E VIX On Buy Signal While SPX Consolidates

VIX rose from its Master Cycle low to close above Long-term support/resistance at 11.11.  VIX is now on a buy signal. The inverted Head & Shoulders formation now has a completed right shoulder giving a potential target for the next move higher.  

(Bloomberg)  Volatility roared back into the U.S. equity market as fresh concern about the prospects for tax reform sent the Cboe VIX Index to its biggest surge since August.

In a year that’s been characterized by record calm, Thursday’s two-point intraday jump in the VIX was enough to push it above the average level for 2017. The gauge, which uses options-trading data to measure implied volatility of S&P 500 stocks, still sits below the bull-market average of 18.3.

SPX makes a new high, then consolidates

SPX made a new high on Monday, but spent the rest of the week consolidating above weekly support.  A decline beneath weekly Short-term support and the upper Diagonal trendline at 2541.22 may signal an end to the rally.  A further decline beneath the lower Diagonal trendline at 2500.00 gives a probable sell signal and suggests a much deeper decline may follow.  

(Reuters) - Wall Street declined on Friday as the markets grappled with concerns over delays in corporate tax cuts but a rise in media stocks helped limit the slide.

Walt Disney rose 2.9 percent as the promise of a new film trilogy overshadowed weak quarterly results and struggles at the media company. The stock was the biggest boost on the Dow.

Senate Republicans have unveiled a tax-cut plan that would delay lowering corporate rate to 20 percent by a year and provide small-business owners with a deduction rather than a special business rate.

 NDX stalls near the high

NDX peaked on Wednesday, then made a key reversal on Thursday. The Cycle Top is at 6232.21 while the lower Diagonal trendline and Short-term support are at 6109.29.  A decline beneath that trendline may produce a sell signal.    

(Tumblr)  No 52-week high in the Nasdaq 100 has ever been accompanied by as few advancing stocks as today’s.

As most readers know, we are big proponents of strong breadth, or participation, in signifying healthy markets. When rallies are accompanied by a large swathe of advancing stocks, it is more likely to go further and last longer than those coming on the back of just a relatively few stocks. As such, it was encouraging to see the significant level of participation during the August-October stock market rally. Recent efforts, however, have not been so robust.

High Yield Bond Index closes above Short-term support.

The High Yield Bond Index eased down towards Short-term support at 181.75.  A break of the upper Diagonal trendline and Short-term support may tell us the rally is over.  

(Bloomberg)  Mounting warnings from Wall Street about the aging business cycle in recent weeks are unanimous: downgrade high-yield bonds.

The shift out of junk bonds by investors this week has been getting underway for weeks on the sell side in the form of allocation calls from Goldman Sachs Group Inc., JPMorgan Chase & Co., and Morgan Stanley. Their advice? Pare high-yield corporate debt, an asset class that, unlike growth stocks, is more likely to unravel in the winter of bull markets.

USB falls through Long-term support

The Long Bond rally was stopped at Intermediate-term resistance at 153.61, after which it sold off beneath Long-term support/resistance at 152.57.  The rally attempt appears to have failed, leaving USB to decline through the end of the month. Should it break beneath the neckline of the Head & Shoulders formation, the decline may accelerate quickly.  .  

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