Weekend Update
December 6, 2013
— VIX broke out above its support/resistance cluster between 13.33 and 14.16, then closed within the group. It now has a “green light” for a higher rally. The next breakout point may be near 21.00, at the neckline of a complex inverted Head & Shoulders formation.
SPX challenges its trendline, closes above it.
— SPX challenged its Short-term support at 1773.00, but closed above its Ending Diagonal trendline and Cycle Top support this week at 1798.44. It was not able to surpass its Thanksgiving “peak week” performance, so this week’s attempt is no surprise. As much as it “back loaded” all of its gains on Friday, it still posted the first weekly loss in two months..
(ZeroHedge) Despite every effort to sell as much JPY as possible to lift stocks and create the best run for the S&P since 2004, the algos failed (by pennies) but with solid gains nevertheless just to disprove all the good news is bad news believers – for now. While the NASDAQ managed a green close on the week (though underperformed today), stocks couldn’t quite make it all back today but broke the 5-day losing streak.
NDX is at double resistance.
— This week NDX rose above its Massive Ending Diagonal but stayed beneath the upper trendline of the Broadening Wedge formation. While Ending Diagonals often have throw-overs, Broadening Tops do not. This suggests that NDX may be approaching the end of the line as it presses to meet the Broadening Top trendline for the last time.
(ZeroHedge) As equities celebrate today’s better than expected jobs report (for now), apparently comfortable in the knowledge that it’s good-enough-but-not-too-good, we are reminded that just six short months ago, none other than the Fed chairman himself uttered these crucial words during his June 19th press conference:
“…when asset purchases ultimately come to an end the unemployment rate would likely be in the vicinity of 7%”
The Euro made a 77.4% retracement.
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— The Euro bounce may be over after a 77.4 % retracement of its decline from the October 24 high. The bounce appears to be complete, since the Cycles Model suggests the Euro may be due for a significant low by the end of the year.
(BBCNews) Ukraine’s President Viktor Yanukovych and his Russian counterpart Vladimir Putin have held surprise talks on a “strategic partnership treaty”.
Mr Yanukovych flew from China to Sochi in southern Russia for the meeting. He also cancelled a visit to Malta. Last month he shelved a partnership deal with the EU, triggering angry protests in Ukraine’s capital Kiev.
The Yen slides toward its Head & Shoulders neckline.
–The Yen continues its slide toward the Head & Shoulders neckline at 96.00. The Yen may break down beneath the neckline in a Primary Wave [5] in a very strong Primary Cycle decline through that may last into the New Year.
(ZeroHedge) Shinzo Abe secured final passage of a bill granting Japan’s govt sweeping powers to declare state secrets. The Bill won final approval of the measures at about 11:20 p.m. Tokyo time after opposition parties first forced a no-confidence vote in Abe’s govt in the lower house. The first rule of the pending Japan’s Special Secrets Bill is that what will be a secret is secret. The right to know has now been officially superseded by the right of the government to make sure you don’t know what they don’t want you to know.
The US Dollar extends its bullish Flag formation.
— USD appears to have extended its bullish Flag formation to retest the lower trendline of its massive Triangle Formation. Despite the further decline, this may imply a potential breakout above the Head & Shoulders neckline in the very near future. The bear trap for dollar shorts may be sprung as early as Monday, which is due for a major Cycle turn.
(Reuters) – Currency speculators trimmed their bets in favor of the U.S. dollar in the latest week, according to data from the Commodity Futures Trading Commission and Thomson Reuters released on Friday.
The value of the dollar’s net long position slipped to $19.85 billion in the week ended Dec. 3, from $20.39 billion the week before. It was, however, the fifth straight week of long positions in the U.S. dollar.
Gold tests its Head & Shoulders neckline…from beneath.
— Gold fell beneath its small Head & Shoulders neckline at 1235.00 and tested the neckline from beneath. It is also now beneath its Cycle Bottom resistance at 1234.16. This is a double warning against anyone contemplating a purchase of gold or anyone who is long. The losses will mount higher.
(ZeroHedge) As we showed back in April, the marginal cost of production of gold (90% percentile) in 2013 was estimated at between $1250 and $1300 including capex. Which means that as of a few days ago, gold is now trading well below not only the cash cost, but is rapidly approaching the marginal cash cost of $1125…
Treasuries crossing the Broadening Wedge.
— USB appears to be ready to cross Cycle Bottom Support at 129.45 and its Broadening Wedge trendline at 129.71 with devastating consequences for the Long Bond.
(ZeroHedge) While nobody is impressed by breaking equity and options markets anymore, since this has become a virtually daily occurrence and the habituation level is high, bond markets, and especially the US government’s “guaranteed” bond issuance machinery, are a different matter altogether. Which is why any time something out of the ordinary happens, people pay attention. Such as what happened moments ago when the US Treasury announced that it would delay the closing of the 3 and 6 month Bill auctions, originally scheduled to close today (Monday), to tomorrow (Tuesday).
Crude rallies off its Cycle low.
— Crude began its final rally this week. Last week I suggested, “… if it makes a low in the next week or so at or above 87.50, the Broadening Wedge may be the dominant formation for up to 2 months.” While WTIC may pull back to its mid-Cycle support at 96.17 in the next week or so, the rally is young and as yet undeveloped. Once it breaks above weekly Intermediate-term resistance at 98.38, the rally may gain even more strength.
(AP) The price of oil rose again Friday on signs of a stronger job market in the U.S. and finished the week with a gain of more than 5 percent. Those gains are showing up at the gas pump. The average price of a gallon of gasoline in the U.S. rose 1 cent to $3.26, the first increase in 10 days. Benchmark U.S. crude for January delivery rose 27 cents at $97.65 a barrel on the New York Mercantile Exchange. The increase for the week was $4.93 a barrel.
China stocks close above mid-Cycle resistance.
–The Shanghai Index rally closed above mid-Cycle resistance at 2229.50, but hasn’t overcome its September high. SSEC made its Master Cycle low on November 14, so a reversal in the next week may be very bearish. The next probable Pivot day is Tuesday, so China stock investors must stay on the alert.
(ZeroHedge) As we noted earlier, pollution in Shanghai has reached record levels causing the government to ban cars and cut production across factories. The images below are not photoshopped or edited… this is the day–to-day life in that bustling city looks like… and in case you thought moving inside was ‘safe’, “the fog” is creeping into the buildings too now… All we are waiting for now is the rotting corpses of over-capacity Chinese industries to come out of the dark…
Has the India Nifty finished its correction?
— The India Nifty index regained its losses from two weeks ago, but has not exceeded its October high. This suggests the current Cycle may resume its decline into the end of December. The next bounce may be near Intermediate-term support at 5947.12. The potential for a panic decline to the weekly Cycle bottom is very high.
The Bank Index showing signs of weakness.
— BKX tested its Short-term support at 65.95 this weekand closed lower for the week. On Friday it made a 56.6% retracement of its decline and may be ready for the next leg down. Next week BKX may be involved in a Flash Crash.
(ZeroHedge) Overnight, the WSJ reported a financial factoid well-known to regular readers: namely that as a result of a broken system that ever since the LTCM bailout has encouraged banks to become take on so much risk they become systematically important (as in their failure would “end capitalism as we know it”), and thus Too Big To Fail, there has been an unprecedented roll-up of existing financial institutions especially among the top, while the smaller, less “relevant”, if far more prudent banks have been forced out of business. “The decline in bank numbers, from a peak of more than 18,000, has come almost entirely in the form of exits by banks with less than $100 million in assets, with the bulk occurring between 1984 and 2011. More than 10,000 banks left the industry during that period as a result of mergers, consolidations or failures, FDIC data show. About 17% of the banks collapsed.”
(ZeroHedge) It is amazing what a few short months of intense regulatory scrutiny, a few multi-billion fines, and the occasional janitorial arrest can do to fraudulent bank business lines. First, recall that as we showed a week ago, and as we have been saying for the past five years, banks were recently “found” to manipulate, in a criminal sense, pretty much everything. Then recall that yesterday the European Union lobbed the biggest monetary fine in history against bank cartel behavior, with the guiltiest party, at least based on monetary amounts, being Deutsche Bank. So now that outsized profits as a result of illegal “trading” become virtually impossible to procure, what is a self-respectable criminal enterprise to do?
(ZeroHedge) It is only fitting that on the morning in which Europe levied the largest cartel fine in history against the criminal syndicate known as “banks”, that Goldman Sachs would issue its #6 “Top Trade Recommendation” for 2014 which just happens to be, wait for it, a “long position in large-cap bank indices in the US, Europe and Japan.” Supposedly, in a reflexive back and forth that should make one’s head spin, this also includes Goldman Sachs (unless they specifically excluded FDIC-insured hedge funds, which we don’t think was the case). So is Goldman recommending… itself? Joking aside, this means Goldman is now dumping its bank exposure to muppets.
Sign of the TOP???
Regards,
Tony
Anthony M. Cherniawski
The Practical Investor, LLC
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