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Catching a Falling Financial Knife

Euro Currency XEU Ready to Flash Crash Markets

Stock-Markets / Financial Crash Apr 18, 2013 - 08:37 AM GMT

By: Anthony_Cherniawski

Stock-Markets

XEU has crossed the lower trendline of its Broadening Wedge, potentially triggering its own Flash Crash scenario.  The only support holding it is the Intermediate-term support at 129.92.


The selling in GLD/gold continues.  There are some major player that are trapped here, IMO.  This reminds me that we are now at the point of causa proxima.

Onset of Crisis Causa remota of the crisis is speculation and extended credit; causa proxima is some incident that snaps the confidence of the system, makes people think of the dangers of failure, and leads them to move from commodities, stocks, real estate, bills of exchange, promissory notes, foreign exchange – whatever it may be – back into cash. In itself, causa proxima may be trivial: a bankruptcy, suicide, a flight, a revelation, a refusal of credit to some borrower, some change of view that leads a significant actor to unload. Prices fall. Expectations are reversed. The movement picks up speed. To the extent that speculators are leveraged with borrowed money, the decline in prices leads to further calls on them for margin or cash and to further liquidation. As prices fall further, bank loans turn sour, and one or more mercantile houses, banks, discount houses, or brokerages fail. The credit system itself appears shaky, and the race for liquidity is on.” – Charles P. Kindleberger – Manias, Panics, and Crashes

The SPX has completed a full impulse down and left a Head & Shoulders formation in its wake.  This appears to be an ideal setup, since the next support level comes from the late February low at 1485.11.  This has the potential of setting up yet another Head & Shoulders pattern, if it isn’t already crashing.

It may also trigger the small Orthodox Broadening Top seen in the chart with a target of  1182.00, whose lower trendline is at 1535.00. 

Now we wait ot see whether the retail funds and institutions start their selling at 3:30.

Best wishes,

Regards,

Tony

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Catching a Falling Financial Knife