-- VIX challenged weekly mid-cycle resistance at 14.27, but closed the week beneath weekly Long-term support at 13.53.This week’s breakout above last week’s high may be a signal to exit equities. VIX may have become “unrigged” on Friday.
SPX may have closed beneath its Ending Diagonal trendline.
SPX appears to have closed beneath the lower trendline of its Ending Diagonal formation.Any debate about this may be quickly resolved on Monday. Technical analysts suggest that an Ending Diagonal will be completely retraced, once broken. Elliott Wave analysis suggests that an Intermediate Wave (1) decline will exceed its Intermediate Wave (4) low of the rally in a change of trend. If so, the 14-year Rising Top trendline will also be violated.
(ZeroHedge) "It is a bad sign for the market when all the bears give up. If no-one is left to be converted, it usually means no-one is left to buy.” - Pater Tenebrarum
The extraordinarily low level of "bearish" outlooks combined with extreme levels of complacency within the financial markets has historically been a "poor cocktail" for future investment success.
NDX has its first weekly loss since August 4.
After challenging the upper trendline of its Ending Diagonal for the last month, NDX pulled away for a weekly loss. Last week I suggested, “That may be the final high, since NDX has a date with a significant cycle bottom low at the end of October.” The observation still stands.
(OfTwoMinds) File this under Devil's Advocate: what if the easy money in the stock market is no longer the "guaranteed" Bull melt-up but the Bearish bet on a sudden air pocket?Just as a thought experiment, put yourself in the shoes of the money managers who have the leverage to move the markets.
You probably know the drill: program your trading bots to recognize every technical trading scheme's key support and resistance levels, and then unleash huge futures/options buys after hours or pre-open so the market jumps in the direction that makes you the most money.
High Yield Flagging.
The High Yield Index has topped on July 3 and has not seen that level since. This week it slipped beneath weekly Short-term support at 42.47 at the close on Friday. Intermediate-term support is barely a point beneath at 141.37. A further violation puts the uptrend in jeopardy.
(ZeroHedge) The high-yield credit market remains stressed. An active week ended poorly as a heavy pipeline saw Vistaprint pull its deal citing "market conditions" as perhaps both a re-awakening of liquidity fears (Fed hawkishness concerns), price/spread moves, potential downgrades soar, and outflows signal the flashing red light that HY markets are shining is as red as ever. With buybacks having dwindled already - removing a significant leg from the equity rally - it seems CFOs are realizing that maybe they should have used some of that easy money to build as opposed to buy as they face weak growth, a lack of liquidity, and a wall of maturing debtin the next few years that will have to be refinanced at higher yields and spreads.
The Eurobounces abovesupport.
The Euro bounced, completing a Primary Cycle decline, but leaving some unfinished business at the origin of its Ending Diagonal formation at 127.55, where it may find its next support.This is likely to be a minor bounce with a final probe lower over the next two weeks.Should the bounce occur at the proposed trendline, it may create a new Head & Shoulders neckline with a still lower target. The next level of possible support is the Cycle Bottom at 125.39.
(TheEconomist) THE euro-zone recovery has stalled and inflation is close to zero. Belatedly, the European Central Bank (ECB) is trying to galvanise a lifeless economy, in two ways beyond ultra-low interest rates: a funding scheme to boost banks’ lending to firms and the purchase of private-sector assets.
On September 18th it will conduct the first of two special lending operations this year that will make up to €400 billion ($520 billion, or 4% of euro-zone GDP) available to banks on extremely generous terms: for up to four years at a fixed annual interest rate of just 0.15%. The only condition is that banks raise the trajectory of their lending to business, which for many may mean that their stock of corporate loans keeps on shrinking but more slowly than before. In 2015 and 2016 more funding will be available provided that banks actually raise their net lending.
Euro Stoxx reverses with no new high.
The EuroStoxx 50 Index reversed without making new highs this week. The first level of support is the Weekly Intermediate-term support at 3189.19. The loss of support at the weekly Long-term level at 3137.06 leaves the Broadening Top formation in sight, whichanticipates a much deeper target, where the Cycle Bottom at 2324.24may be pierced. In addition, the Cycle Model suggests no potential relief bounce until late October.
(Bloomberg) European stocks were unchanged, after swinging between gains and losses, as a jump in U.S. retail sales andconsumer confidence boosted optimism about the world’s largest economy while raising concern interest rates may go up soon.
The Stoxx Europe 600 Index was unchanged at 344.27 at the close of trading, after earlier rising as much as 0.3 percent and falling as much as 0.2 percent. The benchmark gauge slid 1 percent this week, the first loss since Aug. 8, as investors consider central bank stimulus policies, and opinion polls before a referendum next week indicated roughly half of Scottish voters supported independence from the U.K.
The Yen reaches its Ending Diagonal trendline.
The Yen continued to extend its decline into its Master Cycle low. The next probable reversal day may be Monday, as the decline appears to be nearly completed at its Ending Diagonal. The double Triangles doubly forecast the end of the decline. This would have the effect of drying up the Yen carry trade which has been a major source of funding for the equities markets.
(ZeroHedge) Sometimes we wonder what world Japanese leaders live in. This morning's mind-blowing lies and propaganda from BoJ chief Kuroda show one thing and one thing only - Japan has reached Europe's Juncker moment - "it's serious enough that one has to lie."But it's the market's reaction to his every word that is whipsawing JPY around and running algos wild as first he said more QE is to come then rejected it saying there is no need for more QE now...
The Nikkei extends its rally.
The Nikkei appears to have completed Primary Wave [2] at the same time that the Yen made its low.A failure to reach new highs last week may result in a spectacular sell-off. The next possible low may not occur until late October.
US Dollar makes a new Cycle high.
The US Dollar extended its combination Primary and Trading Cycle until Tuesday.This may allow for a shallow retracement lingering near or even above its Cycle Top support at 83.63. The Head & Shoulders neckline is meant to be the business of the next Cycle which may extend into mid-October.
USB approaches an important Anniversary.
The Long Bond declined through Short-term support at 138.84 and Intermediate-term support at 137.18 last week.Chances are now better-than even of an abrupt decline that may last through the end of September in which USB may break its 33-year old trendline.The potential target may be weekly Cycle Bottom support at 125.02. The final Master Cycle low may occur at a much lower level during the week of November 10.
(WSJ) U.S. Treasury bonds strengthened on Thursday for the first time in six days as a $13 billion sale of 30-year bonds drew stronger demand.
But sentiment remains cautious ahead of the Federal Reserve's policy meeting next week. Bond yields climbed to the highest level in more than a month earlier this week amid jitters over potential changes in the Fed's official interest rate policy outlook.
In late afternoon trading, the benchmark 10-year note was 1/32 higher, yielding 2.531%.
The 30-year bond was 8/32 higher, yielding 3.255%. Yields fall as prices rise.
Gold decline accelerates.
The decline in gold accelerated toward the Lip of its Cup with Handle formation at 1181.40 after a breakdown beneath 1240.20. The current decline may not be complete until late September or early October. Gold is in free-fall territory again.
(ZeroHedge) Many precious metals investors like the idea of physical bullion because, unlike paper money, it is difficult to counterfeit. That said, when there is a will, there is a way. In recent years, there have been extremely concerning cases of gold counterfeit, and investors that are not fully prepared can get duped. That’s why we worked with our friends at Silver.com to put together this handy infographic list of ways to test for fake gold or silver.
Crude decline also accelerates.
Crude resumed the decline beneath its Head & Shoulder neckline at 95.84 this week.It now appears ready to decline to its weekly Cycle bottom at 85.60 in the next week.It may bounce for several weeks at that level, also reflecting possible rising global tensions.
(WSJ) Gasoline prices have tumbled from highs hit in June. And markets are signaling that consumers will get even more relief at the pump.
A global glut of crude oil is the main driver behind the decline in gasoline. Relatively cheap oil has made it more profitable for refiners to produce gasoline and other fuels, and they have ramped up production to record levels.
This boom in supplies has sent gasoline prices tumbling. Traders and other market observers expect the flow of both crude oil and gasoline to keep rising, likely exerting more downward pressure on prices.
China extends its retracement to the weekly Cycle Top.
The Shanghai Index appears to have completed its rally to the weekly Cycle Top at 2344.41 on Thursday.It overshot its Cycle Pivot day, but that is common in strong rallies such as this.It may make yet another probe at the top early next week, but the reversal may be even more awe-inspiring as it declines into mid-to-late October.
(ZeroHedge) While China may have mastered the art of goal seeking GDP, always coming within 0.1% of the consensus estimate, usually to the upside, even if the bogey has seen dramatic declines in the past few years, dropping from double digit annualized growth to just 7.5% currently and the projections hockey stick long gone...
... it may need to expand its goal to seek templates to include the other far more important measure of Chinese economic activity, such as Industrial production, retail sales, fixed investment, and even more importantly - such key output indicators as Cement, Steel and Electricity, because based on numbers released overnight, the Q2 Chinese recovery is now history (as the credit impulse of the most recent PBOC generosity has faded, something we have discussed in the past), and the economy has ground to the biggest crawl it has experienced since the Lehman crash.
The Banking Index fails to make a new high.
--BKX extended its rally for yet another week, but failed to better the March 21 high.It is due to begin a Panic Cycle imminently.A further decline to mid-Cycle support at 61.52 may complete its Orthodox Broadening Top formation, sending it near its Cycle Bottom support at 45.04
(ZeroHedge) What’s the easiest way to make a 500x return on investment?
You might be inclined to say, “Buy silver” or “invest in a successful startup while it’s still a privately held company.”
But if you’re a major Fortune 500 company, you generate a 500x return on investment by buying off politicians.
A prime example of this is H.R. 4950: Protecting American Jobs and Exports Act, which aims to reauthorize the US Export-Import Bank for another seven years.
(ZeroHedge) First, Europe infamously shifted to a NIRP and now Japan has begun NIRP monetization. As WSJ reports, Tuesday marked another milestone in the topsy-turvy world of monetary easing in Japan:The Bank of Japan bought short-term Japanese government debt at a negative yield for the first time. In the understatement of the decade, one Japanese bank strategist noted, "The BOJ probably didn't expect this would happen, and T-bill rates staying negative should be a cause of concern for them." The BoJ's decision to scoop up these negative-yielding bills appears to confirm they will meet the QQE-buying demands no matter what the cost (to the Japanese people). The bottom line, the Bank of Japan is now implicitly issuing debt to the Japanese Treasury.
(ZeroHedge) So what are traders talking about at the present time here at the New York Stock Exchange?
We are concerned about two questions. First, how will the Fed do in keeping money reasonably easy without causing inflation? Second, where do we stand with the current geopolitical challenges? For now, these challenges seem to be short term concerns. But should we begin to see a financial contagion and pressure building on banks in Europe, perhaps out of the Ukraine situation, things could theoretically turn into what I call a «Lehman moment». That is when markets come under pressure but seem to be under control, and then things change suddenly.
Have a great weekend!