-- Do you think the VIX has calmed down? Think again! The VIX has found support at its weekly Short-term support at 15.37 and may be prepared for another run at the top of the chart.The fractal pattern in VIX has surprised most observers and may repeat the pattern yet again.
SPX has best week since December 2011.
SPX had its largest low-to-high week since late December 2011.It overcame its Long-term resistance and is now up against Weekly Intermediate-term resistance at 1966.18. It has also reached “point 7” of its Orthodox Broadening Top, giving it a high probability of a panic decline over the next 2-3 weeks, even after having a knock-out week such as this. Unfortunately, most investors will be unaware of this probability.
Technical analysis suggests that an Ending Diagonal may be completely retraced, once broken. A long-term Cyclical change of trend occurs once beneath mid-Cycle support/resistance, which has not been broken since 2011.
(ZeroHedge) Ebola in NYC, no problem.Crappy housing data, all good. School shooting in WA, buying opportunity... and that is how the S&P 500 broke back above its 100-day-moving-average (proving the world is fixed again), and had its biggest low-to-high swing since Dec 2011. It wasn't all great BTFD news today though as small caps underperformed - though still green (just like last Friday), and only Trannies and Russell are green in October. Despite equity exuberance, Treasuries rallied modestly today (ending the week up 8-9bps on the week). HY credit slightly underperformed stocks but compressed 27bps - the biggest weekly drop in spreads since July 2013.
NDX reaches a final phase of an anticipated pattern.
NDX rallied inside its smaller Orthodox Broadening Topto complete an anticipated reversal pattern.Of course it goes without saying that the rallied exceeded expectations, but it remains within the parameters of a retracement within the Broadening Top formation.This is considered “point 7” in the formation. Point 8 is the panic low.
(ZeroHedge) When markets broke on Wednesday, VelocityShares Daily Inverse VIX (NASDAQ:XIV) soared, stocks followed and the volumeless levitation was praised by all as evidence that the world was once again fixed. Yesterday we also saw NYSE Euronext 'break' into the European melt-up close, and later that day, as Ebola headlines hit, the market once again broke numerous times with various exchanges declaring self-help against one another as stocks tumbled on heavy volume. If you are wondering how it is that "the great stock markets in the world" can break so often (and be so ignored by financial media), Nanex exposes the act... as massive quote spamming yesterday sent OPRA to full capacity (broke the efficient flow of data in markets) 13 times...
(ZeroHedge) The "Hotel California" market in one simple chart... you can check in, but never check out...
High Yield bounces back to the Broadening Top.
The High Yield Index rallied back to the lower trendline of its Orthodox Broadening Top.This may also be considered “point 7” of the Orthodox Broadening Top. Now is the time to pay attention to the Orthodox Broadening Top formation which forecasts a much lower outcome.
(ZeroHedge) High-yield bond issuance has surged in recent days as 'wide' spreads have encouraged investors to take the dip once again (despite firms' record leverage and increasing desperation to roll the wall of maturing debt). However, it's not all guns blazing, as one manager noted, "while the market reopens, it reopens with issuers having to be a little more investor friendly." Despite Carl Icahn's warning that "the high-yield bond market is in a major bubble that's gonna burst," Bullard's "QE4" comments sparked Goldman to add US junk bonds and Aberdeen says selling EU and buying US corporate debt "is the trade that kind of screams at you right now." The dash-for-trash down-in-quality is back as CCC-demand surges and, as one trader notes the market's schizophrenia: "one day the market feels like it is shut down and you can’t sell anything and you wake up this morning and you can price any part of the curve."
There is nothing to fear but the lack of The Fed itself...
The Euroreverses to its Cycle Bottom.
The two-week bounce in the Euro from its Cycle Bottom appears complete and now it has round-tripped back to Cycle Bottom support at 126.10.Once through that support level, it may be ready tonpierce the Lip of a Cup with Handle formation at 122.00in short order, setting up a cascading decline.The next Cycle low appears to be expected in the first week of November, but it won’t be the final low of the decline. The Euro finished the week solidly down, despite the media attempt to make the gain on Friday appear larger than reality.
(Reuters) - The euro rose on Friday ahead of an official report on the health of the euro zone's main banks as investors continued a trend of covering their short-positions leading to buying of the currency against the US Dollar.
Despite Friday's weakness, the dollar is on track to close the week with a gain. Concerns about the first diagnosed case of Ebola in New York City, which stifled the dollar's rally late Thursday, have waned, strategists said.
Euro Stoxx rallies to “point 7.”
The EuroStoxx 50 Index made a “throw-back” rally back inside its Broadening Wedge formation while retracing 51.25% of its prior decline. The high this week may also be considered “point 7” of its Broadening Wedge formation. In all probability, EuroStoxx is likely to reverse to the downsidenext week. Last week’s low was an important Cycle bottom. The behavior coming out of significant Cycle Bottoms tells us a lot about the health of the market.
(BusinessSpectator) European stock markets have snapped a three-session winning streak, weighed by investor caution ahead of the results of a sweeping EU bank stress test.
The STOXX Europe 600 closed the session 0.3 per cent lower, mirroring declines on most major country indexes, and ending a three-session gain which had largely been triggered by hopes that the European Central Bank may discuss buying corporate bonds in a move to beef up its economic stimulus program.
On Sunday, scorecards for around 150 lenders are scheduled to be made public in a choreographed series of announcements in London, Frankfurt and other financial capitals across the continent, designed to shine light on how strong balance sheets are and how capable banks are of surviving a deteriorating economic environment.
The Yen finds support inside its Bullish Wedge.
The Yen has pulled back to test the lower trendline of its Ending Diagonal formation. This is a bullish reversal that may be further confirmed once it rises above the upper trendline. This will have the effect of drying up the Yen carry trade which has been a major source of funding for the equities markets.
(Reuters) - The yen pulled away from two-week lows against the dollar on Friday on safe-haven bids after news that a doctor had tested positive for the Ebola virus in New York City after returning from West Africa.
The first confirmed case in the city worried investors because of the possible repercussions in the global financial centre, although some said the market focus could soon shift.
"The volatile move was a good chance for some to buy the dollar on dips," said KaneoOgino, director at Global-info Co in Tokyo, a foreign exchange research firm.
"I think, next week the market will be more event-driven, with the FOMC and the Bank of Japan, so the downside should be limited," he said, adding that dollar support at 107 yen was likely to hold for now.
The Nikkei retests Intermediate-term support.
The Nikkei rallied back through Long-term support to test Intermediate-term support at 15462.34.This is a classic technical pullback that may have strong repercussions if it fails here.A failure here is known to some analysts as the “kiss of death,” since it implies a strong downdraft to the Cycle Bottom at 9069.70 or lower. This move may be supported by the two technical formations shown in the chart.
(MarketWatch) Stocks in Japan surged for a second time this week while Hong Kong emerged as one of the best-performing major Asian indexes so far this month, as bargain hunters returned despite a recent bout of volatility in global markets.
The Nikkei Stock Average NIK, +1.01% led the region with a 2.4% gain after the latest read on Japanese exports, which rose 6.9% from a year earlier in September, helped by a weaker yen and a surge in output among suppliers of components for Apple’s new smartphones. Still, Japan’s trade deficit edged up 1.6% to ¥958.3 billion ($8.96 billion) from a year earlier, the first increase in three months.
Stocks in Japan have had an especially rough run lately, falling over 10% from a late-September peak and seesawing earlier this week. On Tuesday, the Nikkei lost 2%.
U.S. Dollar bounced above its Head & Shoulders neckline.
The US Dollar challenged its Head & Shoulders neckline, then rallied above it as it begins a new phase of its rally.The dollar rally may be in a critical period next week.The Cycles Model calls for a breakout, but if the rally weakens in the next week, the dollar may be due for another retest of the neckline soon after.
(ZeroHedge) With two weeks of weakness, one might be forgiven for thinking the crowded "long-dollar" train had let off a few passengers (after its post-Bretton Woods record-breaking streak of gains).
But no, as Goldman notes, that train just got even more crowded... as overall USD speculative net positioning is now the most long it has been in recent memory.
USB continues its rally at a weaker pace.
The Long Bond continued its rally, but at a slower pace than before.A closer look at the Cycles Model suggests a reversal may be due in the latter half of the week with the odds at better-than even of an abrupt decline that may last several weeks in which USB may break its 33-year old trendline.The potential target may be weekly Cycle Bottom support at 125.55. The final Master Cycle low appears to be due in mid-December.
(WSJ) Investors sold ultrasafe (???-ed.) U.S. government bonds for a third consecutive session, as fresh global data soothed anxieties over the economic outlook.
The selling sent the yield on the benchmark 10-year Treasury note to the highest level in nearly two weeks. Yields on government bonds in Germany and the U.K., two other bond markets perceived as relatively safe, also rose. U.S. stocks rallied.
“To fuel a bond-market rally, we need bad news,” said Jason Evans, co-founder of hedge fund NineAlpha Capital LP in New York. “The global landscape is marginally improved, and Treasury bonds are expensive to buy at these still very low yield levels.”
Gold retreats from Short-term resistance.
After challenging Short-term resistance at 1239.16, Gold closed beneath it. It’s time to be cautious here, since there may be another week of rally in gold as stocks (may) lose their grip next week.
(SFGate) Of all the fancy things snaring stares Thursday at the decidedly fancy San Francisco Fall Antiques Show, the one attracting the most buzz was the crudest, the goldest and by far the oldest.
It was the 6.07-pound “Butte Nugget,” believed to be the biggest gold chunk dug up in Gold Rush country in modern times. Ever since the existence of this whopper was revealed in The Chronicle this week, people all over California have been itching to get a look at it.
Thursday’s opening day at Fort Mason of the annual antiques show, the longest-running and most prestigious on the West Coast, offered that chance. And the place went as bananas as can be expected at a showplace where the finely attired drop hundreds of thousands of dollars on old chairs and the like.
The decline in Crude may not be over yet!
Crude bounced from a higher low this week, suggesting a probable attempt at a higher retracement in the coming week.There is likely resistance at 84.40, so the probe higher may not last more than a few days. The bounce may not deter it from the Head & Shoulders target at 73.18, however it intends to reach it.
(CNBC) Crude oil continued to flirt with the key $80 per barrel level Friday, signaling another possible sharp leg down in price in the coming weeks.
West Texas Intermediate crude fell to an intraday low of $80.36 before inching back up to $81. Oil has slid below the $80 mark recently but has not breached it for long. Oil was weak Friday despite a stronger equity market and weaker dollar, both factors that have lifted crude prices lately.
News that Iraq oil exports are holding close to a record and Kurdish shipments are rising despite unrest in Iraq adds to the view the world market is well-supplied and could continue to be, a negative for prices.
China loses first level support.
The Shanghai Index declined through weekly Short-term support at 2326.07, closing at its lows for the week.The next level of support is Intermediate-term at 2239.64, nearly 3% beneath this week’s close. The rally may be due for a full retracement to the Cycle Bottom at 1923.22. China stocks have a full month of decline ahead before reaching a significant bottom.
(ZeroHedge) With global growth concerns on the rise, whether a bust in the Chinese housing sector could threaten the economic activity and financial stability of the world’s largest contributor to growth is top of mind for Goldman Sachs. As Michael Pettis warns, "this story only has a few possible endings, all of which imply a significant reduction in economic growth as debt problems are addressed." The following 3 charts suggest Pettis is right...
The Banking Index challenges its Broadening Wedge.
--BKX bounced back to challenge the lower trendline of its Broadening Wedge at 69.00, falling short of its Long-term resistance at 70.06.This may be considered point 7 ofthe Broadening Wedge formation. The next target (point 8) may be 20% lower.
(ZeroHedge) Reuters has had a busy day today reporting on Europe’s banks and the stress tests the European Banking Authority is set to unveil on Sunday. And which put the EU and ECB on a see-saw like balancing act between credibility and panic.
The news bureau started off in the early morning citing a report by Spanish news agency Efe, which said 11 banks would fail the tests:
11 Banks To Fail European Stress Tests
At least 11 banks from six European countries are set to fail a region-wide financial health check this weekend, Spanish news agency Efe reported, citing several unidentified financial sources. The results of the stress tests on 130 banks by the European Central Bank are due to be unveiled on Sunday. Four banks in Greece, three Italian lenders and two Austrian ones are among those that preliminary data showed had failed the tests, Efe said. It gave no details of how much capital the banks would have to raise and said this could yet change as numbers could be revised at the last minute. The euro fell on the report. Efe also identified a Cypriot bank and possibly one from Belgium and one from Portugal. (It gets worse…)
(ZeroHedge) With the results of Europe's annual AQR, aka Stress Test, due out on Sunday, most had been expecting that despite some rhetoric that various brand name banks may fail, that it would be largely more of the usual: puff. That, however, may not be the case, and as Bloomberg just reported, a whopping 25 banks are set to fail the stress test, compared to 105 which are set to pass. As Bloomberg notes:
105 banks passed the test, draft document shows
Number of banks that would have shortfall even after capital-raising to Sept. 30, 2014, is the subject of ongoing talks, a person with knowledge of the matter says
Negotiations continue with about 10 banks shown to have net shortfall after 2014 capital measures, the person says
An ECB spokesman says the central bank can’t comment on speculation about the outcome of the comprehensive assessment. Any inferences drawn as to the final outcome of the exercise would be highly speculative until the results are final on Oct. 26, spokesman says.