E VIX Extends Corrective Decline; SPX Continues Rally

VIX extended its corrective decline with a weekly low at 9.11, making eight consecutive daily closes beneath 10.00. It is beneath all technical supports and must rise above its Intermediate-term resistance at 10.83 for a buy signal, with further confirmation above weekly mid-Cycle resistance at 14.79. It has an inverted Head & Shoulders formation that, when triggered, gives us a potential target for the next rally.  

(Barrons)  Trading in CBOE Volatility Index options has become a mirror into the collective soul of investors. Even as stocks grind higher, and the Standard & Poor’s 500 index is the least volatile it has been since 1965, an increase in VIX options trading shows investors are having a hard time believing what they are seeing.

As a result, many investors have bought upside VIX calls to hedge stocks, and even high-yield bonds, that the volatility market’s trading pattern is at an extreme.

SPX is in a throw-over

SPX rallied in a throw-over of its 5-year Ending Diagonal pattern.  A decline beneath the upper Diagonal trendline at 2540 may signal an end to the rally.  A decline beneath the Broadening Wedge formation at 2400.00 gives a sell signal and suggests a much deeper decline may follow.  

(CNBC)  U.S. stock index futures pointed to a slightly weak open Friday, after the latest jobs report disappointed Wall Street.

Dow Jones industrial average and S&P 500 futures fell 20 points and 3.25 points, respectively, while Nasdaq 100 futures declined 7.75 points.

The Bureau of Labor Statistics said the U.S. lost 33,000 jobs last month, marking the first contraction in the labor market since 2010. Economists polled by Reuters expected a gain of 90,000 jobs.

Despite the weak headline number, average hourly earnings rose to an annualized rate of 2.9 percent. Hourly earnings are closely watched by investors looking for indications on inflation. The unemployment rate also fell to a 16-year low of 4.2 percent.

NDX rallies to the top of the Ending Diagonal

NDX also rallied this week, making a new high at the Ending Diagonal trendline today. Short-term support and the lower Diagonal trendline lie at 59323.38.  A decline beneath that trendline may produce a sell signal.    

(Bloomberg)  While human analysts are still overwhelmingly bullish on Alphabet Inc. and Facebook Inc., a new robot analyst at Wells Fargo says it’s time to sell. 

Late last month, Wells Fargo analyst Ken Sena introduced AIERA, short for artificially intelligent equity research analyst, a bot that does massive automated grunt work to support human analysts as they track stocks and make trade recommendations. And while analysts are known to skew toward buy ratings, the new bot doesn’t seem to share the bias.

“AIERA’s approach this week appears decidedly more conservative (than last week), as she places a ‘hold’ recommendation on 11 names and even going so far as to place Google and Facebook in the ‘sell’ category,” Sena says in a new note sent out to clients on Friday.

High Yield Bond Index pushing against its Cycle Top

The High Yield Bond Index appears to be pushing at its Cycle Top at 182.90 but could not make a breakout.  A break of the upper Diagonal trendline at 180.00 may tell us the rally is over. This is no time for complacency.

USB closes beneath Long-term support

The Long Bond closed beneath Long-term support at 152.29 to make a potential Master Cycle low this week. A resumption of the rally may be imminent. Should the right shoulder of a potential Head & Shoulders reach proportionality, 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.  

(Bloomberg)  Don’t expect the U.S. Treasury market to go back to “normal” once the Federal Reserve starts reducing its crisis-era debt investments.

At least that’s the message from the likes of Credit Suisse, Goldman Sachs and Pimco.

While the Fed’s quantitative easing suppressed yields and erased the margin of safety which investors have historically needed to own long-term Treasuries, the firms say it isn’t a foregone conclusion the opposite will happen as the central bank reverses course. If anything, that buffer, otherwise known as the term premium, may remain well below its long-run average for years to come.

1 2 3 4
View single page >> |

Disclaimer: 

Nothing in this email or article should be construed as a personal recommendation to buy, hold or sell short any security.  The Practical Investor, LLC (TPI) may provide a ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.