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Stock Market Breaks Support, Nasdaq Broadening Top Pattern

Stock-Markets / Stock Markets 2011 Mar 20, 2011 - 04:52 AM GMT

By: Anthony_Cherniawski


Best Financial Markets Analysis ArticleThe FDIC Goes Quiet on Closures
The FDIC Failed Bank List announced no failures this weekend.  The total bank failures for the year number 25. There may be a moratorium of thing closures. See the next article.

Fed Says Some of 19 Largest (and most insolvent) Banks Can Resume Dividends After Stress Tests
Bloomberg reports that, “The Federal Reserve cleared some of the 19 largest U.S. banks to increase dividends, buy back shares or repay government aid after “significant improvement” in their capital and the economy.” These are the same banks that got a "pass" to allow them not to use "mark to market" accounting that would reveal their true financial state.
Will there be weeping when bank executives are being carted off to jail for covering up their insolvency? See the next story.

TEPCO Director Weeps After Disclosing Truth About Fukushima Disaster

ZeroHedge says, “The Daily Mail has released a dramatic picture showing the emotional exhaustion of TEPCO managing director Akio Komori who is openly weeping as he leaves a conference to brief journalists on the true situation at Fukushima, following his acknowledgment that the radiation spewing from the over-heating reactors and fuel rods was enough to kill some citizens. "A senior Japanese minister also admitted that the country was overwhelmed by the scale of the tsunami and nuclear crisis. He said officials should have admitted earlier how serious the radiation leaks were.”

Unlike the US, China Orders their Banks to “Fasten the Hatches”

(Bloomberg)  China ordered banks to set aside more cash for the third time this year, judging that inflation remains a bigger threat to the world’s second-largest economy than Japan’s earthquake and nuclear crisis.
Reserve requirements will increase half a percentage point from March 25, the People’s Bank of China said on its website yesterday. The ratio will rise to 20 percent for the nation’s biggest banks, excluding any extra limits for individual lenders.

VIX Surges, then Consolidates.

-- VIX rallied to 30.28 before consolidating at the 61.8% retracement level. Next week's action may take the VIX to the upper trendline of its Broadening Bottom formation.
Within the massive broadening formation is a smaller, Broadening Wedge that suggests the completion of the larger Broadening Bottom formation within a short period of time. Both the Broadening Bottom and Broadening Wedge are reversal formations.
My Cycles model also suggests a melt up above the flash crash high of 48.20.

10 week Support is gone in the SPX.

SPX has left three unfilled declining gaps in the daily charts, a very bearish message. The illusion of the “Bernanke put” may be about to disappear. My weekly Cycles model suggests a decline to 800 may be the next order of business for the SPX.
The disaster in Japan is causing international money flows that are on anticipated by our central banks. Contrary to the reports on CNBC, the Japanese are repatriating assets out of the United States and Europe. The money flows will be evident for all to see in the next week.

The NDX is ready to activate its smaller Broadening Top.

--The NDX has violated the lower trendline of a Broadening Top formation on Wednesday. On Thursday and Friday it made a partial retracement inside formation. It now appears ready to decline below the lower trendline at 2200, which gives a target below the last Summer lows.
The question at hand is whether this decline will activate the larger broadening top that has dominated the 2010 charts. This implies that the current decline is only the beginning of a larger cascade that will take out the March 2009 lows.         

Gold tested its 10 week moving average.

-- Gold declined from its cycle top resistance at 1456.94 to test its 10 week moving average at 1386.12. From there it made a 66% retracement. If it joins in the equities decline, it should take out the 10 week moving average and the two-year-old trendline supporting the gold rally since early 2009. What is intriguing is the Orthodox Broadening Top formation with its trendline near 1300. This calls for a target below the 2010 low at 1044.80, once it is activated.

The illusion of a safe haven and stability in gold may come crashing down with its price when it activates its Orthodox Broadening Top.

$WTIC retraced its initial decline.

-- $WTIC extended its retracement of the decline off the top at 107.34. However, crude is in multiple Broadening Top formations that imply a severe decline is ahead.  
Although the rally is extremely extended, the big picture is that crude may have finished the largest pre-crash formation in its history.

The Bank Index weakens on dividend payouts.

-- Despite the surge in bank stocks after the fed cleared 19 of the too big to fail banks to pay dividends, $BKX closed lower for the week ending. This is the index most susceptible to a Flash Crash.  The Panic of 1907 has some interesting parallels to today. The great San Francisco earthquake of 1906 contributed to market instability as the New York financial institutions were sending money out West to aid in reconstruction.  A further stress on the money supply occurred in late 1906, when the Bank of England raised its interest rates, partly in response to UK insurance companies paying out so much to US policyholders, and more funds remained in London than expected. Could be that the payout of dividends will make the banks weaker?

The Shanghai Index may be ready to exit the triangle.

-- $SSEC declined through Wednesday, then made a 53% retracement. This suggests that the Shanghai index may be ready to decline through its triangle formation next week.
Last week I had suggested that, "It would be no surprise to see the Bank of China raising interest rates on Monday." They were a little slower than I expected and raised reserve requirements instead, but the effect may be the same. They're trying to build a retaining wall around their financial institutions.

USB retested its Broadening Wedge.

-- After making a spectacular break out of its declining Broadening Wedge, $USB pulled back to retest the formation.   In the absence of virtually any other safe harbor, the long bond may surge between 20 and 46% above the broadening wedge formation, according to the Encyclopedia of Chart Patterns (page 87).
The flight quality was evident this week as the situation in Japan worsened. It took the G-7 Yen intervention to dampen the ardor of investors for treasuries. The problem with most interventions is that the effects don't last.

$USD appears to have finished wave (e).

-- $USD may be in the final throes of completing wave (e). This now opens the door for a very strong upward thrust in the dollar. Most analysts can plainly see the lower trendline and have concluded that the break in the trendline is bearish. That is why these weekly charts are so helpful. The longer-term charts show a massive triangle formation that is nearing completion. The message here is very bullish. 

The reversal in the Yen after the G-7 intervention was pretty spectacular. It may be that the reversal in the Euro and the dollar, which are waiting for their Pivot this week, will also be spectacular.

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Anthony M. Cherniawski, President and CIO

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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The Chairman
22 Jul 11, 23:02
Where's Tony?

Hey, anyone know what's happened with Tony?

23 Jul 11, 01:30
Huh Tony

Probably went broke. What a shame:)

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