VIX challenged its Intermediate-term resistance at 10.18 but closed beneath it  A close above Long-term resistance at 10.98 may 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.  

(WSJ)  U.S. stocks continue to loll along but a few under-the-radar readings reveal simmering uncertainty about some of the market’s best-performing sector groups.

It’s no secret that 2017 is poised to go down as one of the calmest in history. The S&P 500 is riding its third-longest streak ever without a decline of at least 5%, a level typically associated with a pullback, as we noted in our Morning MoneyBeat newsletter Thursday. 

SPX gives up some of its early gains

SPX made a new all-time high on Monday, but saw most of those gains erode over the rest of the week. The proposed pullback may continue through the year-end.  Should it break Intermediate-term support and the trendline at 2571.93, the decline may continue through January.  

(ZeroHedge)  Earlier this week, as Trump's tax reform was finally being voted through Congress, we showed that in a surprising market reaction, total asset returns - those combination of S&P and 30Y Treasurys - saw their biggest two-day drop since last December, a shock which led to one of the biggest declines for risk-parity investors in months.

As of this morning we now know the reason for this steep stumble: as BofA Chief Investment Officer Michael Hartnett writes in his latest, and last for 2017, Flow Show report US tax reform passage was greeted by near-record redemptions across key asset classes, with $14.5 billion withdrawn from equities- the largest redemption since Brexit - and a further $3.2bn from bonds, the largest in 52 weeks, and even a modest $0.4bn was pulled from gold funds.

NDX throws over Cycle Top resistance

The NDX did likewise, closing the week above its Cycle Top support/resistance, but with a small loss.  A decline beneath the lower Diagonal trendline at 6200.00 and Intermediate-term support at 6189.56 may produce a sell signal.    

(ZeroHedge)  Do you ever feel like you’re being watched when there’s nobody else around?

Decades ago, if the answer to that question was ‘yes’, doctors might’ve advised you to see what they called a headshrinker. But technological progress has a funny way of turning situations on their head. For example, at the turn of the 20th century, everybody had horses - but only the wealthy had cars.

Today, everybody has a car: but only rich people have horses.

The same principle applies to surveillance: If you don’t believe you’re being spied on constantly, then you should probably have your head examined.

High Yield Bond Index surges higher

The High Yield Bond Index continues to make new highs without a major pullback since May.  A break of the Cycle Top at 189.54 may tell us the rally is over. A sell signal may be generated with a decline beneath the lower Diagonal trendline at 180.00.

FinancialTimes has an article worth reading concerning corporate bonds.

UST declines to the neckline

The 10-year Treasury Note Index made a long-overdue Master Cycle low at a potential Head & Shoulders neckline.  The Cycles Model now suggests a potential rally through mid-January that may be quite strong. Should the rally materialize, the minimum target may be mid-Cycle resistance at 127.23 or higher in a panic situation.  

(CNBC)  U.S. government debt yields rose on Wednesday after the U.S. Senate and House of Representatives passed a sweeping tax bill.

The yield on the benchmark 10-year Treasury note rose to 2.497 percent at 2:50 p.m. ET, while the yield on the 30-year Treasury bond was up at 2.876 percent. Bond yields move inversely to prices.

Earlier, the 10-year yield hit a high of 2.503 percent, its highest level since March 20 when the 10-year yielded as high as 2.513 percent.

The Euro may be testing support

The Euro rose above Intermediate-term support at 118.17. The Euro is gaining strength and should be moving higher.      

(Reuters) - The euro slipped against the dollar on Friday after Catalan separatists won a regional election, prompting worries about the possible break-up of the euro zone’s fourth-largest economy.

Spain’s government had hoped that the Catalan election would strip pro-independence parties of their control of the regional parliament and end their campaign to force a split. But with 96 percent of ballots counted in a vote to elect Catalonia’s regional parliament, separatist parties are seen winning 70 seats out of 135.

EuroStoxx  weakens near Long-term support

The EuroStoxx 50 Index challenged the Broadening Wedge trendline and Long-term support at 3527.63 again. A stumble here has the potential to set off a cascading decline into motion through the end of the year.  It appears to be running out of time as a new Master Cycle low is due in the next week or two.

(NASDAQ)  European stocks slipped on the last trading day before the Christmas holidays Friday, with Spanish lenders being the biggest decliners after pro-independence parties secured a majority in Catalonia's regional elections, which is expected to rekindle uncertainty over the region which declared independence two months ago after a referendum deemed unconstitutional by Spain.

Risk assets took "a knock following the Separatists' narrow victory in the Catalonia poll yesterday," Chris Beauchamp, chief market analyst at IG, said by e-mail. "2017 saw a number of political risk events, but none have been quite as interesting or as durable as the Catalonian issue. This, perhaps more than Brexit, threatens to be the problem to watch in 2018."

In economic news, France's rate of Q3 economic growth was revised higher. Gross domestic product ( GDP ) rose 0.6% from the previous quarter, rather than 0.5% estimated in November, France's statistics office Insee said. The rate of expansion was the same as in Q2.

The Yen consolidates beneath resistance

The Yen declined back beneath Short-term support/resistance at 88.55 in a small retracement. The Yen may rally back through the support/resistance cluster to new highs. There may be a lot of stored up energy waiting to be put to use.  

(Bloomberg)  Yen analysts in Tokyo pretty much agree: the outlook for U.S. economic growth and interest rates will determine where Japan’s currency goes next year. And that’s where the consensus ends.

As with U.S. economists, Japanese currency strategists are divided on whether a strong American job market will propel inflationary pressures that finally send 10-year Treasury yields climbing. If they do, a widening U.S. yield advantage is seen lifting the dollar. Another year of disappointment would bring a stronger yen. A survey of nine forecasters by Bloomberg showed estimates ranging from 105 to 120 yen per dollar for year-end 2018. The exchange rate was at 113.14 on Wednesday.

Nikkei bounces off  its Cycle Top

The Nikkei has been using its Cycle Top support to stay elevated, but has not made a new high since early November.  A break beneath the Cycle Top and Short-term support suggests the rally is over and may produce an aggressive sell signal. Confirmation comes at the crossing of the lower Diagonal trendline near 21000.00.

(Reuters) - Japan’s Nikkei share average was flat on Friday morning as gains in commodities trading houses offset weakness in drugmakers, while Kobe Steel stumbled after it said senior executives were aware of data tampering.

The Nikkei was flat at 22,869.58 in midmorning trade. For the week, it has gained 1.4 percent so far, the biggest weekly percentage gain in more than a month.

The pharmaceutical sector tumbled 1.6 percent and was the worst performer on the board, after Eisai Co dived more than 16 percent on news an Alzheimer drug it is jointly developing failed to meet its mid-stage trial goals.

U.S. Dollar declines beneath Intermediate-term support

USD declined beneath Intermediate-term support/resistance at 93.18, confirming its sell signal. The Cycles Model calls for a a probable continuation of the decline with a likely termination at “point 6.”  The next significant low may not occur until early February.

(SeekingAlpha)  2017 was not a good year for the US dollar, although people believed at the start of the year that the opposite would occur.

However, economic conditions were not seen as the cause of the decline in the value of the US dollar as political considerations appeared to dominate the scene.

It seems as if the market is now looking for reasons for the US dollar to decline, and this will create an underlying softness in the market throughout 2018.

Looking forward to 2018, my impression is that the market favors US dollar weakness and will find any reason it can for moving the value of the US dollar lower. This is just the opposite of what the situation was in 2016. During much of the year, it seemed to me that traders leaned on any reason for dollar strength to bid the value of the US dollar up.

Gold challenges Short-term resistance

Gold continued its bounce to challenge Short-term resistance at 1274.00.  The Cycles Model suggests up to another possible week of strength before reversing back down.  

(KitcoNews) - A U.S. dollar struggling to find momentum and last-minute tax selling in record-breaking equity markets could help push gold higher next week in what likely will be a quiet holiday trading period, according to some analysts.

Not only is gold benefiting from a weaker U.S. dollar, but a collapse in Bitcoin, which at one point Friday was down more than 40% on the day, is another major headwind removed from the gold market.

Heading into the Christmas holiday weekend, gold futures have pushed to a more than two-week high. February gold futures last traded at $1,278.20 an ounce, up 1.6% since last Friday. This is yellow metal’s second consecutive positive weekly close.

Crude is riding on Short-term support

Crude rose modestly while riding Short-term support at 57.05 again this week, closed above it. Oil’s period of strength may be over but a new trend has yet to be established. It appears that Cyclical strength may last another week.

(OilPrice)  The number of active oil and gas rigs rose this week, according to Baker Hughes data, increasing by 1 rig, for a total of 931 rigs currently in operation in the United States—278 rigs above this time last year.

The number of oil rigs in the U.S. stayed the same, while the number of gas rigs climbed by 1. The number of oil rigs stands at 747 versus 523 a year ago. The number of gas rigs in the U.S. now stands at 184, up from 129 a year ago.

For Canada’s part, the number of oil and gas rigs fell hard, by 28 rigs, with gas and oil rigs each falling by 14.

Shanghai Index bounces on Long-term support

The Shanghai Index bounced at Long-term support at 3258.53 in a brief spell of strength that may not last.  The Shanghai Index appears to be on a sell signal. The predicted bounce is over. The Cycles Model suggests that the decline may resume through early January.  The potential for a sharp sell-off rises as the next levels of support are breached.   

(ZeroHedge)  Here we go again...

On December 8, we lamented how every few days we return to the subject of systemic risk in China related to its big four highly-indebted conglomerates, HNA, Anbang, Evergrande and Dalian Wanda. We also noted how our chief source of concern had become HNA, after it issued a bond with less than one year to maturity with the extortionately high coupon of 9%. And S&P downgraded HNA’s credit rating from b+ to b, five levels below investment grade. The reason for our continuing focus on HNA is its $28bn of short-term debt which matures before the end of next June, much of it accumulated during a $40 billion binge of acquisition-driven growth which saw it become a major shareholder in Deutsche Bank, Hilton Worldwide and others.

The Banking Index stalls beneath its Cycle Top

BKX made a marginal new high beneath its Cycle Top resistance at 109.98, but appears to be losing strength.  A decline beneath that trendline at 105.00 suggests the rally is over. A further decline beneath Intermediate-term support at 100.02 may give a sell signal. If the Orthodox Broadening Top formation is correctly identified the next move may be beneath mid-Cycle support at 82.35.

(ZeroHedge)  The latest confirmation that the US consumer is now effectively tapped out came moments ago when the Dept of Commerce reported that in November, Personal Income rose by a lower than expected 0.3% (exp. 0.4%), while US consumers continued to splurge at an accelerated rate, with personal spending rising 0.6%, above the 0.5% expected, as Americans decided to splurge on holiday products and services.

However, and speaking of savings, therein lay the rub, because as Americans splurged in November - and much of 2017 - the personal savings rate continued to decline, and in the latest month it tumbled from 3.2% to 2.9%, the lowest since November 2007, which as a reminder is one month before the recession started.

(ZeroHedge)  With Republicans in Washington D.C. on the verge of passing their first major piece of legislation in the form of comprehensive tax cuts that will allow Americans across the income spectrum to keep a little more of their hard earned cash in 2018, it appears as though eager U.S. consumers may have already "pre-spent" their savings on their credit cards. 

As the folks at Gluskin Sheff point out, 13-week annualized credit card balances in the U.S. have gone completely vertical in the last few months of 2017 which should make for some great Christmas gifts for little Johnny and Susie...gifts that will undoubtedly find themselves tucked away in a dark closet, never to be seen again, by mid January.

(CNBC)  Credit Suisse and Canaccord Genuity joined a growing list of top Wall Street banks that have raised their 2018 outlooks for U.S. equity markets before the year has even started.

The two echoed peers in citing the Republican tax bill in adjusting their S&P 500 targets higher, with a reduced corporate tax rate expected to buoy earnings for scores of the nation's largest companies more than they expected when hatching their initial 2018 outlooks.