Weekend Update: Bearish Potential In SPX
Anthony M. Cherniawski | Nov 07, 2014 02:14PM ET
-- VIX made an important Cycle low beneath the upper trendline of its Ending Diagonal and just beneath its mid-cycle support/resistance at 14.32.Coming up next is a Primary Wave [3] which may meet or exceed the Head & Shoulders target listed on the chart.
SPX stalls at its Ending Diagonal trendline.
SPX hit overhead resistance at the upper trendline of its Orthodox Broadening Top at 2038.00 this week. The new megaphone formation carries a very bearish potential. Unfortunately, most investors will be unaware of this probability.
(ZeroHedge) Stocks end the week on a weaker note round tripping off premature exuberance into the European close after jobs data that missed expectations (or did they). Of course the kneejerk response took the S&P and Dow to record highs before the weakness set in. Thanks to a late day panic-buying rip though, NASDAQ and Russell 2000 close the week unch - no need to call Mr. Bullard.
NDX reaches a new high.
NDX made its final high on Wednesday, its Cycle Pivot day and has been treading water since.TheOrthodox Broadening Top formations in the indexes are bearish reversal patterns that indicate high public participation, peak emotional involvement and no risk control.A decline beneath the October 15 low at 3700.23 completes the pattern and signals a major change in trend is underway. The excitement isn’t over yet.
(ZeroHedge) What really matters... "It's time to be invested... the correction is over... we've got good jobs number [which was a miss], GDP is there [which is being revised lower each day], earnings are there [which have been revised drastically lower for the rest of 2014 and 2015]... and even if we do get a dip down, we've got Mr Bullard to come in and reassure the markets..."
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High Yield meets its Ending Diagonal trendline.
The High Yield Index met the lower trendline of its Ending Diagonal formation in a final push this week.Traders often refer to this as the “kiss of death,” since a reversal from an Ending Diagonal usually means a complete retracement of that Diagonal.Now is time topay attention to the Orthodox Broadening Top formationas well.A decline beneath weekly Long-term support at 137.49 and the lower trendline puts MUT in motion toward its first target.
(team say they’ve seen some new trends emerging lately. One example is the way that the market is pricing risk.
Markets Are Discriminating More Between High and Low Quality Issuers As bonds have sold off, a bigger gap has emerged in spreads between higher and lower-quality issuers. This tells us something about the market’s attitude to credit risk. For example, the difference in spreads between the highest- and lowest-rated high-yield credits gives a measure of the risk premium that investors demand for moving down the credit-quality spectrum.
The Euromakes its low on time and on target.
The Euromay have made its low on Friday, as suggested last week, hitting the upper target range between 124.00 and 122.00.We may see a strong bounce, especially since it did not challengethe Lip of a Cup with Handle formation at 122.00.We may see a bounce of approximately two weeks with an upside target at mid-Cycle resistance at 132.99.
(CNBC ) The euro fell below $1.24 for first time since August 2012 on Thursday.
The euro plunged to its lowest in more than two years against the dollar on Thursday after European Central Bank President Mario Draghi affirmed his pledge to use unconventional measures to stimulate a sluggish euro zone economy.
He added that the impact of the ECB's asset-buying program on its balance sheet would be sizable. His remarks, which came after the ECB kept interest rates at a record low of 0.05 percent, were a green light for investors to sell the euro.
Euro Stoxx reverses at “point 7.”
The EuroStoxx 50 Index reversed at “point 7” resistance of its Broadening Wedge formation. A cross beneath the lower trendline at 3000.00 has the potential to propel Stoxx to its Cycle Bottom trendline at 2408.20. Last weekend provided Stoxx a Cycle Pivot that may send it to its target in as little as two more weeks.
(ZeroHedge) Riot police clashed with demonstrators in the Belgian capital of Brussels on Thursday amid a massive protest against government plans to reform the country’s welfare system. This comes on the heels of violent French, Italian, and Spanish youth protests in recent weeks as the citizens of the non-Germanic European Union decry the 'austerity' they have been crushed by. What is odd, though, is externally, there has been 'no' austerity with stunning answer : an audit, published this morning, found that £109 billion out of a total of £117 billion spent by the EU in 2013 was "affected by material error”. Brussels accounts have not been given the all clear for 19 years running. In other words, Brussels 'embezzles' billions of euros per year, and blames it on austerity. Is it any wonder, Europe is burning?
The Yen also meets its bearish target.
The Yen has declined to the midrange of its bearish target (not shown). The Cycles Model called for a low on Friday and it appears that it was made. Of course, confirmation won’t be evident until next week, but it pays to follow the indicators.Last week I suggested, “The Yen may hit its intended downside target by the end of next week.”
(Reuters ) - Japanese cabinet ministers expressed concern about the yen's rapid fall, suggesting that the government may be trying to ward off any criticism that it is intentionally devaluing its currency to boost exporters' competitiveness.
The yen hovered near a seven-year low versus the dollar on Friday, having tumbled around 7 yen this week after the Bank of Japan stunned investors by expanding its quantitative easing programme on Oct. 31.
Policymakers have stated the BOJ's easing is not targeted at the yen, but some politicians worry higher import prices will hurt the economy .
The Nikkei 225 makes makes an exhaustion high.
The Nikkei gapped on Tuesday to point 5 (at the upper trendline) of its Orthodox Broadening Top formation where it hovered for the balance of the week.This is considered the peak of the formation and a decline to mid-cycle support at 13625.46 may be the next move. The Broadening formations represent a market that is out of control and has a highly emotional public participation. Of course, the bank of Japan is doing more than just cheerleading.
(StarTribune ) From hot to not and back again, Japanese stocks have been a confusing lot the last couple years.
Japan's stock market is flying after the Bank of Japan surprised the world last week by increasing its bond-buying stimulus program. The Nikkei 225 index jumped nearly 5 percent the day of the announcement, and it's back in the black for the year. In the spring, it was down nearly 15 percent. That follows a stellar 2013, where the Nikkei soared nearly 60 percent.
Underlying all the market moves is investor confidence in whether Japan can jumpstart its economy's too-weak inflation. Japanese shoppers and companies have grown accustomed to prices staying the same, which encourages them to delay purchases and investments. That weighs on consumer spending and restricts the economy.
US Dollar peaks at 3 ½ year high.
The US Dollar appears to have reached the limit of its first wave to emerge out of its massive Triangle formation.Therally had made all buta final target that was attempted on Friday, but it fell short by 18 ticks. I had called for the end of the rally earlier in the week after the lesser targets were met, but missed an important Pivot on Friday. We may now see the dollar weaken through the end of November as it digests some of the gains it has recently made.
(ZeroHedge) Remember that in a beggar thy neighbor world, where currency warfare has once again broken out between the US, Europe and Japan, for every winner there is a loser. In this case, the loser is the one country that has decided that a strong currency is a great thing for its economy (if only for the time being): that would be the US. There is a problem with that, however: because in Q3 the trade deficit rose by 7.6%, virtually identically to how much stronger the US Dollar basket, the DX, increased by in the same period which surged by 7.7% the most since Q3 2008 when Lehman blew up!
USB remains in an exhaustion formation.
The Long Bond remains in an exhaustion formation that it made a month ago.While it has failed to go higher, the reversal is becoming overdue. This weekend offers a probable reversal date that may take USB to mid-December.The potential target may be weekly Cycle Bottom support at 125.63.
(WSJ ) Treasury bonds strengthened on Friday as a smaller-than-expected increase in October nonfarm payrolls bolstered expectations that the Federal Reserve would be in no hurry to raise official interest rates.
The bond market got an extra boost after Fed Chairwoman Janet Yellen said “supportive policy remains necessary ” given the slow and unsteady economic recovery. Ms. Yellen spoke at a conference in Paris and the comments came after the jobs report.
In late afternoon trading, the benchmark 10-Year note was 17/32 higher, yielding 2.314%. The yield’s 0.06-percentage-point decline was the biggest one-day drop since Oct. 15.
The yield fell by 0.02 percentage point for the week. Yields fall as prices rise.
Gold breaks a 16-month old support.
Gold reached its first Cycle low beneath the Lip of its Cup with Handle formation. Don’t expect this bounce to last more than two weeks as the Cycles Model suggests the decline may soon resume into early December.
(Reuters ) - Gold rose 2.6 percent on Friday, its biggest one-day gain in nearly five months, as a retreat in the U.S. dollar and heavy short-covering lifted bullion from a 4-1/2-year low.
The metal notched a third straight week of losses, however, having dropped to its lowest since April 2010 at $1,131.85 an ounce earlier on Friday.
The dollar slipped after a solid but below-expectation October U.S. jobs report as investors took profits on the greenback's months-long rally, which has seen it reach multi-year highs in anticipation of tighter U.S. monetary policy next year.
The decline in Crude still not be over yet!
Crude continues its decline, but hasn’t yet made its Head & Shoulders target.Last week I suggested, “This is likely to occur during the second week of November.”The Cycles Model and pattern both suggest another probable 2-3 days of decline to completion.Once accomplished, there may be a few weeks of consolidation before it resumes a further decline.
(WSJ) Oil prices rose Friday on expectations that cold weather could boost demand for petroleum products. For the week, however, prices posted losses as ample global supplies continued to weigh on the market.
Brent, the global benchmark, posted a seventh weekly loss, while the U.S. benchmark fell for a sixth straight week.
Oil prices have slid for months, hitting multiyear lows Tuesday, on concerns that the Organization of the Petroleum Exporting Countries is unlikely to cut its output to reduce a global glut of oil.
China stocks linger at point 5.
The Shanghai index lingered for a week after making new highs and a point 5 of an Orthodox Broadening Top.Point 6 may take it as far as its mid-cycle support at 2154.69 over the next two weeks or so before a meaningful bounce.Soon after, the formation calls for a full retracement to the Cycle Bottom at 1918.58.
(ZeroHedge) The former Portuguese trading outpost Macau, which similar to Hong Kong is a “special administrative region” of China, is a Mecca for China’s gamblers – and China is reportedly brimming with gamblers. Macau’s gambling industry has accordingly been on fire for many years.
Macau has benefited disproportionately from two major trends: the rise of a class of very rich people in China (as well as a growing middle class), and the need of corrupt bureaucrats to launder their money, resp. get it out of China.
The Banking Index continues its“throw back” inside its Broadening Wedge.
--BKX continues its throw back after bouncing above Model support/resistance at 71.18.This may still be considered point 7 ofthe Broadening Wedge formation. The next target (point 8) may be 20% beneath the lower trendlline.
(ZeroHedge) Several years ago, anyone who suggested there was a massive Libor manipulation conspiracy was branded as, what else, a tin-foil fringe lunatic: after all "how can so many people possibly collude in complete secrecy?" And then it was revealed that for years, there was a massive Libor manipulation conspiracy.
Now, even though it has been extensively leaked in advance, we are about to get the next market rigging "conspiracy theory" become fact, after countless traders working for major banks and conspiring in secret chatrooms such as "The Cartel" and the "Bandits" are about to cost their employers billions in settlement charges as regulators after regulator and country after country charges the world's biggest, and most criminal banks, with billions for manipulating their currency for years.
(ZeroHedge) A week ago it was Citi (NYSE:C), which took farcical non-GAAP earnings through the rabbit hole when it revised its already reported Q3 earnings lower by $0.20 to, as described in "Algos Please Ignore: Citi Slashes Previously Reported Net Income Due To "Legal Investigations" Over FX Rigging Probe" and now it is that other bank which has made crime an ordinary course of business.
From the just released press release which sees its Q3 EPS revised down from $0.04 to -$0.04
Bank of America Corporation today announced an adjustment to its financial results for the third quarter ended September 30, 2014 to include additional litigation expense related to its foreign exchange business.
(RollingStone) She tried to stay quiet, she really did. But after eight years of keeping a heavy secret, the day came when Alayne Fleischmann couldn't take it anymore.
"It was like watching an old lady get mugged on the street," she says. "I thought, 'I can't sit by any longer.'"
Fleischmann is a tall, thin, quick-witted securities lawyer in her late thirties, with long blond hair, pale-blue eyes and an infectious sense of humor that has survived some very tough times. She's had to struggle to find work despite some striking skills and qualifications, a common symptom of a not-so-common condition called being a whistle-blower.
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