E VIX Hits Another Low As SPX Attempts New Highs


VIX appears to have made its final decline to a new low on May 9. This may be the Super Cycle low in volatility.  A reversal is now overdue. An actual change in long-term trend may occur above the top trendline of the 16-month long Ending Diagonal formation near 17.50.  

(Bloomberg)  The most profitable short trade in town has been a gift that keeps giving. To be precise, it’s had an eye-popping surge of more than 4,000 percent since the start of the bull run in 2009. That allure has been enticing investors to jump on the gravy train.

That gift -- selling volatility -- is so crowded now that when everyone reaches for the exit, it’s bound not to end well.

SPX makes a new high

SPX Made a new all-time high on Tuesday, barely 3 points higher than the March 1 top and two days past a Pi Cycle from the Brexit low.  The Cycle appears to be overdue for a reversal. The DJIA does not confirm the new SPX and NDX highs. The risk parity model which has been a major driver of this rally appears to be losing its energy.  

(CNBC)  CNBC's Mike Santoli spoke with Arnott in an exclusive interview for CNBC PRO. Santoli asked the fundamental indexing pioneer about his market outlook.

"Our global asset allocation work is giving some pretty stark indications. We like to look at what we call a Shiller PE ratio, price relative to 10-year smoothed earnings. U.S. is at 29 times earnings. The markets have been higher than those levels twice in history, the tech bubble and 1929. That's not very pleasant company to keep. I'd be very worried about US equities," Arnott said.

 NDX also makes a new all-time high

NDX posted another new all-time high on Tuesday.  It is clearly on an extension with earnings playing a big part of the ebullience. Wave relationships suggest that Wave 5, at 150% the length of Wave 1, may be complete.  A decline beneath Short-term support and the trendline at 5482.46 may suggest a deeper correction is in order.  

(WolfStreet)  Over the past 10 weeks – so since March 1, 2017 – five stocks in the S&P 500 index have gained a total of $260 billion in market value, the infamous FAANG stocks: Facebook, Apple, Amazon, Netflix, and Google (now Alphabet).

By any measure, $260 billion is a massive surge in valuation for just five stocks, or 1% of the S&P 500, in just 10 weeks.

And the rest of the S&P 500? On March 1, the index closed at 2,394. Today it closed at 2,397. In those 10 weeks, it went absolutely nowhere. Which means this: the remaining 495 stocks in the index lost as much in total market capitalization as the FAANG stocks gained.

High Yield Bond Index ready to challenge long-term support

The High Yield Bond Index declined toward long-term support at 163.07, the last bastion of defense against a bear market. It remains on a sell signal.  Should MUT decline beneath Long-term support, the Cycles Model suggests accelerated weakness ahead that may last through the end of May.  

(FoxBusiness)  Global bonds have been roiled by improving growth prospects, but in one of the riskiest parts of the market, junk-rated credit, yields are still falling to all-time lows.

That has left this market looking expensive to some investors, particularly given the potential for central banks to tighten monetary policy and trigger a selloff.

In Europe, yields on junk-rated bonds hit their lowest level on record this week. U.S. high yield is also outperforming other bonds, with yields falling toward the lows reached in mid-2014.

USB at multiple supports

The Long Bond has slipped beneath Intermediate-term (150.74) and Short-term support at 151.28, closing just beneath both of them. USB made a Master Cycle low on Thursday as the Treasury finished its quarterly refinancing. USB is due for a period of strength over the next 2-3 weeks. The mid-Cycle resistance at 158.31 appears to be the target, but it may go higher.  

(ZeroHedge)  One day after the ugliest 10Y auction in a long time, the US sold $15 billion in 30Y paper in what was yet another "deplorable" bond auction.

The refunding stopped with a sizable tail, with the high yield printing at 3.05%, 1.3bps wide of the 3.037% When Issued, with a light bid/cover, and small buyside takedown. Indirect bidders took down 59.1% of the auction today, and Direct bidders took down 5.3% of the auction.

The high yield of 3.05% was above last month's 2.938% in April but below the 3.17% in March. It also tailed the When issued at 1pm.

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