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Tom Fitzpatrick continues:


“VIX Index:  Has effectively met the reverse head and shoulders target at 28%.  The price action however looks similar to that seen in 2011.  Should this continue, we could be on verge of seeing much higher levels on the VIX Index.


S&P 500:  Breached the 55 week moving average and posted a bearish outside week suggesting lower levels still in this move.  A move to the 200 week moving average at 1,135 is the danger.


Dow Industrials and Nasdaq 100:  Both indices here also posted bearish outside weeks suggesting lower levels ahead. 


DAX Index:  Tested and breached the 200 week moving average.  The Dax/S&P 500 Ratio is on the trend support coming from 2003, and a breach of that would suggest further underperformance of the DAX Index.  We also include a quick update on the Greek and Spanish equity indices, which both look bearish.




VIX Index (see chart above): “The short term reverse head and shoulders target was 28% which has effectively been met now.  There is however quite a concerning picture here where the price action is looking similar to that seen last year before the VIX went up to 48%.”


For KWN readers globally, when Fitzpatrick discusses a dramatic rise in the VIX, that means we will see significant downside action in the stock markets.  Markets tend not to go in a straight line, so we may see some ferocious bear market counter-trend rallies.


“On the way up last year the Index briefly consolidated in the 25% area, which happened again last week (see parallel lines).  The danger here is that if the price action continues to remain similar, we could be on verge of

seeing much higher levels over the coming days and weeks (a negative indication for the S&P 500).




The S&P 500 has broken through the Nov 2011 high and 55 week moving average at 1,283-1,292.  This area is likely to provide resistance now if tested.  Last week we also posted a bearish outside week which was also seen on the Dow Industrials and the Nasdaq 100 (see below).  We have a gap to the 200 week moving average which comes in at 1,135 with horizontal support above there at 1,158.


German DAX Index (See chart below): Closed the 55 – 200 week moving average gap.  The next support comes in at 5,345-66 followed by the 2011 low at 4,965.




Greek Index (see chart below):  Posted the monthly close below the 1992 low of 558 and is making lower lows again this week.  This looks to have been an important break lower and a move to 260 is the danger.  Note that we are already over 90% off the 2007 highs (the chart below is on log scale).




Overall we remain convinced that the dominant trend in major equity indices is down and lower levels will be seen this year. 


Last week’s closes on major U.S. Indices, as well as the similarity to last year’s price action on the VIX Index, suggests the weeks and possibly even the days ahead could be quite concerning.  While U.S. indices look weak, European ones still look worse.”


© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


The interviews with Dr. Stephen Leeb, Don Coxe ($538 billion BMO), Art Cashin ($612 billion UBS) and Rob Arnott (Oversees $100 billion) are available now.  Also, be sure to listen to this week’s line-up of other KWN interviews which include Newmont CEO Richard O’Brien, John Hathaway and James Turk by CLICKING HERE.


Eric King

KingWorldNews.com

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