VIX ran up to test weekly Intermediate-term resistance at 10.79, but closed beneath it. A buy signal awaits it above that level, with further confirmation above weekly mid-Cycle resistance at 14.75. It has an inverted Head & Shoulders formation that, when triggered, offers us a potential target for the next rally.

(TheStreet)  Although it is early in the month and a lot can change between now and the 31st, October is on pace to be the least volatile month ever in the S&P. Not surprisingly, the lack of volatility has sucked the life out of the Chicago Board of Options Exchange's (CBOE) volatility index, known simply as the VIX. Likewise, those attempting to go long volatility with inefficient ETF derivatives of the VIX have likely suffered surprisingly painful losses.

SPX tangles with Cycle Top resistance

SPX has been attempting to overcome Cycle Top resistance at 2560.92, to no avail. It also has challenged its Broadening Wedge trendline, but closed beneath it as well. A decline beneath the upper Diagonal trendline at 2545.00 may signal an end to the rally.  A further decline beneath the Broadening Wedge formation at 2450.00 gives a sell signal and suggests a much deeper decline may follow.  

(Reuters) - A surge in technology stocks sent the S&P 500 and the Nasdaq to record highs on Friday, but the gains were kept in check by a drop in banks as Wells Fargo missed revenue estimates for a fourth straight quarter.

Wells Fargo tumbled 3 percent, set for its biggest drop since mid-April, adding to the pressure on bank stocks after results from JPMorgan and Citigroup on Thursday stoked concerns about consumer credit.

NDX pressing against the top of the Ending Dagonal

NDX rallied to the top trendline of its smaller Ending Diagonal, closing under a technical stop at 6102.00. Short-term support and the lower Diagonal trendline lie at 5952.37.  A decline beneath that trendline may produce a sell signal.    

(ZeroHedge)  Despite storms, wildfires, quakes, higher gas prices, and failed Washington policies, Americans are - according to The University of Michigan - their most confident since January 2004.

But we think it's clear what is driving the optimism... total delusion!

Americans have never been more confident that that stock market will rally further in the next 12 months.

High Yield Bond Index reaches parity

The High Yield Bond Index appears to have made a final push to reach parity [Wave (5) equals Wave (1)], a common target.  A break of the upper Diagonal trendline at 180.00 may tell us the rally is over. This is no time for complacency.

(Bloomberg)  The largest European high-yield bond fund is now cutting down on risk as higher interest rates loom on the horizon.

“This is the time you want to be fearful and not greedy,” Sandro Naef, chief executive officer of Capital Four, said in an interview in Copenhagen on Thursday. “You want to have good downside protection.”

USB rallies above Long-term support

The Long Bond rallied above Long-term support at 152.41 as it emerges from its Master Cycle low. An aggressive buy signal may have been made, with confirmation above Intermediate-term resistance at 154.50. Should the right shoulder of a potential Head & Shoulders reach proportionality with the left, the rally may go to 165.00. However, should it go higher, there is the possibility of new all-time highs in USB. The next rally will tell.  

(CNBC)  U.S. government debt yields fell Friday, as investors digested another round of economic data and a batch of speeches set to be given by leading Federal Reserve members.

The yield on the benchmark 10-year Treasury note sat lower at around 2.277 percent at 2:39 p.m. ET, while the yield on the 30-year Treasury bond was down at 2.81 percent. Bond yields move inversely to prices.

The 10-year Treasury note yield neared a session low of 2.273 percent, which would be its lowest level since Sep. 27, when it yielded as low as 2.237 percent.

The Euro challenges its Cycle Top resistance

The Euro challenged its weekly Cycle Top at 118.44 in what may turn out to be a very short bounce before resuming its decline.  A break of the Intermediate-term support may put the Euro on a sell signal.

(MarketWatch)  It’s basic economics that monetary tightening should be bad for bonds but great for the currency.

Expectations that the European Central Bank could move to taper its bond buying program have been swirling for some time, but when a report from Bloomberg News on late Thursday suggested the ECB could halve its asset-buying beginning January, bond prices jumped, pulling down yields. The euro, meanwhile, faced selling pressure, although that was alleviated later by the dollar’s knee-jerk depreciation in response to weaker-than-expected U.S. inflation data.

EuroStoxx  stalls at its retracement high

The EuroStoxx 50 Index stalled near the top of an oversized right shoulder of a small Head & Shoulders formation. The Cycles Model suggests that Stoxx may go into a panic cycle in the very near future.  A reversal has the potential to set a cascading decline into motion over the next two weeks.     

(CNBC)  European stocks finished Friday's session mostly higher, with a strong uptick in commodities helping prop up sentiment on the final trading day of the week.

The pan-European Stoxx 600 ended up 0.29 percent, bouncing back from a dip during afternoon trade. On the week, the Stoxx 600 closed up 0.5 percent.

Looking to major bourses, the U.K.'s FTSE 100 slipped 0.28 percent, while France's CAC 40 ended down 0.17 percent. Germany's DAX however rose 0.07 percent.

The Yen tests mid-Cycle resistance

The Yen tested mid-Cycle resistance at 89.62 as it reverses out of a Master Cycle low. The Cycles Model suggests a possible week-long rally that may break out above the prior highs. A lift above mid-cycle resistance puts the Yen back on a buy signal. 

Nikkei completes a first Super Cycle Wave 

The Nikkei appears to have completed its first Super Cycle advance from its October 28, 2008 low. Last week I commented, “This appears to be a Cycle inversion, which indicates a possible end of a trend.”  That was verified in a much larger manner than I had imagined.

(NikkeiAsianReview)  The Nikkei Stock Average staged a dramatic ascent Friday afternoon, breaking though the 21,000 level for the first time in almost 21 years, despite the lack of any obvious triggers such as a weakening of the yen or remarks by key officials.

The day marked the ninth straight session that the index rose, and in dollar-denominated terms, the Nikkei average also reached its highest in more than 17 years. Foreign investors who had built up short positions in the Nikkei futures market "finally gave up," in the words of a trader at a major securities brokerage, and started buying in the afternoon, looking to limit the risk of incurring losses.

U.S. Dollar declines to Short-term support

USD declined to Short-term support at 92.63 before closing above it. A decline beneath that support activates a sell signal that may lead to a panic decline. The lower trendline of the Orthodox Broadening Top at 90.00 may be the next attractor, but the formation calls for a breakout beneath the trendline, as indicated by “point 6.”  .  

(Reuters) - Treasury yields were lower on Friday after muted underlying U.S. inflation data offset higher gasoline prices and strong retail sales while the U.S. dollar regained ground but was set for its worst week in five.

Stocks on major world markets, however, hit their fourth record high in a row, with Wall Street moving higher as some investors bet the inflation data could curb future rate hikes while others eyed trade discussions and retail data.

Gold tests Short-term resistance

Gold rallied to Short-term resistance at 1306.46. It appears that the Master Cycle low had arrived early on October 6. The rally appears to be complete, or nearly so.  A decline back through Intermediate-term support at 1281.34 reinstates the sell signal..

(Kitco News) - Weak inflation pushed gold to nearly three-week highs Friday and momentum will likely spill over into next week, according to analysts.

Ending a four-week losing streak, the gold market spiked above $1,300 at the start of the North American trading session, in reaction to disappointing Consumer Price Index data. While gasoline prices pushed headline inflation to an annual rate of 2.2% -- the highest reading since April -- core CPI inflation, which strips out energy and food prices, remained unchanged at 1.7%.

This is the fifth month in a row that inflation has remained at the low end of this year’s range, falling from a high of 2.3% seen in January.

Crude bounces off Long-term support

Crude bounced off Long-term support at 49.75, making a 70% retracement of its decline. A sell signal may be made by crossing Short-term support at 49.36. The Cycles Model anticipates a probable two-week decline ahead for the next Trading Cycle low.

(OilPrice)  U.S. crude oil exports hit an all-time high at the end of September, and are poised to surge even more to hit unprecedented levels in the coming two or three weeks, Marco Dunand, chief executive of trading house Mercuria, told the Reuters Global Commodities Summit on Friday.  

U.S. crude oil exports hit a record-high of 1.98 million bpd in the week to September 29, EIA data showed. This was the highest weekly average since the U.S. removed restrictions on crude oil exports at the end of 2015, after a four-decade ban. Oversupply due to Harvey drove the higher exports, but most of all, it is the wide spread of around $6 between WTI and Brent prices that drives buyers to lust after the cheaper U.S. crude grade. The spread is also wide enough to offset shipping costs to destinations like Asia and Europe.

Shanghai Index may be exhausted

The Shanghai Index appears to have had an exhaustion rally on Monday, after investors returned from a week-long holiday. This may also be known as an inversion rally, which was discussed last week. Once the inversion is complete, the potential for a sharp sell-off rises.    

(ZeroHedge)  China is a relatively open economy; therefore it is subject to the impossible trinity.

China has also been attempting to do the impossible in recent years with predictable results.

Beginning in 2008 China pegged its exchange rate to the U.S. dollar. China also had an open capital account to allow the free exchange of yuan for dollars, and China preferred an independent monetary policy.

The problem is that the Impossible Trinity says you can’t have all three. This model has been validated several times since 2008 as China has stumbled through a series of currency and monetary reversals.

The Banking Index retreats from resistance

BKX retreated from its Broadening Top formation and Cycle Top. It ran out of its period of strength last weekend as suggested. If the Orthodox Broadening Top formation is correctly identified, the next level of support may be the mid-cycle line at 79.53.   

(CNBC)  Bank of England Governor Mark Carney said there likely will be an interest rate hike in the UK soon as the central bank seeks to control inflation as the Brexit process continues.

Markets have been expecting the BOE to raise rates a quarter-point in November. While Carney did not confirm an exact time line, he strongly hinted that some tightening is not far off — "in the coming months," as he put it.

"We've been willing to tolerate inflation being over target. We're in relatively rare company with having inflation over target," Carney told CNBC in a live interview from the World Bank/International Monetary Fund session in Washington D.C.

(ZeroHedge)  While in recent days Bridgewater has been in the news not for its investing acumen (or lack thereof), or the outspoken, contrarian views of its founder Ray Dalio, but rather the recent spirited attack by Jim Grant who in not so many words hinted, if not explicitly stated, that there is something very rotten in the state of (Westport) Connecticut, it is still the case that any major investing move the hedge fund... pardon the algo-driven investing hedge fund with no prime brokers and lots of ETFs, makes is sure to result in headlines, and today was no exception, because as Bloomberg reports, Bridgewater has amassed a "$713 million wager against Italian financial stocks, its biggest disclosed bearish bet in Europe."

(CNBC)  Intesa Sanpaolo CEO Carlo Messina has said a multi-million dollar bet against his company is doomed to fail.

The world's largest hedge-fund firm Bridgewater Associates, has mounted a reported $713 million wager against Italian financial stocks. Its biggest bet is calculated to be against Intesa Sanpaolo.

The short position, which aims to profit on a fall in the bank's shares price were disclosed in regulatory filings and reported by Bloomberg on Friday.

ZeroHedge)  As if Theresa May did not face enough challenges, the latest survey from The Bank of England (BoE) suggests the British consumer is about to face the biggest credit crunch since the great financial crisis.

After repeated warnings from BoE about the surging pace of lending to households, British lenders are planning the biggest cutback in consumer loans in nearly 10 years (BoE's quarterly net balance of lenders' expectations for the availability of unsecured lending over the next three months fell to -28.6 from -16.2.)

(ZeroHedge)  Four months ago, when looking at the latest S&P/Experian data, we first reported that credit card defaults had surged the most since June 2013, a troubling development which ran fully counter to the narrative that the economy was recovering and the US consumer's balance sheet was improving.

The troubling deterioration prompted Moody's to pen its own report titled "Spike in Charge-off Rates Indicates a Slide in Underwriting Standards" and as Moody's analyst Warren Kornfelf wrote, the steep increase in credit card charge-off rates in 1Q’17 and 4Q’16 was the largest since 2009, and indicates that "strong underwriting standards in place since the financial crisis have deteriorated, potentially rapidly."