E SPX In Danger Of Decline

VIX challenged its mid-Cycle resistance at 15.08 before closing beneath Intermediate-term resistance at 11.61.  A rally that closes above Long-term resistance at 12.58 implies that VIX may challenge its Ending Diagonal trendline at 17.50 in the following move.  

(ZeroHedge)  There’s been a growing chorus lately suggesting that perhaps the record low VIX readings aren’t due to record low feelings about volatility, but instead due to the dramatic increase in VIX products and assets betting on decreases in volatility.

As RCM Alternatives notes, it sure feels like that is the case, with every move higher in the VIX seemingly smacked down earlier, and with more force, than the one before it.

SPX breaks its Diagonal trendline

SPX broke through its Cycle Top and  Ending Diagonal trendline at 2436.60, closing beneath them. It has also challenged the Weekly Short-term support at 2413.76, suggesting the next decline may successfully continue beneath it. This may be the start of a decline that completely retraces the rally from the February 2016 low.  

(ZeroHedge)  With the Shiller CAPE index having surpassed the 30x for the first time since September 2001, its creator, Nobel Laureate and Yale School of Management Economics Professor Robert Shiller is warning investors that they should be cautious about investing in such an “unusual” market.

“… the CAPE index that John Campbell and I devised 30 years ago is at unusual highs. 

The only time in history going back to 1881 when it has been higher are, A: 1929 and B: 2000.” 

“We are at a high level, and its concerning.”

  NDX also declines beneath its trendline

NDX had another bad week as it broke beneath its Brexit trendline.  A decline beneath Intermediate-term support at 5583.84 implies that a deeper correction is in order.  Both SPX and NDX have a potential 3-week decline ahead of them.  It’s time to take necessary precautions.  

(YahooFinance)  The sell-off in government bonds that extended for a fourth day on Friday could signal pain ahead for the stock markets, particularly for an unexpected sector: Technology stocks.

In fact, some analysts have noticed a strong correlation between bonds and the likes of Facebook (FB), Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL). This is odd because tech companies are cyclical and their stocks are expected to do the exact opposite of that and then some.

 High Yield Bond Index declines to support

The High Yield Bond Index declined to challenge Intermediate-term support at 166.05 before a small bounce into the weekly close. The sell signal may be reinstated beneath that support level. The Cycles Model suggests weakness may continue on a timetable similar to that of equities.  

(Bloomberg)  Oil’s plunge into a bear market has broken the link between bonds of junk-rated U.S. energy companies and their peers. The yield on a Bloomberg Barclays index of high-yielding energy-company debt has jumped 1 percentage point in the past month, while the average yield on a junk bond index that excludes energy companies has barely moved. A drop in oil prices below $35 a barrel may drive yields higher across the board, strategists at Deutsche Bank AG said in research note this week.

USB tests Short-term support

The Long Bond pulled back from its rally to challenge Short-term support at 153.81. The next higher challenge appears to be mid-term resistance at 157.91.  The rally has quite a distance to go, since it must complete the right shoulder near 165.00 before plunging through the neckline near 146.00.  

(FoxBusiness)  More central banks may be following the Federal Reserve’s hawkish lead, sending bond yields skyrocketing

Treasury yields have broadly risen after a batch of mixed data offered some optimism to investors hoping for an improvement to second-quarter growth, but demonstrated the difficulty of anticipating the economy’s near-term direction.

The 10-year Treasury yield rose 1.8 basis point to 2.285%, contributing to a 14 basis point jump over the past week. The 30-year bond, or the long bond, gained 1.7 basis point to 2.831%, while the 2-year note was relatively unchanged at 1.370%. Bond prices move up when yields go down; one basis point is one hundredth of a percentage point.