practical Investor, LLC
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