VIX bounced at the 2-year Ending Diagonal trendline at 12.50 again, closing at the confluence of Long-term and mid-Cycle support/resistance.  The VIX may be on a buy signal, or very near one. Re-crossing the mid-Cycle resistance at 13.56 confirms the VIX buy signal.

(ZeroHedge)  The VIX may struggle to move much lower than current levels - and may signal limitations to further stock market gains.

Some folks argue that technical analysis cannot be applied — and therefore should not be attempted — on volatility markets. We actually used to be in that camp but, given the evidence we’ve observed over time, we have changed our tune. We think support and resistance levels, particularly via trendlines, have been readily identifiable on many occasion. And one pretty significant signal in that regard may be in the works at the moment.

SPX between trendline resistance...and trendline support

This week SPX rallied up to its 2-year trendline at 2740.00 on Monday, but declined to its 7-year trendline and Intermediate-term support at 2700.00 at the end of the week.   It has the potential of creating a sell signal by declining beneath 2700.00 next week.

(Bloomberg)  One week doesn’t make a market cycle. Investors who just poured almost $9 billion into U.S. equities can take comfort in that.

Not that this was such a bad one. Small-cap stocks, in particular, acquitted themselves well, even as 10-year Treasury yields soared to a seven-year high. But for most companies, the specter of rising rates was too much to bear, and the S&P 500 Index had its biggest drop since early April.

In a bull run powering through its 10th year, market timing has become an onerous task. One week stocks are climbing to reflect a stellar pace of earnings growth. The next they’re in the red as yields jump and trade talks with China stall. The cost is less to the wallet than the psyche, after two years of uninterrupted gains.

“It’s really more of a no man’s land area, is how I look at this -- in other words, not definitively good or bad,” said Jason Browne, chief investment strategist at FundX Investment Group. “It’s too early to fully jump on board, for lack of better way of putting it.”

NDX also repelled at the trendline

The NDX also tagged its 2-year trendline, making a 73% retracement of its decline.  A decline beneath Intermediate-term support/resistance at 6756.36 restores the sell signal.  Declining through Long-term support at 6555.93 confirms the sell signal.

(ZeroHedge)  Forget MAGA, it's a MANA market in 2018...

Since the start of the year NYSE's FANG+ Index has massively outperformed the broad market...

With Information Technology accounting for 97% of the S&P 500's total return performance YTD...

However, as S&P Dow Jones Indices' Howard Silverblatt tweeted today, it gets even more concentrated, forget FAANG+, FANG, it's MANA that matters as just four stocks - Microsoft, Apple, Amazon, and Netflix - were responsible for over 68% of the S&P 500's total return through Monday.

High Yield Bond Index fails at Intermediate-term resistance

The High Yield Bond Index challenged the two-year trendline and Intermediate-term resistance at 189.32, but couldn’t hold either by the end of the week.  MUT is now on a sell signal. The next area of support is Long-term support at186.59, but it may not hold, since the rallies are getting progressively weaker.  A broken Diagonal trendline infers a complete retracement to its origin.

(MauldinEconomics)   Last week, I mentioned an insightful comment my friend Peter Boockvar—CIO of Bleakley Advisory Group—made at dinner in New York: “We now have credit cycles instead of economic cycles.”

That one sentence provoked numerous phone calls and emails, all seeking elaboration. What did Peter mean by that statement?

In an old-style economic cycle, recessions triggered bear markets. Economic contraction slowed consumer spending, corporate earnings fell, and stock prices dropped. That’s not how it works when the credit cycle is in control.

UST probes its Cycle Bottom, but closes above it

The 10-year Treasury Note Index probed its Cycle Bottom at 118.58, but closed above it. This is a potential reversal pattern that may indicate a Cycle low has been made. If so, we may see UST rally back to the Head & Shoulders neckline at 123.00.  

(ZeroHedge)  Observing the eurodollar system as I’ve done for so many years, you have to be prepared for curve balls thrown at you. Just when you think you’ve got it clocked (sometimes literally), something changes and it all gets tossed out the window.

About a month ago, the Federal Reserve reported a sharp drop of UST’s in custody on behalf of foreign agents. I noted then, and remain convinced now, that was something like a collateral call. It happened the week of April 18.

Not surprisingly, the same data shows over subsequent weeks the amount of UST’s in custody continued to decline sharply. The four-week total (through the week of May 9, the latest available) is about -$66 billion. That’s an enormous drop, a level in the same class as other episodes where global liquidity problems were obvious.

The Euro makes a deeper low

The Euro appears to have extended its Master Cycle low for a second week. In all probability, today may have been the final low for this Cycle. It now has the capability of a rally back to its Cycle Top at 125.25 over the next three weeks.  

(Bloomberg)  Euro bulls are keeping the faith.

The shared currency is headed for its worst run of weekly losses in more than three years, weighed down partly by speculation that Italy’s populist parties may seek a 250-billion euro debt writeoff. While the euro may be in for some more turbulence in the near term, analysts see its bullish trajectory being largely intact on optimism the euro-area economy will pick up momentum, leaving the European Central Bank on course to tighten monetary policy.

“It feels like a perfect storm has engulfed euro-dollar of late,” said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA. He maintains a “moderately constructive view” over the medium to long term, seeing $1.26 by the end of the year, in line with an unchanged consensus in a Bloomberg survey.

EuroStoxx extends the right shoulder

The EuroStoxx 50 Index extended its right shoulder to near equality with the left shoulder and a 74.8% retracement.  Last week’s comment that, “…it may have another day or two early next week to prove the rally is over.” was prescient. It lurched higher on Thursday, making its final high on Friday morning.

(MarketWatch)  European stocks on Friday retreated from an almost-four month high as uncertainty about Italian politics contributed to a downdraft in a market already jittery over trade tensions between global superpowers China and the U.S.

What are markets doing?

The Stoxx Europe 600 index SXXP, -0.28% closed 0.3% lower at 394.67, breaking a three-day winning run. On Thursday, the pan-European benchmark ended at its highest level since Jan. 30, buoyed by a rally for oil-related companies.

For the week, the Stoxx 600 scored a 0.6% gain.

The Yen makes a Master Cycle low

The Yen was rejected at mid-Cycle resistance and made a new low beneath its Long-term support at 90.88.  The Cycles Model now suggests that a bounce may develop over the next two weeks. A likely target may be Intermediate-term resistance at 92.95

 (Xinhua) -- Tokyo shares closed higher on Friday as a weak yen versus the U.S. dollar lifted exporter issues, with the market mood also buoyed by potentially easing global trade issues.

The 225-issue Nikkei Stock Average added 91.99 points, or 0.40 percent, from Thursday to close the day at 22,930.36.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, gained 6.88 points, or 0.38 percent, to finish at 1,815.25.

The yen's softer tone against the U.S. dollar saw investors snap up export-related issues, helping push the Nikkei index to a three-and-a-half-month closing high.

Exporters' profits when repatriated from overseas and their overall competitiveness get a boost when the yen is weak versus its major counterparts, brokers here highlighted.

Nikkei extends the surge

The Nikkei extended its surge to a 65% retracement of its decline form the January 26 high.  A decline beneath the trendline at 22500.00 and Intermediate-term support at 22008.49 renews the sell signal. The potential for a decline to the Cycle Bottom is very high.

(EconomicTimes)  Japan's Nikkei share average rose to a 3.5-month high on Friday and scored its eighth straight weekly gain after a weaker yen lifted exporters, while financial stocks extended their rally as US bond yields remained high. 

The Nikkei gained 0.4 per cent to 22,930.36, the highest closing level since Feb 2. The benchmark index rose 0.8 per cent on a weekly basis to mark the eighth straight weekly gains, the longest winning streak since a nine-week stretch between September and November. 

U.S. Dollar rallies on renewed strength

USD rallied to a new retracement high on Wednesday, making a strong close for the week.  The Cycles Model suggests a consolidation next week, with a possible test of Long-term support at 91.77. USD is still on track to meet its next target at “point 7.”

(Investing) - The dollar gained steam on Friday, reaching a new five-month high.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rallied 0.17% to 93.55 as of 10:50 AM ET (14:50 GMT).

The dollar has surged over 1% this week, as bond yields jumped to a seven-year high. The yield on the benchmark United States 10-Year  Treasury note dipped to 3.078 after hitting an overnight high of 3.126.

The rise in bond yields, along with positive economic data and rising inflation, has boosted expectations that the Federal Reserve will increase interest rates and tighten monetary policy.

The Fed raised rates in March and is expected to raise rates twice more, with some investors expecting a third hike.

Gold breaks down beneath Long-term support

Gold declined through Long-term support at 1307.88 on Wednesday, closing the week beneath it. There is a Head & Shoulders formation (not shown) that implies a target of 1235.00 in the next 4-5 weeks. Crossing the lower trendline and mid-Cycle support at 1277.21 implies a much deeper low may be in store.

(BullionVault)  GOLD PRICES moved in a tight $5 range above yesterday's new 2018 low against a rising US Dollar on Friday, holding a 2.5% drop for the week at $1287 per ounce as Asian stockmarkets climbed back to unchanged and European equities held a half-a-per-cent gain.

The rising Dollar also pushed other non-US currencies down to 5-month lows, with the Euro falling back below $1.18.

.Crude prices stall at the Master Cycle inversion date

Crude made a new high on Thursday at 72.30, but could not surpass the Cycle Top resistance at 72.59. That matched the Cycles Model suggested top for an inverted Master Cycle. A break beneath the Cycle Top and trendline at 66.86 may indicate a reversal is underway.  A further decline beneath Intermediate-term support at 65.30 confirms it.

(ZeroHedge)  For the first time since September, the front-month Brent futures curve has flipped into contango suggesting notable physical supply being added (driving the front-month below the curve) - a sure sign of an oversupplied market.

Despite oil’s surge to near $80 a barrel, some corners of the market that reflect the trading of actual barrels are weakening fast.  That’s in part because for the coming months cheaper U.S. crude is set to flood across the Atlantic, while demand for Brent grades from traditional buyers in Asia has been muted, according to Citigroup Inc. analyst Chris Main.

Oil refiners have plenty of crude at hand right now, with unsold cargoes in north-west Europe, the Mediterranean, China, and West Africa, according to physical traders who asked not to be named discussing market movements.

Shanghai Index extends the bounce above mid-Cycle resistance

The Shanghai Index rose above its mid-Cycle support/resistance at 3165.92 and may challenge Intermediate-term resistance at 3216.16 before reversing. The recent strength is due to run out in a few days. The Cycles Model suggests a lengthy decline, perhaps until mid-June.

(ZeroHedge)  Washington’s renewed sanctions on Tehran supports China’s newly established oil futures, according to analysts, who, as RT reports, say that the sanctions can make the yuan a more preferable currency than the dollar on the oil market.

Since their launch in May, the interest in the renminbi-backed oil contracts has steadily surged. Traded daily volumes hit a record 250,000 lots last Wednesday, and the share of yuan contracts in global trading jumped to 12% compared to eight percent in March and 14% of WTI volume, up from 2% in April.

“The contract is thundering into action,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore, as quoted by Reuters.   “It makes sense for Iran to begin selling oil under contracts denominated in yuan rather than dollars.”

The Banking Index rallies stalls at the 2-year trendline

BKX rallied to the 2-year trendline, but could not overcome it. Thereafter, it pulled back beneath Intermediate-term support at 110.14, leaving a potential sell signal in play. The Cycles Model suggests that the Banking Index may decline through the end of July.

(PBS)  An obscure government database of suspicious financial activity was thrust into the spotlight Wednesday when the New Yorker’s Ronan Farrow reported that key information on Michael Cohen, President Donald Trump’s personal attorney, is missing from the system.

The Financial Crimes Enforcement Network is missing two reports showing Cohen accepted more money in potentially illicit transactions from than was previously known, a law enforcement official told the New Yorker. The official acknowledged leaking the database’s existing reports on Cohen — which were released last week by Michael Avenatti, Stormy Daniels’ lawyer, and showed that Cohen received a payment from a firm tied to a wealthy Russian businessman — out of concern over the missing documents.

(Bloomberg) Buyout titans are benefiting as banks get less fearful about leveraged buyouts.

When Leonard Green & Partners recently decided to buy a majority stake in SRS Distribution Inc., banks led by Bank of America Corp. and Barclays Plc sought loans and bonds to help finance the $3.6 billion buyout. Investors have so far been willing to increase debt for the building supply company to more than seven times a measure of earnings, a level that just a few years ago would have raised regulators’ eyebrows.

That deal isn’t unusual. Debt in leveraged buyouts is creeping above the six times level that regulators said in 2013 was potentially too risky, after commitments to private equity deals scorched banks during and after the crisis. The average company in an LBO had borrowings equal to 6.4 times earnings before interest, taxes depreciation and amortization in 2018, according to Fitch Ratings. Last year it was 6.2 times Ebitda and in 2016, it was 5.9 times.

(ZeroHedge)  Just when you thought that after the last criminal offense by Wells Fargo (which as a reminder was pushing customers into higher-fee retirement accounts), surely there was no way Warren Buffett's favorite criminal organization would be caught again engaging in some even more bizarre criminal activity.

Alas, it was not meant to be as Wells somehow always finds a way, and moments ago the WSJ reported that in the latest scandal involving America's largest mortgage lender, "some employees" in Wells Fargo’s business banking, aka "wholesale" unit and is separate from Wells' retail division, improperly altered information on documents related to corporate customers without their knowledge.