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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Valentines Day Massacre?

Stock-Markets / Stock Markets 2011 Feb 13, 2011 - 06:37 AM GMT

By: Anthony_Cherniawski

Stock-Markets

Best Financial Markets Analysis ArticleThe FDIC Averaging 3 Weekly Closures for Past Year. The FDIC Failed Bank List announced four new bank closures this week. Premier American, based in Miami, acquired Sunshine State Community Bank, the Federal Deposit Insurance Corp. said today in a statement on its website. Lenders in Michigan, Wisconsin, and California also closed, and the four transactions drained $144.9 million from the FDIC’s deposit-insurance fund.


Fannie and Freddie Being Phased Out?
(Bloomberg) The Obama administration’s proposal for reducing the government’s role in housing finance may pit Wall Street against real estate groups as it restructures the $11 trillion mortgage market.

The report released yesterday by Treasury Secretary Timothy F. Geithner offers three options for attracting private capital back into housing finance while shrinking the role played by Fannie Mae and Freddie Mac, the government-sponsored enterprises that have been sustained by U.S. aid since September 2008. The debate over the options may create new sets of winners and losers, according to stakeholders on both sides of the issue.

M2 Grows By $40 Billion In One Week, Hits Fresh All Time High
(ZeroHedge) Just in case someone was confused about the relationship between liquidity, currency devaluation and nominal (not real) asset prices, the St. Louis Fed was kind enough to email us their weekly M2 level. And after last week's surprising drop, M2 once again rose, this time by a whopping $40 billion.

VIX retraced below its 10-week moving average.

--The VIX may have reached its Master Cycle low last week. This low appears to be confirmed by the large divergence in the Stochastics. Weekly Stochastics indicate that momentum may be building for a bullish breakout in the VIX.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 2.5 percent to 15.69 today. The gauge fell to an intraday low of 15.55 at 11:03 a.m., minutes after Mubarak stepped down. That’s close to the three-year closing low of 15.45 in December. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, which rose 0.6 percent to 1,329.15.

SPX closed above Cycle Top Resistance.

SPX has been pushing its weekly Cycle Top Resistance, now at 1336, a little higher each week since the first of the year, but has closed below it each time. It appears that the Master Cycle high may have been made on Friday. Last week’s rally appears to have completed point five of an Orthodox Broadening Top. This is the same pattern that formed just before the Flash Crash in May. The Current Master Cycle normally would see a bottom by February 28th. The risk of a possible Flash Crash is very high.

The NDX closed below Cycle Top Resistance.

--The NDX also closed below its weekly Cycle Top Resistance at 2384.00. This week the NDX broke out of its sideways 4th wave in what appears to be an exhaustion move. The NDX also sports an Orthodox Broadening Top that is clearer than the April top.

…the US markets are due a breather. At the very worst for bulls, the US market will punish the piggishness of this up trend and do it very quickly to trap all bulls at the higher end. At the same time, a flash crash would punish bears because there are few shorts in the market at the moment and very few nimble enough to catch a flash crash in progress and have the balls to ride it down.

Gold caught inside its Diagonal.

-- Gold remains caught inside its weekly Diagonal Formation. It rebounded from its Trading Cycle low which arrived on January 28th and has tested its upper trendline. Gold is also a candidate for a Flash Crash.

$WTIC violated its 10-week moving average.

-- $WTIC violated its 10-week moving average at 89.57 and the 7-month trendline of its Master Cycle. This has the potential of a very steep decline to the lower trendline of the Orthodox Broadening Formation over the next couple of weeks. The Commodities Index ($CRB) appears to have finished its wave 5 rally and may be ready to roll over in a Flash Crash as well.

The Bank Index surges to a top.

--The $BKX appears to have completed the final wave of its rally from the August low while remaining beneath weekly Cycle Top Resistance at 56.24. It formed a probable right shoulder to a massive Head and Shoulders pattern. It is also a prime candidate for a Flash Crash.

On Monday, the FDIC approved a draft rule that would require large financial institutions to hold a minimum of half of senior executives' bonuses for at least three years. This falls in line with what some financial institutions have already started to implement on their own. Morgan Stanley (MS), for example, recently announced that they are extending their bonus deferral program to more of their employees.

The Shanghai Index resumes trading above the 10-week moving average.

-- $SSEC leaped above its 10-week moving average at 2810.25, giving it a buy signal from a Master Cycle low. It also closed above its weekly ½ Cycle Support, giving it the potential to rally above the neckline of an inverted Head & Shoulders pattern over the next couple of months.

The outlook for the Shanghai Index is that the corrective rally to the top of (c) is still in order before its final decline. It appears highly likely that it will rally to its 50% retracement before the final decline in wave C.

USB may be building a base.

-- $USB rallied from its daily Cycle Bottom Support at 117.30 on Wednesday, its Master Cycle low. It is still within its descending Broadening Wedge, which is a continuation formation. Last week I mentioned, “We will know within a few days whether the bottom is finally in.” It doesn’t appear to be much in the weekly chart, but I expect to see a very sharp rally from this bottom.

Yields on 30-year bonds were the highest in 10 months as the amount of bids at the Feb. 10 bond sale was less than the average for the past 10 auctions and the Feb. 8 note sale drew the lowest demand in the category of bidders that includes foreign central banks since May 2007.

$USD marching higher.

-- $USD formed an inverted Head & Shoulders pattern in the daily chart. The neckline at 78.50 was tested this week. Once it rises back above it, the 10-week moving average may be easily overcome and a new uptrend in the weekly chart started.

The greenback gained for a third week against the euro amid speculation Portugal’s funding costs are becoming unsustainable and as Egyptian President Hosni Mubarak stepped down yesterday and handed power to the military. Job data in the U.S. helped boost appetite for the currency.

Regards,

Tony

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Anthony M. Cherniawski, President and CIO http://www.thepracticalinvestor.com

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

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Comments

Marcin Strojny
13 Feb 11, 17:57
pro traders against scribomaniacs

Anthony, whats your point?

"…the US markets are due a breather"

Because Anthony says so, once again and wrongly.

"At the very worst for bulls, the US market will punish the piggishness of this up trend and do it very quickly to trap all bulls at the higher end."

Why on earth? Before the May flash crash last year the price went through the trendline, it was time to get out and many did.

"At the same time, a flash crash"

Well, lets assume that the flash crashes from last year on would occur every spring.

"would punish bears because there are few shorts in the market at the moment and very few nimble enough to catch a flash crash in progress and have the balls to ride it down."

Anthony, the other way around. The price goes up because the shorts move their positions higher. Yeah, you must be very nimble, versatile and wise to sell when the price slumps. click and take profit. Click and take profit.


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