VIX broke above prior highs and challenged its weekly Intermediate-term resistance at 16.91 before falling back beneath weekly mid-Cycle support/resistance at 15.97.  This may indicate a potential buy signal (NYSE sell).  Further confirmation of the buy signal lies with a close above the mid-Cycle resistance and Intermediate-term resistance.

(Bloomberg)  Since its April low, the Chicago Board Options Exchange Volatility Index -- a gauge tracking U.S. equity swings -- has climbed 25 percent through Thursday, beating similar indexes for other asset classes, Bloomberg Tradebook highlighted in a note. While still much lower than at previous peak levels, the VIX’s average this year is the highest since 2011 amid concern over global growth, the timing of Federal Reserve interest-rate increases and lackluster earnings.

SPX breaks its “shelf of support  

SPX broke through its critical shelf of support at 2044.00, then retraced to its Short-term resistance at 2061.11 before the close.  A decline beneath the “shelf of support” may may alert us to a potential sell signal on the SPX regardless of the retracement. Trendlines are important support areas that often attract, then repel the markets.  

(Reuters)   U.S. stocks were higher in early afternoon trading on Friday, with the S&P on track to eke out its first weekly gain in four weeks as technology and financial stocks rose.

The tech-heavy Nasdaq Composite index was up 1.13 percent and was on track to end four straight weeks of losses, boosted by gains in Microsoft and Apple.

The S&P financial sector index rose 0.91 percent as a flurry of comments from U.S. Federal Reserve officials, suggested a possibility of an interest rate hike as early as June.

The index has risen about 2 percent since the Fed released minutes of its April meeting on Wednesday.

NDX consolidates between support and resistance.

NDX broke through Intermediate-term support at 4330.29 but bounced to consolidate between it and Long-term resistance at 4421.20.  This suggests weakness ahead.  The Head and Shoulders formation may be in play once NDX declines through its mid-Cycle support at 4239.96.

(ZeroHedge)  Now that 13-F reporting season is over, we have the data to compile who bought, who sold, and what the top holdings of the largest hedge funds are.

To help in that endeavor, we used the latest Q1 Hedge Fund quarterly ownership highlights courtesy of FactSet. This is what it found:

• Equity Exposure Declines 6.9% in Q1: The top 50 hedge funds decreased their equity exposure by 6.9% in Q1.

• All Ten Sectors Hit with Aggregate Sales: All ten GICS sectors experienced aggregate sales, with the Information Technology, Energy, and Consumer Discretionary groups leading the selloff.

• Top Purchase- Facebook; Top Sale- Apple (AAPL): Facebook (FB) was the largest purchase by the top 50 hedge funds in Q1, while Apple was the largest sale.

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High Yield Bond Index retraces to its cycle top

The High Yield Index completed a retracement to its Cycle Top support at 151.24 after testing new lows.  It may have also completed an important reversal pattern.  This may be construed as a sell signal for High Yield Bonds.  

(MarketRealist) High yield bond issuance activity gained traction last week on improved Market sentiment. According to data from S&P Capital IQ/LCD, dollar-denominated high yield debt amounting to $6.9 billion was issued in the week ended May 13, 2016. It was the fourth-largest YTD (year-to-date). In the previous week, high yield issuance stood at $3.8 billion. The number of transactions increased to 11 last week from five the previous week.

Last week brought the total US dollar-denominated issuance of high yield debt to $60.8 billion in 2016 YTD. This is lower by 46.0% compared to the corresponding period of 2015.

The Euro is testing critical support

    

The Euro declined to its Intermediate-term support at 112.10 prior to its weekly close just above it. A further decline beneath Intermediate-term support suggests a sell signal may be in place for the Euro.

(SovereignMan)  On 23 June 2016, this British citizen will be voting to leave the European Union.To me it’s clear: the EU has not only become too big for its own good, it’s too big to do hardly anything good.Back in 1975 when the UK first confirmed membership in the EU (when it was called the European Economic Community), it made sense.

Britain has always thrived on international trade, and the EU promised more trade.But that’s not what happened. The EU didn’t turn into a peaceful, efficient, multi-national trading bloc that enables commerce and prosperity.

Rather it has become an ever-expanding, unaccountable bureaucracy ruling over vastly disparate nations who are increasingly at odds with one another.

 

EuroStoxx consolidates beneath Intermediate-term support 

The EuroStoxx 50 Index continues its consolidation beneath Intermediate-term support at 2975.47.  The index remains on a sell signal so long as it remains beneath Short-term resistance at 2999.11.  The decline may not stop at the Cycle Bottom, but appears more likely to challenge the Head & Shoulders neckline at 2650.00.

The Yen remains in its uptrend

The Yen continued its correction, but remained within its uptrend.  This week marked a probable Trading Cycle low.  However, a decline beneath Intermediate-term support at 89.45 may indicate a potential change in trend.  The inverted Cup with Handle formation appears to be activated.  While the Cup-with-Handle target may seem farfetched, the Cycle Top at 99.97 may be attainable as a minimum target.  

(ZeroHedge)  While it most likely is just the usual Friday (past) midnight trial balloon by the Nikkei, a media outlet that has promptly become the BOJ's mouthpiece (recall a week ago the new owner of the FT reported that Abe would delay his 2017 sales tax increase, only to see the premier backpedal when the reaction in the USDJPY was not quite as desired), moments ago the Japanese publication reported that the Bank of Japan will "likely set aside funds for the first time to prepare for losses on its huge holdings of Japanese government bonds should the central bank end its monetary easing policy in the future." 

The Nikkei rallies to a probable retracement high

The Nikkei bumped the retracement to 51% as it attempted to rally this week.  A decline beneath Intermediate-term support at 16543.67 may soon develop into a panic as the next support may be the Head & Shoulders neckline near 15000.00, followed by the Cycle Bottom at 13644.95.

(EconomicCalendar)  The Nikkei managed to stage a rally to end the week ahead of the G7 meeting in Sendai, Japan, where ministers and governors are set to discuss the outlook of global economy and policy issues.

Japanese government bonds rallied after heavy selling on Thursday following hawish news from the Fed on June rate hike expectations. The strong demand showed JGB futures close at 151.81, an impresssive gain to end the week.

A weaker yen contributed to the rally as well, as USD/JPY rallied towards its weekly highs to post a 0.35% gain on the day. We are seeing broad based pressure on the Japanese Yen at the European open, as all major currencies are gaining versus the Yen, with New Zealand leading the way with a 0.70% gain, while the British Pound lags, with a 0.11% gain on the day.

U.S. Dollar extends to Intermediate-term resistance

 

USD rallied toward weekly Intermediate-term resistance at 95.75 as it finishes its bounce off mid-Cycle support.  What may follow is a decline to retest the low and possibly the lower trendline.  The Cycles Model suggests the next low to occur in early June.

(Reuters)  The dollar traded close to two-month highs after it pushed past $1.12 per euro for the first time since March. Sterling gained 1.7 percent for the week as fears abated that Britain would vote to leave the European Union next month, a move referred to as "Brexit." EURGBP=GBP=

"The question for traders now is whether this Fed rate hike issue is a 'risk-on' or a 'risk-off' situation," said Saxo Bank FX strategist John Hardy. "Our interpretation is that they want to do a June move, especially now Brexit chances seem to have dropped right off."

Not everyone believes a rate hike is imminent.

The probability of a June rate hike has jumped to 30 percent from around 4 percent at the start of the week, according to CME Group's FedWatch site. Futures markets are predicting two rate hikes this year as opposed to just one as recently as last week.

USB pulls back

The Long Bond pulled back before making a breakout above its April high of 166.02.  The pullback may last another week before the Long bond resumes its rally.  Bonds have not been this overpriced (historically lowest yields) in over 300 years.

(NASDAQ)  U.S. government bonds were little changed Friday, as investors continued to digest recent statements from Federal Reserve officials about the possibility of a summer interest-rate increase.

Overnight trading was light, suggesting some bond traders were taking a pause at the end of an eventful week that included the biggest one-day selloff of 2016.

The rally, though, was modest, and bond yields still finished the week at levels they have rarely reached since January.

The yield on the benchmark 10-year note settled at 1.849%, compared with 1.845% Thursday. Yields rise when bond prices fall.

Gold declines beneath its uptrend line

Gold appears to have declined beneath its uptrend line, but closed just above Short-term support at 1251.30.  This may be the end of the rally in gold, but we await confirmation from a further decline beneath the Short-term support line.  Additional confirmation may be had beneath Intermediate-term support at 1235.84.  A Master Cycle low may arrive later next week.  

(Reuters)  Gold edged lower on Friday for the third straight session and notched its biggest weekly slide in nearly two months on growing expectations for an increase in U.S. interest rates as soon as next month.

Spot gold was down 0.2 percent at $1,252.1 an ounce by 2:43 p.m. EDT (1843 GMT), down 1.6 percent this week in its third straight week of losses.

U.S. gold futures for June delivery settled down $1.90 at $1,252.90.

New York Fed President William Dudley said on Thursday there was a strong sense among central bank officials that markets were underestimating the probability of policy tightening.

Crude makes its top

Crude appears to have made its top on Wednesday at 49.56.  The technical limitation discussed last week for the rally held, but the decline is not yet apparent.  A decline beneath Short-term support and the Ending Diagonal trendline at 43.05 may trigger a sharp decline in crude.

(ZeroHedge)  "I've been coming to Singapore once a year for the last 15 years, and flying in I have never seen the waters so full of idle tankers,"   - Senior European oil trader a day after arriving in the city-state. 

Back in November, when the world-record crude inventory glut was still in its early innings, we showed what we then thought was a disturbing image of dozens of oil tankers on anchor near the US oil hub of Galveston, TX, unwilling to unload their cargo at what the owners of the oil thought was too low prices.

Little did we know that just a few months later this seemingly unprecedented sight of clustered VLCCs would be a daily occurrence as oil producers, concerned by Cushing hitting its operating capacity, would take advantage of oil curve contango to store their oil offshore indefinitely.

 Shanghai Index consolidates beneath support

The Shanghai Index had an “inside week” beneath Intermediate-term support/resistance at 2893.01.   There appears to be another week of weakness ahead, according to the Cycles Model.  The sell signal in the Shanghai is confirmed. There is no visible support beneath the prior low at 2638.30.

(ZeroHedge)  Now that China's brief infatuation with "rationalizing" excess capacity in its massively glutted (and insolvent) steel sector is over after lasting all of 2-3 months, China is back to doing what it did in late 2015 (and what it has always done) when as we reported, a surge in Chinese exports led to the first salvos in the trade war between China - the world's biggest exporter of various steel products and is responsible for half the entire world's steel output - and countries who are importing dumped Chinese products at the expense of their own steel and mining industries.

Nowhere has this trade tension been more obvious than in the UK, where in recent months angry, protesting steel workers have been demanding rising protectionist steps against a country they, rightfully, see as unleashing a global commodity deflation driven by out of control, and unprofitable by highly subsidized, production by Chinese steel mills.

The Banking Index bounced at trendline support

BKX bounced at trendline support at 66.00 last Friday, rallying to Long-term resistance at 69.41. The Pennant trendline and Short-term support at 66.54 are the keys to a continued decline.   Once broken, the Cycle Bottom support at 62.70 may not be capable of providing the next bounce, as it too is in decline.  The next significant low is due in mid-June.

(ZeroHedge)  This could not have come at a more perfect time, with the Fed once again flip-flopping about raising rates. After appearing to wipe rate hikes off the table earlier this year, the Fed put them back on the table, perhaps as soon as June, according to the Fed minutes. A coterie of Fed heads was paraded in front of the media today and yesterday to make sure everyone got that point, pending further flip-flopping.

Drowned out by this hullabaloo, the Board of Governors of the Federal Reserve released its delinquency and charge-off data for all commercial banks in the first quarter – very sobering data.

(ZeroHedge)  With Trump going after billionaire-funded media in America, and Italy facing probes over its banking-system-controlled media, it is perhaps no surprise that yet another generally corrupt nation -Greece - is facing a parliamentary committee investigation into spuriously large 'bank loans' and highly-concentrated advertising spend made to various political parties and media groups in 2015.

The Parliamentary Inquiry Commission decided on Wednesday to investigate the advertising expenditure of Greek banks to the media over a period of the last 10 years. As KeepTalking Greece reports, the Commission investigates in general the legality ofbank loans to political parties as well as loans to mass media groups. The extension of mandate to investigate also the bank advertisement to media was submitted by SYRIZA MP Annetta Kavvadia, a former journalist.

(ZeroHedge)  With banker bonuses set to drop this year, it should be no surprise that things are not all sunshine and roses on Wall Street. After 30 years of dramatically outperforming Main Street, Wall Street wages may be set for some mean-reversion as JPMorgan analysts take an ax to the biggest global investment banks' earnings. As Bloomberg reports, "quiet trading floors" are set to depress global investment banks’ second-quarter revenue 24 percent, with weakness across equities, interest rates, currencies, with a regionally-driven weakness from Asia.

While equity trading volume declines are well known, FX trading volumes are tumbling...

(ZeroHedge)  In what many considered to be a flagrantly criminal abuse of investment bank "restricted lists", yesterday Goldman underwrote a $2 billion equity offering for Tesla (to find its amusing expansion strategy) just hours after Goldman upgraded the stock to a Buy.

We have done our best to alert the regulators...however we are confident the regulators are paid far better to remain unalerted.