SPX has crossed the neckline of a Head & Shoulders formation and crossed beneath the September 1 low at 1903.07. This move greatly reduces the probability of a sideways or higher consolidation through the end of the month. Lower quarterly statements also imply further selling into the month of October, as investors receive their statements and pull the trigger.

Although the very early part of the window for a potential Master Cycle low begins October 1, day 258 arrives on October 19.

All of the targets on the chart are “Wave 3” targets. What may be hidden in all of this is a potential Cup with Handle with an average target of 1263.20. That takes us back to the June 4, 2012 low at 1266.74. The three-year Ending Diagonal trendline originates there.

Could all of this happen in October? Yes it can.

NDX appears to be capable of challenging its September 1 low, as well.

ZeroHedge reports that NASDAQ Composite has just had its “Death Cross.” The NDX Death Cross is at 4385, so the 50-day Moving Average (currently at 4400.75) appears to be about 15 points above its 200-day MA.

VIX also appears to have broken out above its 26.29 high of a week ago.

The NYSE Hi-Lo also appears capable of declining beneath last Thursday’s low at -346.00.

MUT may have just had a “running correction” Wave 2. This occurs when each successive wave of the correction (both highs and lows) are lower than the previous wave.

ZeroHedge comments, “We have been warning for months that high-yield bonds have decoupled from equity markets, just as they did in 2007/8, and the credit cycle's turning will inevitably flow through to crush the only thing left supporting stock valuations - the irrational non-economic corporate buyback-er. However, as we detail below, time's running out and it’s getting tougher out there for our QE and ZIRP-coddled corporate junk-bond heroes.”

Prepare for the potential ride of your life!

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.

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