VIX created a bullish engulfing pattern in which the highs and lows exceeded the prior week with a weekly close above last week’s closing high. A buy signal awaits it above Intermediate-term resistance at 10.79, with further confirmation above weekly mid-Cycle resistance at 14.69. It has an inverted Head & Shoulders formation that, when triggered, offers us a potential target for the next rally.

(CNBC)  VIX spikes just aren't what they used to be.

The CBOE Volatility index, or VIX, hit a high of just under 12 early Thursday, its highest level in six weeks. While that may seem like an impressive move, it actually underscores what has been a historically mild year for volatility.

SPX throws over Cycle Top resistance

SPX made a throw over in the last day of the week by probing above its Cycle Top  resistance at 2570.69. It also has closed above the upper trendline of its Broadening Wedge trendline at 2555.00.  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.  

(Bloomberg)  Earnings-day blowups, leverage warnings in China, Apple’s worst rout since August. Oh, and a sixth straight week of gains for the S&P 500.

No matter what happens lately, stocks just keep rising, with record closes piling up in U.S. benchmarks at a rate that is starting to defy precedent. The Nasdaq 100 Index has finished at all-time highs 62 different times this year, on par with the most ever in 1999, while the S&P 500 and Dow Jones Industrial Average are closing in on history, too.

NDX keeps pressing against the top of the Ending Diagonal

NDX rallied a second week at the top trendline of its smaller Ending Diagonal, making an all-time closing high. Short-term support and the lower Diagonal trendline lie at 5987.70. A decline beneath that trendline may produce an aggressive sell signal.    

(EuroPac)  In light of the 30-year anniversary of the Black Monday Crash in 1987 (when the Dow lost more than 20% in "one day", we should be reminded that investor anxiety usually increases when markets get to extremes. If stock prices fall steeply, people fret about money lost, and if they move too high too fast, they worry about sudden reversals. As greed is supposed to be counterbalanced by fear, this relationship should not be surprising. But sometimes the formula breaks down and stocks become very expensive even while investors become increasingly complacent. History has shown that such periods of untethered optimism have often presaged major market corrections. Current data suggests that we are in such a period, and in the words of our current President, we may be "in the calm before the storm."

High Yield Bond Index throws over its Cycle Top

The High Yield Bond Index appears to have made a throw-over above its Cycle Top at 184.13.  A break of the upper Diagonal trendline at 180.00 may tell us the rally is over. This is no time for complacency.

(ZeroHedge)  Stocks are so hot that junk bond managers want in to equity markets. Bloomberg’s Lisa Abramowicz explained the conditioning that’s led to this – simply that the performance rankings of corporate debt funds shows that those which are taking the most risk have, not surprisingly, booked the best performance in 2017. While this involved purchasing lower-rated credit instruments, in some cases, it has meant buying more equities.

Abramowicz cites two funds, firstly the Fidelity Capital & Income Fund, this year’s top-performer in high yield debt. FC&IF steadily increased its equity exposure to more than 20% earlier this year.

USB is back beneath Long-term support

The Long Bond declined from Intermediate-term resistance at 153.64 as it made an inside weekly consolidation.  A buy signal may be made at the breakout at that level. 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 may tell.  

(FoxBusiness)  Benchmark 10-year yield nears 2.40%

Treasury prices tumbled early Friday, pushing yields firmly higher, as the Senate passed a budget bill late Thursday that was seen as a crucial bridge to reforming the U.S. tax code--delivering a further jolt to appetite for assets perceived as risky and away from the safety of government bonds.

The Euro is repelled at Cycle Top resistance

The Euro was repelled its weekly Cycle Top at 118.61 as it consolidates before resuming its decline.  A break of the Intermediate-term support at 117.61 may put the Euro on a sell signal.

(CNBC)  There'll be some big political changes taking place inside the inner chambers of the EU over the next few months, as officials decide who'll take key roles at the helm of the euro zone bloc.

Behind closed doors some names have started to emerge with the incumbents set to step down at the end of the year. The roles up for grabs will be the president of the Eurogroup (which brings together the finance ministers of the 19 countries that share the euro) and the president of the Euro Working Group (a less-known position, which decides the agenda of the Eurogroup).

EuroStoxx  stalls at its retracement high

The EuroStoxx 50 Index made a new retracement high on Wednesday, but closed the week virtualy unchanged. 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.     

(NASDAQ)  The broad-based major European indices closed relatively flat in Friday's trading session as investors favored banks and insurance firms over mining stocks and automotives.

In economic news, the UK's Office for National Statistics ( ONS ) reported that public sector net borrowing (excluding public sector banks) decreased by £2.5 billion to £32.5 billion ($2.9 billion to $38 billion) in the current financial year-to-date (April 2017 to September 2017), compared with the same period last year. It is the lowest year-to-date net borrowing since 2007.

The Yen makes a new retracement low

The Yen appears to have made a new Master Cycle low this week, although higher than the July MC low. The Cycles Model suggests a probable three week-long rally that may break out above the prior highs. A lift above mid-cycle resistance at 89.67 puts the Yen back on a buy signal.  

Nikkei completes a first Super Cycle Wave 

The Nikkei has broken above its Cycle Top resistance at 21289.20 as it completes a doubly indicated period of strength. However, should it consolidate above its Ending Diagonal trendline, it may probe higher in November.  .

(JapanTimes)  Japan’s benchmark Nikkei stock average rose for the 14th straight day Friday, matching its longest-ever winning streak last seen in the early 1960s as a weak yen added to expectations for solid first-half earnings among listed Japanese companies.

The Nikkei 225 average ended up 9.12 points, or 0.04 percent, from Thursday at 21,457.64, its highest close since October 1996. The broader Topix, including all first-section issues on the Tokyo Stock Exchange, finished 0.60 point, or 0.03 percent, higher at 1,730.64.

The Nikkei last scored a 14-straight-day gain in a period between December 1960 and January 1961, when Japan’s economy was expanding rapidly in the run-up to the 1964 Tokyo Olympics.

U.S. Dollar challenges Intermediate-term resistance

After testing Short-term support at 92.68 last week, USD rose to challenge Intermediate-term resistance at 93.36.  A decline beneath Short-term support at 92.68 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 Orthodox Broadening Top formation calls for a breakout beneath the trendline, as indicated by “point 6.”  .  

(Reuters) - The dollar rose on Friday, on track for its biggest daily gain in more than two weeks, as progress on U.S. tax reforms raised prospects of a fiscal lift to the economy, bolstering investor appetite for risk.

The dollar rose to a three-month high against the Japanese yen, at 113.46 yen, and a five-month high against the Swiss franc, touching 0.9846 franc. Traders seek the yen and Swiss franc in times of uncertainty and fear and sell the currencies when they favor riskier assets.

Gold makes a Bearish Engulfing pattern

Gold rallies higher on Monday only to sell off, losing all of its prior week’s gains in a bearish Engulfing pattern.  The rally appears to be complete, or nearly so. It declined under Intermediate-term support at 1281.76, reinstating the sell signal.

(Reuters) - Gold prices fell on Friday after the U.S. Senate approved a budget blueprint that paves the way for tax cuts, causing  stocks, the dollar and bond yields to rise. The Republican-controlled Senate voted by 51-to-49 late on Thursday for the measure, clearing a hurdle for tax cuts that would add up to $1.5 trillion to the federal deficit over the next decade.             

Investors betting on faster economic growth as a result bought riskier assets while bond holders reduced their positions on worries that inflation and federal borrowing could rise.

Crude bounces off Long-term support

Crude consolidated this week while making a retracement high.  A sell signal may be made by crossing Short-term support at 49.72.  A shallow low was made today, but there may be another opportunity for a deeper low next week.  

(OilPrice)  Despite renewed geopolitical risk on the oil market hailing from the Middle East, oil prices were down on Friday morning and set for a weekly loss as profit-taking weighed more on the price of oil than the Iraq-Kurdistan standoff and increased U.S.-Iran tensions.

At 9:55 a.m. EDT on Friday, WTI Crude was down 0.31 percent at $51.35, while Brent Crude was trading down 0.09 percent at $57.18.  Both benchmarks rallied somewhat around noon EST, to $51.59 for WTI and $57.48 for Brent.

“There’s a little bit of profit-taking…The market has really been treading a small range all of this week without any true momentum,” Olivier Jakob, chief strategist at consultancy Petromatrix, told Reuters on Friday.

Shanghai Index consolidates beneath its high

The Shanghai Index consolidated beneath last week’s high where the decline was halted at Short-term support at 3350.76. 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.    

(EconomicTimes)  China stocks fell on Thursday after slightly slower economic growth in the third quarter and soft property sales caused concern the economy will see further cooling.

While the dip in second quarter growth to 6.8 percent from 6.9 percent was in line with economists' forecasts, some investors had bet on a stronger reading after comments by central bank governor Zhou Xiaochuan at the weekend.

Zhou said growth may hit 7 percent in the second half of this year.
 

The Banking Index makes another run for the Broadening Top

BKX made another run at the upper trendline of its Broadening Top formation and Cycle Top resistance at 105.09. There may be some residual strength left next week to complete the job prior to a reversal. If the Orthodox Broadening Top formation is correctly identified, the next level of support may be the mid-cycle line at 79.79.   

(ZeroHedge)  Wells Fargo CEO Tim Sloan received the patented Elizabeth Warren treatment during testimony before the Senate Banking Committee last month when the Massachusetts Senator accused him of sharing in the blame for the bank’s fraudulent sales practices and opined that he ‘should be fired’, echoing comments she made about his predecessor, John Stumpf, a year earlier.

And just as the CEO has been making the media rounds to try to rehabilitate the bank’s battered public image, yet another scandal appears to be breaking - but this time it originated in the bank’s investment banking unit.

WSJ reported that the bank has fired four foreign-exchange bankers amid an investigation into that business by both the bank and regulators.

(NYT)  Udean Murray, a 62-year-old retired telephone operator in Brooklyn, relies on more than a dozen credit cards to make ends meet. Her prescription medication often goes on a Capital One card. She pays for groceries with one from Discover Financial Services.

That’s a risky financial strategy for Ms. Murray, whose only income is Social Security and who struggles each month to make the minimum payments on all her cards.

But it has been a boon for the nation’s biggest banks, which are earning millions of dollars a month on their credit card customers. The four top American banks — Bank of America, JPMorgan Chase, Citigroup and Wells Fargo — together made more than $4 billion in pretax income from their credit card businesses from July through September.

(ZeroHedge)  After weeks of testimony, the fate of former HSBC trader Mark Johnson, who stands accused of orchestrating a massive international front-running scheme that netted his firm over $8 million in illicit profits, has been left in the hands jurors.

Over the past couple of weeks, tidbits of the prosecution's case has made it's way into the media, including reports last week that Johnson used the code phrase "my watch is off" to trigger trading by HSBC traders all around the globe.Meanwhile, as Law360 recently pointed out, jurors also had the opportunity to hear some rather damning recordings of Johnson's phone conversations with traders, including the one below in which he says "I think we got away with it."

(ZeroHedge)  Oct. 19, 1987, was one of the worst days in stock market history. Thirty years later, it would be comforting to believe it couldn’t happen again.

Yet that’s true only in the narrowest sense: Regulatory and technological change has made an exact repeat of that terrible day impossible. We are still at risk, however, because fundamentally, that market crash was a mass stampede set off through viral contagion.

That kind of panic can certainly happen again.