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Weekend Update by thepracticalinvestor.com<\/a><\/p>\n January 31, 2014<\/p>\n — VIX tested mid-Cycle support\/resistance and closed higher for the week. \u00a0This confirms the change in trend. \u00a0It is now due to break through the Triangle trendline near 20.50 and challenge the weekly Cycle Top resistance at 22.05. \u00a0Its ultimate target may be above its massive 4-year Ending Diagonal at 27.50.<\/p>\n SPX may threaten the lower Diagonal Trendline next week. <\/p>\n SPX closed solidly beneath its weekly Intermediate-term support\/resistance band at 1792.58. \u00a0The next support level is the trifecta of supports, consisting of the 14-year Top trendline, weekly Long-term support and the lower Diagonal trendline, all near 1705.00 to 1715.00. \u00a0The bear market truly begins beneath that level.<\/p>\n (ZeroHedge<\/a>) \u00a0Another volatile day ended with the Dow is down around 5% in January – the\u00a0worst start to a year since 2009 (and 2nd worst since 1990) and the worst month since May 2012 (a\u00a03-sigma miss of the average +1.5% per month gain since 2009’s lows).<\/p>\n Trader’s Almanac –\u00a0 every down January on the S&P 500 since 1938, without exception, has preceded a new or extended bear market, a 10% correction, or a flat year.\u00a0As we also noted here, The JAJO Effect<\/a><\/p>\n NDX careens between support and resistance. This week NDX declined to weekly Long-term support at 3463.23, then bounced back toward weekly Short-term resistance at 3531.21, but closing beneath it. \u00a0The next decline may be much more substantial once it falls beneath the support lines.<\/p>\n <\/p>\n (ZeroHedge<\/a>) \u00a0Despite the best efforts of CNBC to have every bull on Amazon explain how great it really is and how they could enable to magical profit machine any minute if they so choose, the hedge fund hotel stock du jour is now down 10% and Bloomberg headlines blare:<\/p>\n *SEC Short Sale Rule 201 is in Effect : AMZN (NASDAQ)<\/p>\n<\/li>\n<\/ul>\n Last night’s algo-ramp to VWAP (on rising Prime prices?) is a long-distant memory now…<\/p>\n (ZeroHedge<\/a>) \u00a0Following December’s biggest-surge-in-4-years for UMich consumer confidence (though a miss),\u00a0UMich data has fallen back to 80.4 – missing expectations by the biggest margin in 8 years.<\/p>\n <\/p>\n The Euro is losing its grip.<\/p>\n The Euro has broken down beneath its prior weekly lows of the past month, also closing beneath both weekly Short-term and Intermediate-term supports. \u00a0The weekly Long-term support at 133.51 remains unbroken, but may be due for a challenge.<\/p>\n (Bloomberg<\/a>) \u00a0Euro-area inflation<\/a> remained below half of the European Central Bank<\/a>\u2019s target in January, driven by falling energy prices, adding to the case for policy makers to cut\u00a0interest rates<\/a>\u00a0next week.<\/p>\n Consumer prices rose an annual 0.7 percent after a 0.8 percent gain in December, the European Union\u2019s statistics office in Luxembourg said today. The median estimate in a Bloomberg News survey<\/a>\u00a0of 41 economists was for an increase to 0.9 percent. That\u2019s the fourth consecutive reading of less than 1 percent. The Frankfurt-based central bank aims to keep inflation at just under 2 percent.<\/p>\n <\/p>\n The Yen may have completed its retracement.<\/p>\n The Yen may have completed its retracement bounce just under weekly Intermediate-term resistance at 98.43. \u00a0The Cycles Model suggests a reversal may occur next week. The next break of the Head & Shoulders neckline may bring it beneath its 2008 lows.<\/p>\n <\/p>\n (Bloomberg) <\/a>\u00a0The yen extended monthly gains against emerging-market currencies as growing volatility amid a selloff spurs investors to reverse carry trades while seeking haven assets.<\/p>\n <\/p>\n The yen strengthened 0.7 percent to 102.04 per dollar at 5 p.m. in New York for a 3.1 percent monthly advance that was the biggest since April 2012. The dollar rose 0.5 percent to $1.3486 per euro, pushing monthly gains to 1.9 percent, the most since February.\u00a0Japan<\/a>\u2019s currency appreciated 1.2 percent to 137.63 per euro, having strengthened 5.2 percent since Dec. 31.<\/p>\n U.S. Dollar is building a base to move higher.<\/p>\n The dollar has been building a base from which it may surge higher. \u00a0It made an important Cycle low on January 24, tagging the Triangle trendline. \u00a0The reversal from the trendline took the dollar back to challenge Long-term resistance at 81.59. \u00a0We may see a smaller consolidation occur back to the weekly mid-Cycle support at 81.03 before a strong breakout that has the potential to challenge the Cycle Top at 83.82.<\/p>\n <\/p>\n (Reuters<\/a>) – The euro fell on Friday as soft\u00a0euro zone<\/a>\u00a0inflation data rekindled concerns the European Central Bank may have to act to combat deflation, while the dollar strengthened on mildly encouraging data to close out its best month since May.<\/p>\n <\/p>\n The dollar index .DXY, which measures the dollar against six major currencies, rose 0.26 percent to 81.25, still helped by the prior day’s solid reading on U.S. fourth-quarter gross domestic product, which revived hopes that the global\u00a0economy<\/a>\u00a0could, on the whole, take troubles from emerging\u00a0markets<\/a>\u00a0in stride.<\/p>\n The dollar index rose 1.3 percent in January, its biggest monthly gain since May.<\/p>\n Treasuries continue to climb, but not for long.<\/p>\n Treasuries continued their \u201csafe haven\u201d status as the long bond advanced toward weekly Long-term resistance and a potential Trading Channel trendline at 134.66. \u00a0It is probable that this rally may continue for a week or more as hot money looks for sanctuary from declining equities. \u00a0Unfortunately, this is only a retracement rally within a bear market in bonds.<\/p>\n (ZeroHedge<\/a>) \u00a0You didn’t think the US could at first slowly, and then all of a sudden, expropriate retirement accounts and invest them in the “no risk, guaranteed return<\/a>” MyRA Ponzi scheme introduced by Obama during the State of the Union address without lots of behavior-modifying indoctrination in the “friendly press” first now did you? Sure enough, here is the first major propaganda salvo, coming from none other than the US Treasury Secretary, Jack Lew, which will be published tomorrow across the McClatchy media empire.<\/p>\n <\/p>\n Gold retreats from its retracement high.<\/p>\n Gold retreated from its retracement high after challenging its Trading Channel trendline and weekly Intermediate-term support at 1262.69. \u00a0The Cycles Model calls for a month-long decline that may break through the lower trendline, or Lip of a Cup with Handle formation. \u00a0The potential consequences appear to be severe.<\/p>\n (FoxBusiness<\/a>) Gold edged higher on Friday but was still on course for the first weekly fall in six due to strong U.S. economic growth, concerns over the U.S. Federal Reserve’s withdrawal of monetary stimulus and a slump in Chinese demand.<\/p>\n Bullion had gained for most of January until this week, underpinned by weakness in global equities on concerns over emerging economies.<\/p>\n But upbeat U.S. growth data reassured investors worried about capital outflows from emerging markets and also validated the Fed’s decision this week to reduce its monthly bond purchases to $65 billion from $75 billion, as expected.<\/p>\n Crude could not overcome Long-term resistance. <\/p>\n Crude made a substantial retracement of its decline into January 9, but could not overcome Long-Term resistance. \u00a0When rallies fail to overcome prior highs in less than 30 days, they are doomed to a more substantial reversal. \u00a0There is a Head & Shoulders formation at the base of this rally, which, if pierced, may lead to a much deeper decline.<\/p>\n (Reuters<\/a>) – U.S. crude oil rose nearly $1 on Thursday on spread trading and higher demand as blistering cold sapped distillate supplies and government data showed solid economic growth in the fourth quarter last year.<\/p>\n The price difference between the European benchmark Brent and U.S. crude oil settled at its narrowest point in more than 2-1\/2 months, after news that U.S. gross domestic product grew by a 3.2 percent annual rate, according to the U.S. Commerce Department.<\/p>\n <\/p>\n China stock bounce weakens beneath resistance.<\/p>\n The bounce from the January 20 low has weakened, allowing a pullback. \u00a0However, the bounce may extend at least to its Short-term resistance at 2089.79 in the next week or so. \u00a0Once accomplished, the secular decline resumes with the next significant low in mid-March.<\/p>\n (ZeroHedge<\/a>) \u00a0The topic of China’s real estate bubble,\u00a0its ghost cities<\/a>, and its emerging middle class<\/a>\u00a0– who now have enough money to invest and have piled into houses not stocks – and have\u00a0been dubbed “fang nu” or housing slaves\u00a0(a reference to the lifetime of work needed to pay off their debts)<\/a>; is not a new one here but, as Bloomberg reports, the latest report from economist Gan Li shows\u00a0China\u2019s households are massively exposed to an oversupplied property market.<\/p>\n \u00a0The Chinese have piled their savings into real estate…<\/p>\n The India Nifty begins its plunge\u2026 <\/p>\n The CNX Nifty gapped beneath both Short-term and Intermediate-term support and closed beneath them last week. \u00a0The loss of near-term support is ominous and the potential loss of Long-term support at 5964.46 could be deadly for India stocks.<\/p>\n (ZeroHedge<\/a>) \u00a0India’s recently crowned central bank head (and predecessor of the IMF’s Nostradamal Olivier Blanchard<\/a>), Raghuram Rajan, has not had it easy since taking over India’s printer: with inflation through the roof, and only so much scapegoating of gold as the root of all of India’s evils, Rajan announced an unexpected 50 bps interest rate hike two days ago in an attempt to preempt the massive EM capital flight that has roundhoused Turkey, South Africa, Hungary, Argentina and most other current account deficit emerging markets. Whether he succeeds in keeping India away from the EM maelstrom will be unveiled in the coming days, although if last summer is any indication, the INR has a long way to fall.<\/p>\n The Banking Index closed at its Trading Channel trendline.<\/p>\n BKX declined this week to its lower Trading Channel trendline and Intermediate-term support at 67.29. \u00a0A break beneath these supports would do serious damage to the uptrend. \u00a0The Cycles Model suggests a new low may be seen in a little less than three weeks.<\/p>\n (ZeroHedge<\/a>) \u00a0It would appear the fears of a global bank run are spreading. From HSBC’s limiting large cash withdrawals (for your own good)<\/a>\u00a0to Lloyds ATMs going down, Bloomberg reports that\u00a0‘My Bank’ – one of Russia’s top 200 lenders by assets – has introduced a complete ban on cash withdrawals until next week. While the Ruble has been losing ground rapidly recently, we suspect few have been expecting bank runs in Russia.\u00a0Russia sovereign CDS had recently weakned to 4-month wides at 192bps.<\/p>\n (ZeroHedge<\/a>) \u00a0The biggest problem facing European banks – one we highlighted\u00a0most recently yesterday\u00a0<\/a>when we showed the latest 20% surge in Spanish Banco Popular Non-Performing Loans to a fresh record – and one we have been\u00a0covering since 2010<\/a>, which as of\u00a02012 amounted to some $4.5 trillion\u00a0<\/a>that needs to be “remedied” – is the staggering amount of bad debt on the books of Europe’s numerous banks, the bulk of which especially in the periphery are cojoined with their sovereign host in an unbreakable bond which despite Europe’s theatrical attempts to sever, only keeps getting stronger.<\/p>\n (ZeroHedge<\/a>) \u00a0A classical economist…\u00a0and\u00a0Harvard professor… preaching to the world that one’s money is not safe in the US banking system due to Ben Bernanke’s actions?\u00a0And\u00a0putting his withdrawal slip where his mouth is and pulling $1 million out of Bank America? Say it isn’t so…<\/p>\n From Terry Burnham, former Harvard economics professor, author of\u201cMean Genes\u201d<\/a>\u00a0and\u00a0\u201cMean Markets and Lizard Brains,\u201d<\/a>\u00a0provocative poster on this\u00a0page<\/a>\u00a0and long-time\u00a0critic of the Federal Reserve<\/a>, argues that the Fed\u2019s efforts to strengthen America\u2019s banks have perversely weakened them.\u00a0First posted in PBS<\/a>.<\/p>\n Is your money safe at the bank? An economist says \u2018no\u2019 and withdraws his<\/p>\n \u201cLast week I had over $1,000,000 in a checking account at Bank of America. Next week, I will have $10,000.\u201d<\/p>\n That’s the question being asked in China, where the murky rescue of a high-yield fund appears to have prevented a default that would have cost investors millions and undermined faith in the country’s financial system.<\/p>\n But the 11th hour bailout by a mysterious third party has raised questions about China’s readiness to let investors pay the price for failed investments and mounting risk in the country’s shadow banking system.<\/p>\n <\/p>\n Have a great week!<\/p>\n <\/p>\n Tony Cherniawski<\/p>\n <\/p>\n Disclaimer: Nothing in this email should be construed as a personal recommendation to buy, hold or sell short any security.\u00a0 The Practical Investor, LLC (TPI) may provide a status report of certain indexes or their proxies using a proprietary model.\u00a0 At no time shall a reader be justified in inferring that personal investment advice is intended.\u00a0 Investing carries certain risks of losses and leveraged products and futures may be especially volatile.\u00a0 Information provided by TPI is expressed in good faith, but is not guaranteed.\u00a0 A perfect market service does not exist.\u00a0 Long-term success in the market demands recognition that error and uncertainty are a part of any effort to assess the probable outcome of any given investment.\u00a0 Please consult your financial advisor to explain all risks before making any investment decision.\u00a0 It is not possible to invest in any index.<\/p>\n <\/p>\n The use of web-linked articles is meant to be informational in nature. \u00a0It is not intended as an endorsement of their content and does not necessarily reflect the opinion of Anthony M. Cherniawski or The Practical Investor, LLC.<\/p>\n <\/p>\n P.O. Box 129 Email: tpi@thepracticalinvestor.com<\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" \u00a0\u00a0\u00a0\u00a0\u00a0 Weekend Update by thepracticalinvestor.com January 31, 2014 — VIX tested mid-Cycle support\/resistance and closed higher for the week. \u00a0This confirms the change in trend. \u00a0It is now due to break through the Triangle trendline near 20.50 and challenge the weekly Cycle Top resistance at 22.05. \u00a0Its ultimate target may be above its … <\/p>\n![\"\"](\"https:\/\/lh6.googleusercontent.com\/2wL10wp2z7P6hYvyin1YSrYKONKIkuVU6c1-_AEVLMQPzwc3kvDxIuoeQQ0JOjs0qYjoF6DK2uWJMsS8wjTLubBmBH7F9SZtMBhsBZEiyMLaCEvlVP7kbcVo7oJRHezfiXM\")
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(CNNMoney<\/a>) \u00a0When is default a good thing?<\/h2>\n
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