{"id":46187,"date":"2014-01-12T08:21:43","date_gmt":"2014-01-12T13:21:43","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=46187"},"modified":"2014-01-12T08:21:43","modified_gmt":"2014-01-12T13:21:43","slug":"weekend-update-practical-investor-5","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2014\/01\/12\/weekend-update-practical-investor-5\/","title":{"rendered":"Weekend Update by the Practical Investor"},"content":{"rendered":"

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Weekend Update<\/p>\n

January 10, 2014<\/p>\n

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\u00a0\"\"<\/p>\n

— VIX made a very deep 84.5%retracement of the rally from its Primary Wave [5] low on December 26. \u00a0Preliminary evidence of a reversal may come with a breakout above its January 2 high at 14.59. \u00a0Confirmation of a change in trend lies at 16.26 to 16.75.<\/p>\n

SPX no longer making new highs.<\/p>\n

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— SPX made four probes at a new high this week, but failed to overcome daily Cycle resistance between 1843.00 and 1845.00. \u00a0The Orthodox Broadening Top, otherwise known as a \u201cMegaphone\u201d pattern, is still the key formation at this juncture. \u00a0A decline from this peak through the bottom trendline of the Broadening Top completes the formation and sets up the initial downside target.<\/p>\n

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(ZeroHedge<\/a>) Late last night the music may have just skipped a major beat after Goldman released a Friday evening note that is perhaps the most bearish thing to come out of Goldman’s chief strategist David Kostin in over a year, (and who incidentally just repeated what we said most recently a week ago in “Stocks Are More Expensive Now Than At Their 2007 Peak<\/a>“). To wit:<\/p>\n

S&P 500 valuation is lofty by almost any measure, both for the aggregate market (15.9x) as well as the median stock (16.8x).\u00a0We believe S&P 500 trades close to fair value and the forward<\/p>\n

path will depend on profit growth rather than P\/E expansion.<\/p>\n

NDX closes the week at its trendline.<\/p>\n

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— NDX closed the week at the upper trendline of its Ending Diagonal formation without making a new high this week. \u00a0\u00a0The 4.8 year rally may now be finished. \u00a0Initial confirmation of that would come with a decline beneath the trendline followed by a further decline below the Cycle Top line at 3465.74.<\/p>\n

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(ZeroHedge<\/a>) \u00a0\u2026David Stockman, author The Gret Deformation, notes\u00a0Wall Street\u2019s institutionalized fiddle of GAAP earnings made P\/E multiples appear far lower than they<\/p>\n

actually are, and thereby helps perpetuate the myth that the market is “cheap.”<\/p>\n

The Euro declines, bounces from weekly supports.<\/p>\n

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. \u00a0\"\"<\/p>\n

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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0— The Euro declined to its weekly Intermediate-term support at 136.03, then bounced in a near-50% retracement. \u00a0It may be done or nearly so with the retracement and appears ready to resume its decline this week. \u00a0\u00a0Final support is at 133.07 and 130.90, beneath which the Euro decline may accelerate.<\/p>\n

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(BBCNews<\/a>) \u00a0The President of the European Central Bank, Mario Draghi, has urged MEPs and EU governments to set up a “true banking union”.<\/p>\n

Giving evidence to the Economic and Monetary Affairs Committee on 16 December 2013, he said he welcomed the agreement reached last week to set up common rules on a “resolution fund”. \u00a0This means that each EU member state will build up a fund to help banks in trouble.<\/p>\n

The Yen continues \u00a0testing its Head & Shoulders neckline.<\/p>\n

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–The Yen has tested the Head & Shoulders neckline at 96.00 for a second week. \u00a0The breakdown to a new low and the inability to rally above the neckline suggests a continuation of a Primary Wave [5] in a very strong decline that may last through mid-February.<\/p>\n

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The US Dollar closed beneath mid-Cycle resistance.<\/p>\n

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\u00a0\"\"<\/p>\n

— After USD closed above its weekly mid-Cycle support\/resistance at 80.98 it pulled back to its weekly Short-term support at 80.64. \u00a0The Cycle Model suggests the next phase of the rally lasting through late January that may bring the USD above its inverted Head & shoulders pattern shown in the chart. \u00a0Surprised Dollar bears may help make this rally a memorable one.<\/p>\n

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Here\u2019s one dollar bear\u2019s<\/a> view\u2026\u201dCentral banks around the world are increasingly diversifying their currency reserves away from the US Dollar. Even as overall holdings soar to a record $11.4 trillion, the\u00a0US Dollar accounted for 61.44% (down from well over 65% at the peak of the crisis in 2008). With\u00a0China outspokenly concerned at the US Dollar’s future status<\/a>, we suspect this will only become more ‘diversified’.\u201d<\/p>\n

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Gold bounces from a new Cup with Handle formation.<\/p>\n

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— Gold bounced from its new Cup with Handle formation at 1181.40 and appears to have closed at Short-term resistance at 1248.50. \u00a0Indications are that gold may turn back down early next week. \u00a0A bearish Cup with Handle formation may be triggered beneath the Lip at 1181.40, so be prepared for that probability. \u00a0\u00a0There are simply too many goldbugs who have called for a bottom to be a valid one. \u00a0See below.<\/p>\n

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(ZeroHedge<\/a>) \u00a0It’s been one of the worst years for gold in a generation. A flood of outflows from gold ETFs, endless tax increases on gold imports in India, and the mirage (albeit a convincing one in the eyes of many) of a supposedly improving economy in the US have all contributed to the constant hammering gold took in 2013. \u00a0Perhaps worse has been the onslaught of negative press our favorite metal has suffered. It’s felt overwhelming at times and has pushed even some die-hard goldbugs to question their beliefs\u2026 not a bad thing, by the way.<\/p>\n

Treasuries retest the Broadening Wedge.<\/p>\n

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— USB bounced from its 32.25-year trendline, testing both the trading channel trendline (blue) and it Broadening Wedge trendline (red). \u00a0The Broadening Wedge suggests a probable 20% loss beneath this resistance level. \u00a0More importantly, the loss of a long term uptrend is in jeopardy, should it decline beneath 127.35.<\/p>\n

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(WSJ) \u00a0Treasury bond prices rallied Friday as a disappointing employment report diluted concerns that the Federal Reserve could wind down its bond purchases at a faster pace in coming months.<\/p>\n

The world’s largest economy added 74,000 jobs last month, the smallest gain in three years and sharply below 200,000 forecast by economists. The report stood in contrast with releases earlier this week that had showed employment gathering speed.<\/p>\n

Crude challenges its Head & Shoulders neckline.<\/p>\n

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— Crude challenged the neckline of its Head & Shoulders formation this week. \u00a0It may have more of a bounce next week, but we now have confirmation that a downtrend may already be in place. \u00a0Upside movement, should it appear, may be inhibited by the weekly Short-term resistance at 95.63 and mid-cycle resistance at 96.26.<\/p>\n

(Reuters<\/a>) – A fire on a crude oil tanker on a\u00a0Canadian National Railway<\/a>\u00a0Co train that derailed this week in New Brunswick was extinguished by Friday afternoon and CN said blazes on cars carrying liquid petroleum gas (LPG) would be put out shortly.<\/p>\n

China approaches its Cycle Bottom.\"\"<\/p>\n

–The Shanghai Index is approaching its Weekly Cycle Bottom support at 1972.13. \u00a0this may set up a bounce next week back to the Model resistance cluster at 2140.93. \u00a0Once the bounce is complete, it has a high probability of making some new lows. \u00a0The duration of this decline may not be finished until late February to mid-March..<\/p>\n

(ZeroHedge<\/a>) \u00a0Overnight China reported disappointing export data, missing expectations of +5%. The government explained this on the basis that they were losing their competitive edge since the Yuan has strengthened to 20 year highs but perhaps most telling is that fact that, as\u00a0the FT reports<\/a>,\u00a0China became the world’s biggest trader in goods for the first time last year – overtaking the US for all of 2013.<\/p>\n

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The India Nifty caught between support and resistance.<\/p>\n

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— The India Nifty declined to Intermediate-term support, then bounced to Short-term resistance at 6176.74 this week. \u00a0The decline may continue through mid-February. \u00a0This decline may be deflationary to an extreme, since equities have become thoroughly saturated with liquidity from India\u2019s central bank and simply cannot absorb any more. \u00a0Indian investors are leveraged to the hilt. \u00a0The potential for a panic decline to the weekly Cycle bottom (4756.17) is very high.<\/p>\n

The Bank Index \u00a0reaches its weekly Cycle Top.\"\"<\/p>\n

— BKX \u00a0has reached its weekly Cycle Top resistance at 71.14 this week. \u00a0The 50% Fibonacci retracement of its 2007 to 2009 decline is at 69.46 and it is due for a weekly Cycle turn. \u00a0The resumption of the secular bear market may be most spectacular in BKX.<\/p>\n

(ZeroHedge<\/a>) \u00a0In a memo to employees today, Bank of America has made some ‘improvements’ to its recommendations for analysts and associates working hours…<\/p>\n