By TonyC
– VIX extended its Master Cycle low an extra week. This falls within normal parameters of a cycle bottom, but extensions can frustrate at times. Once the reversal is made, VIX may quickly vault to its Cycle Top at 34.11, and possibly much higher.
SPX reaches its Diagonal trendline.
– SPX may have completed its final thrust in a Primary Wave (C) to the upper trendline of its massive Ending Diagonal. In doing so, it closed above its May 22 high. The Ending Diagonal trendline is at 1702.00. Within the Ending Diagonal is a smaller Broadening Wedge. In crossing the lower blue trendline of the Broadening Wedge, SPX will also lose the support of the 13-year Top and the 1987 trendlines, which would be very bearish.
(ZeroHedge) Between Detroit’s bankruptcy, Microsoft’s miss and worst drop in over 13 years, and GOOG’s miss (latter gobbled back by the BTFD’ers), it is no surprise that stocks rallied (thanks to GE’s explosion higher and Trannies surging). Mixed bag overall in stocks with the Nasdaq -1.4% on the week and TRAN +2.2% (with the S&P and Dow around 0.6%).
NDX is repelled by the Cycle Top and its Diagonal trendline.
–The NDX was repelled at its weekly Cycle Top resistance and Ending Diagonal trendline this week. This may indicate completion of the multi-year rally at multiple degrees of trend. A decline beneath the lower trendline of the Ending Diagonal may prompt a swift follow-through decline beneath Cycle Bottom support at 2101.65.
(ZeroHedge) Microsoft’s collapse last night is extending this morning as the stock holds at its 100DMA, down 10% from yesterday’s close. The drop is knocking 24 points off the Dow and along with GOOG’s damage is weighing heavily on the Tech sector overall (which was more evident in last night’s Nikkei dump than in the US for now). The drop for Balmer’s baby means a $30 billion loss of market cap – or one Schwab or Aflac or Freeport-McMoRan (or 2 Mattels).
The Euro extended its retracement rally.
– The Euro completed a 63.84% retracement of its most recent decline this week, falling short of its weekly mid-Cycle resistance at 132.14. Cycle support is just below at 130.37 to 130.75. Once beneath it, the decline may be swift and deep.
(ZeroHedge) Europe has denigrated into a strange place where fantasy replaces reality as necessitated by their governments and the Union that governs them. It is a world where anything but direct liabilities are not counted, where securitizations worth 50 cents on the Dollar are held at par and where both data and numbers are manipulated for the preservation of the State.
Dreams are born of imagination, fed upon illusions, and put to death by reality. The guillotine returns after September 22, 2013. Maybe sooner.
The Yen loses support at Cycle Bottom.
–The Yen appears to have lost all shortr-term support as it broke through its Cycle Bottom at 99.71. The minor retracement appears over and a resumption of the decline may be expected. The struggle to keep the Yen at or above the 100.00 level has failed.
(ZeroHedge) When it comes to changing the “measurement” rules in the middle of the game, nobody does it quite like Japan: in the aftermath of the Fukushima nuclear explosion, when radiation was soaring (and still is with Tritium levels just hitting a record high but who cares – Goldman partners have to earn record bonuses on the back of the irradiated island) Japan’s solution was simple: double the maximum safe irradiation dosage. Done and done. Now, it is time to do the same to that other just as pesky, if somewhat less lethal indicator: inflation. Reuters reports that the Japanese government plans to adopt a different measure of inflation to the central bank’s.
The US Dollar poised for a new breakout.
– USD closed just beneath Short-term and Intermediate term support/resistance at 82.88. The Cyclical low appears to have been completed on Wednesday and the rally in the Dollar is expected to continue through mid-August. The Head & Shoulders formation appears to be offering the next target in the US Dollar at 95.50. The trading community has been overwhelmingly bearish on the dollar, so a confirmation of the breakout may force the unwinding of the dollar shorts.
Gold may be failing on its bounce.
– Gold struggled to attain higher ground, but failed to regain any of its Cycle supports. The stall at the top of wave 4 of the previous decline suggests more downside is ahead. The multiple bearish formations on the chart suggest that gold has further to decline, as well.
(ZeroHedge) Starting yesterday, JPM reported that just under 12,000 ounces of Eligible gold (the same Registered gold that two days earlier saw its warrants detached and convert to eligible) were withdrawn from its warehouse 100 feet below CMP 1. But it was today’s move that was the kicker, as a whopping 90,311 ounces of eligible gold were withdrawn, accounting for a massive 66% of the firm’s entire inventory of non-Registered gold, and leaving a token 46K ounces, or a little over 1 tonne in JPM’s possession.
Treasuries haven’t reached bottom…yet.
– USB had a two-week pullback from its July 5 Master cycle low, but both the Cycle Model and the chart suggest more decline to come. The record bond fund redemptions may resume until USB completes its journey to the Cycle Bottom. The unfilled gap that remains at 127.04 is also an attractor as the index retraces its rise since 2011.
(Bawerk.net) Something peculiar has been going on the treasury market during the latest round of quantitative easing (QE). If we study the chart provided below we find that treasury rates increased as soon as a QE-program was enacted, and fell immediately after its termination. Take the TSY 10 year for example; as soon as QE1 was implemented rates rose rapidly from a low of 2.08 per cent to a high of 4.01 per cent. What is striking about this is the fact that the low was set three days into the program, while the high was set three days after the program. A similar development occurred under the QE2 program. Rates reversed their sharp downtrend from the peak set around the end of QE1.
Crude may have trouble in its rarified atmosphere.
– Crude may be having difficulty at this level, since it has extended its Primary Cycle high by a full week. The parabolic rally may lead to a very vicious unwind as it declines into its Master Cycle low in August. The attempt to reflate the price of crude will end badly.
(ZeroHedge) For the first time since QE2 was announced (August 2010), the price of WTI Crude oil is now more expensive that Brent crude. The Brent-WTI spread has collapsed from over $23 in Feb 2013 and is now negative and notably below the long-run average level of around $0.98. At $109, WTI is the highest since March 2012. Gas prices – at the pump – continue to rise significantly reaching the highest since March, but given the lag to production, are set to reach well over $4.00 per gallon on average.
China decline resumes.
–The Shanghai Index failed its attempt to reach weekly short-term resistance at 2117.08 and appears to be resuming its decline. The influence of the Cup with Handle formation is similar to the Head & Shoulders formation and offers a particular target for this decline. The probabilitiy of meeting its target is 90%.
(ZeroHedge) The Shanghai Composite Index has underperformed global peers in the past year. The pace of expansion may fall below the government’s goal of 7.5 percent and that may prompt a rate cut and/or an accelerated pace of infrastructure project approvals (unleashing the inflation monster). Policy makers need to prove they remain in control, meaning GDP growth must finish the year at or above the target, but for now, the following four charts suggest all is not well with the ‘soft-landing’…
The India Nifty may have reached a pivot high.
– India Nifty has stretched its retracement of its decline into June to 75%. This oversize bounce may be one of the residual effects of the Orthodox Broadening Top which is stalling in mid-formation. The decline may resume shortly as CNXN appears to be in sync with the world markets.
The Bank Index challenges its upper trendline.
– BKX continued to challenge the upper trendline of its year-old trading channel this week. The Cycles Model suggests that the rally may have run out of time.
(ZeroHedge) Earlier today, Bank of America surprised the market with its n-th consecutive profit beat in many quarters. Ironically that same profit, of $4,012 MM to be precise, should have been a loss of $221 MM.
As we reported in late June, what happened in Q2 was an absolute devastation to bank balance sheets courtesy of the surge in interest rates, and the result would be a huge impact on bank AFS holdings, which as we said would soon exude major losses. Or rather “would exude losses” had Mark-To-Market still been around (and which at least initially was supposed to be offline until the recovery arrives, which begs the question: where is this recovery that so many have said already took place since MTM is nowhere to be found?). Instead we get Mark-To-Unicorn.
(ZeroHedge) Moments ago (Wednesday) Bank of America was the last TBTF bank to report earnings, which came in at $4 billion or $0.32 per diluted share compared to expectations of a $0.26 print. Revenue was $22.9 billion net of interest expense which was just a fraction above the $22.7 billion expected. The immediate reason for the beat: the usual accounting fudge to net interest losses which came in at $1.2 thanks to yet another $900 Million (well above the $804MM in Q1 and the same as Q4 2012) loan loss reserve reduction to the total net charge off number of $2.1 billion. And with $21.2 billion in credit loss “buffer” allowance still left on the books from those torrid days of 2008, expect the accounting fudges to continue for a long time.
(ZeroHedge) In the US, our regulators have publicly embraced a “too big to prosecute” doctrine. We are restraining, underfunding and dismantling regulatory oversight in the interests of short-term stability for the status quo. Which as a criminologist, Black knows with certainty creates an environment where bad actors will act in their self-interest with assumed (and likely real, at this point) impunity.
Consider the prior two articles and tell me Bill Black hasn’t hit the nail on the head.
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