VIX created a bullish engulfing pattern in which the highs and lows exceeded the prior week with a weekly close above last week’s closing high. A buy signal awaits it above Intermediate-term resistance at 10.79, with further confirmation above weekly mid-Cycle resistance at 14.69. It has an inverted Head & Shoulders formation that, when triggered, offers us a potential target for the next rally.

(CNBC)  VIX spikes just aren’t what they used to be.

The CBOE Volatility index, or VIX, hit a high of just under 12 early Thursday, its highest level in six weeks. While that may seem like an impressive move, it actually underscores what has been a historically mild year for volatility.

SPX throws over Cycle Top resistance

SPX made a throw over in the last day of the week by probing above its Cycle Top  resistance at 2570.69. It also has closed above the upper trendline of its Broadening Wedge trendline at 2555.00.  A decline beneath the upper Diagonal trendline at 2545.00 may signal an end to the rally.  A further decline beneath the Broadening Wedge formation at 2450.00 gives a sell signal and suggests a much deeper decline may follow.  

(Bloomberg)  Earnings-day blowups, leverage warnings in China, Apple’s worst rout since August. Oh, and a sixth straight week of gains for the S&P 500.

No matter what happens lately, stocks just keep rising, with record closes piling up in U.S. benchmarks at a rate that is starting to defy precedent. The Nasdaq 100 Index has finished at all-time highs 62 different times this year, on par with the most ever in 1999, while the S&P 500 and Dow Jones Industrial Average are closing in on history, too.

NDX keeps pressing against the top of the Ending Diagonal

NDX rallied a second week at the top trendline of its smaller Ending Diagonal, making an all-time closing high. Short-term support and the lower Diagonal trendline lie at 5987.70. A decline beneath that trendline may produce an aggressive sell signal.    

(EuroPac)  In light of the 30-year anniversary of the Black Monday Crash in 1987 (when the Dow lost more than 20% in “one day”, we should be reminded that investor anxiety usually increases when markets get to extremes. If stock prices fall steeply, people fret about money lost, and if they move too high too fast, they worry about sudden reversals. As greed is supposed to be counterbalanced by fear, this relationship should not be surprising. But sometimes the formula breaks down and stocks become very expensive even while investors become increasingly complacent. History has shown that such periods of untethered optimism have often presaged major market corrections. Current data suggests that we are in such a period, and in the words of our current President, we may be “in the calm before the storm.”

High Yield Bond Index throws over its Cycle Top

The High Yield Bond Index appears to have made a throw-over above its Cycle Top at 184.13.  A break of the upper Diagonal trendline at 180.00 may tell us the rally is over. This is no time for complacency.

(ZeroHedge)  Stocks are so hot that junk bond managers want in to equity markets. Bloomberg’s Lisa Abramowicz explained the conditioning that’s led to this – simply that the performance rankings of corporate debt funds shows that those which are taking the most risk have, not surprisingly, booked the best performance in 2017. While this involved purchasing lower-rated credit instruments, in some cases, it has meant buying more equities.

Abramowicz cites two funds, firstly the Fidelity Capital & Income Fund, this year’s top-performer in high yield debt. FC&IF steadily increased its equity exposure to more than 20% earlier this year.

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