E An SPX Decline Below Cycle Top Suggests Rally Over

VIX declined to make a double right shoulder to match the double left shoulder of a potential Head & Shoulders formation. The Moving Averages are so low that it may take a break of Long-term resistance at 10.93 to generate a buy signal. A breakout above the Ending Diagonal trendline suggests a complete retracement of the decline from January 2016, and possibly to August 2015. It appears that the Fed had its fingers on the scale all along, as many surmised.

(ZeroHedge)  For years, market watchers and Fed skeptics had warned that the record low volatility "blanket" that has fallen like a pall over the comatose market was the result of Fed actions, both direct or indirect. And while they mostly spoke metaphorically (although back in 2012 we observed a distinct shift in the VIX futs  when the current head of the Fed's trading desk, Simon Potter, replaced Brian Sack), we now have explicit confirmation that the Fed's "short vol" position appears to be rather literal.

SPX Throws Over its trading channel

SPX used its Cycle Top support at 2687.44 to throw over its Ending Diagonal formation. A decline beneath its Cycle Top suggests the rally is over and profits should be taken. Should it break Intermediate-term support and the trendline at 2642.10, a sell signal may be generated. Should that happen, the decline may continue through the month of January.  

(Reuters) - The S&P 500 and Nasdaq were on track to post their best weekly gain in more than a year on Friday, as U.S. stocks extended their new year rally even after December U.S. job growth came in weaker than expected.

The Dow and S&P 500 also were set to register their strongest start to a year since 2013.

U.S. stocks this week have been adding to momentum from last year driven by a series of strong economic reports from across the globe. The passage of a major U.S. tax overhaul last month helped to fuel late-year gains, and the S&P 500 ended 2017 up 19.4 percent.

NDX soars above Cycle Top resistance

The NDX found a base at Short-term support at 6410.72 to rally above Cycle Top resistance at 6528.58 in a throw-over move that may complete the rally.  A decline beneath the lower Diagonal trendline at 6400.00 and Intermediate-term support at 6257.12 may produce a sell signal.    

(Fortune)  In recapping the stock market’s strong performance in 2017, the bulls invariably laud the tech titans as the force that, more than any other, propelled the S&P 500 and the Nasdaq to record after record. It’s chiefly the power of these world champions, the Wall Street crowd crows, that will make 2018 another double-digit winner for shareholders.

For the tens of millions of Americans who rely on index funds, however, the tech explosion may well prove the just the opposite—a heavy drag on their future returns.

High Yield Bond Index pushes higher

The High Yield Bond Index pushed higher all week to start off the New Year. The rally is substantially extended, but a break of the Cycle Top at 191.79 may tell us the rally is over.  A sell signal may be generated with a decline beneath the lower Diagonal trendline at 181.00.

(Bloomberg)  It’s too late in this market cycle to bet on high-yield bonds, according to Morgan Stanley Wealth Management.

So, the $2 trillion money management arm is completely slashing junk bond allocation. True, tax cuts are expected to inject fresh momentum into high-flying stocks, but the boost may be short-lived and mask balance-sheet weaknesses, Mike Wilson, chief investment officer, wrote in a note distributed Wednesday.

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