Stock Market Breaks Neckline, Gold Trending to Below $1200

By: Anthony_Cherniawski

U.S. stocks fell, extending the market’s first quarterly retreat in more than a year, after Moody’s Investors Service’s warning that it may downgrade Spain snuffed out an earlier rally.

The Standard & Poor’s 500 Index fell 1.1 percent to 1,030.11 at 3:45 p.m. in New York. It has declined 12 percent since March 31, breaking a four-quarter winning streak that drove the benchmark index for U.S. stocks up 47 percent. The Dow Jones Industrial Average fell 115.44 points, or 1.2 percent, to 9,754.86.

Bill Fleckenstein Says You Can't Trust S&P PE Multiples As All The Financials' Earnings "Are Pure Nonsense"

A casually dressed Bill Fleckenstein was on Bloomberg TV bursting assorted myths and bubbles. First, Bill discusses how the market is no longer a discounting mechanism, noting that "after having completely ignored the bursting of the dot com and the real estate bubbles, I think this a function of the fact that since Greenspan took over the Fed and serially bailed out bigger and bigger problems with more and more easy money, the market evolved into much more of a speculative casino, and a lot more momentum type traders began to operate and everything always resolved itself on the upside... We have had much more of a speculative market that seems not to discount problems."

Goldman Technician Says To Short Market Unless S&P 1083 Is Recovered Today

(ZeroHedge) …we present the following piece of technical analysis from Goldman's Tony Pasquariello. According to the technician, a critical level to watch is the 12-month moving average, which many consider a critical indicator of upward (or downward momentum). According to Goldman, "unless S&P recovers the 1083 level today, we will have crossed down and through the moving average. On this simple basis, the technical signal is to be short the market." Do you think Goldman was already short?

VIX retested intermediate-term Support.

-- VIX retested intermediate-term Trend Support at 31.51 before closing higher today. This is clearly the beginning of a third wave, where Head & Shoulder necklines and Broadening Top trendlines are taken out. Count on it. The CBOE Put-Call Ratio for equities ($CPCE) stayed neutral at 1.04, as retail investors awake from their lethargy. The pros relaxed a little as $CPCI drifted to 1.04 at the end of the day. The 10-day average remains bearish at 1.38. The NYSE Hi-Lo index closed up 29 points today to -69. The Hi-Lo index remains in bearish territory.

SPY closed below its Head & Shoulders Neckline.

Action: Sell/Short/Inverse -- Talking heads and many newsletter writers are waking up today to a new market as SPY closed below its neckline. I still cannot figure out why there was so much reluctance to call it a bear market. SPY didn’t cave below 104.00 until 3:00 pm when the big players took the field. From that point forward, volume spiked and selling began in earnest. Yesterday I suggested that, “The mood in the market does not support a rally at this time.” Now that the end of quarter is behind us, we can expect downside acceleration as early as this overnight session.

QQQQ is heading for its own neckline.

Action: Sell/Short/Inverse -- QQQQ now has its own Head & Shoulders neckline in sight. The lower trendline of the Broadening Top also has the ingredients for a neckline of a large Head & Shoulders pattern. If the pattern is followed through, the new target for this decline is 31.57. By the way, the average decline once the Broadening Top is violated is also 31.57. ICI reports the eighth consecutive week of equity fund outflows. I wonder why?

XLF is now at its neckline.

Action: Sell/Short/Inverse -- XLF managed to close just above its Head & Shoulders neckline today. There is a good probability of taking out the neckline tomorrow, which leaves the lower trendline of the Broadening Top formation. Not surprisingly, both patterns have identical targets.

FXI closed below intermediate-term Trend Support.

Action: Sell/Short/Inverse -- FXI closed just below intermediate-term Trend Support/Resistance at 39.17. My model now confirms a downtrend, since all uptrend support has been taken out. The retracement rally from May 6th took an unusually long period of time, which doesn’t leave a lot of room for a decline by Monday, its next potential Trading Cycle low. Is China taking a turn for the worse? $SSEC closed at 2398.37 in what appears to be a bearish flag. The giant triangle that I have been following may have failed. I will reassess the pattern sometime next week.

GLD spends a second day at retracement levels.

Action: Sell/Short/Inverse (partial) -- GLD broke its intermediate-term Trend Support at 119.79, then rallied a second day, falling short of its 61.8% retracement level. I have a high confidence pattern on the break of the trendline, so my view hasn’t changed. I have recommended a partial short position, since this is a Broadening Formation and the pattern is not yet certain. We will add more short ETFs to our position when the share price closes below 119.80.

USO broke below intermediate-term Support.

Action: Sell/Short/Inverse -- USO broke and closed below intermediate-term Trend Support/Resistance at 34.04 today. You may be surprised to hear that the next target in USO is 18.00. (Bloomberg) Hurricane Alex picked up strength as it bore down on the energy-rich region of southern Texas and the western Gulf of Mexico, closing oil and gas platforms and ports from Corpus Christi, Texas, to eastern Louisiana.

Still cautious on TLT.

Action: Caution, no new positions -- There are several ways with which to view the pattern in TLT. All of them say we are in a topping process. Admittedly, it is still above its shortterm Trend Support at 98.60. There are arguably five waves up from the end of the triangle formation, but the last wave appears to be extending. In addition, I am expecting a Primary Cycle bottom in about two weeks. The next pivot in TLT is on Friday.

UUP closed above short-term Trend Support.

Action: Buy/Long -- UUP slipped in early trading, but managed to close above short-term Trend Support/Resistance at 25.02 today. The action shows that a much needed reversal pattern was put into play today. The action in UUP implies something dramatic is about to happen in the financial world. I am clueless, so far, but we will know when we see it. Tony

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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

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