E VIX Testing Lows While SPX Tests Highs

VIX broke down to make a new 3-month low. In doing so, it elevated its status from a Minor degree to and Intermediate one. A potential Head 7 Shoulders formation suggests that the Cycle Top at 23.97 may be a viable target.  An actual change in long-term trend may occur above the top trendline of the 15-month long Ending Diagonal formation at 18.00.  

For more insights, pleas read the Financial Times article entitled, “Wall Street’s Vix index falls to its lowest since January”

SPX gaps above resistance, but no new high

SPX rallied to within 3 points of its all-time high. Not being able to achieve new all-time highs in the last week of April raises questions about its strength. There certainly were enough reasons to propel it higher. The first quarter US GDP may have been the show stopper..

(CNBC)  U .S. equities closed lower on Friday as investors digested economic data and key corporate earnings, but ended April with strong monthly gains.

The Dow Jones industrial average slipped about 40 points, with Intel and Goldman Sachs contributing the most losses. The S&P 500 fell 0.2 percent, with financials and telecommunications leading decliners. The Nasdaq composite hit a fresh record high before closing marginally lower.

That said, the three major indexes posted a monthly advance of about 1 percent. The S&P and the Dow posted their fifth positive month in six, while the Nasdaq recorded its sixth straight monthly gain.

 NDX gaps to a new all-time high

NDX posted another new all-time high this week. It is clearly on an extension with earnings playing a big part of the ebullience. Wave relationships suggest the April 28, 2017 target of 5333.00 has been exceeded.  A decline beneath Short-term support and the Orthodox Broadening Top trendline at 5418.43 may suggest a correction is in order.  

(ZeroHedge)  It was a little over a year ago when the market first started noticing that the private startup market had gotten just a little ahead of itself, with various dotcom 2.0 darlings such as Dropbox, Square and others slashing their private valuations by substantial amounts. Well, overnight investors at peak private valuations got another harsh reminder of just how much they may have overpaid whenCloudera, once one of the most highly valued private tech companies, priced its IPO at less than half the company’s valuation from its last private financing round back in 2014.

As the FT notes, the share sale marked a new low for so-called unicorns, or private tech companies once valued at more than $1bn. Companies such as Cloudera have turned to Wall Street as the once red-hot private investment market has cooled, forcing some to take big discounts on their former valuations to raise more money.

High Yield Bond Index bounces to Short-term resistance

The High Yield Bond Index bounced from Long-term support at 162.96, to Short-term resistance at 167.00. It remains on a sell signal. Should MUT not be able to overcome resistance, the Cycles Model suggests further weakness ahead that may last the entire month of May.  

(Bloomberg)  Call it the seven-year itch.

The torrid romance that doubled the global junk-bond market to $2 trillion since 2010 is losing the spark for a handful of investors, just like the supposed tendency to infidelity after years of marriage. High-yield bond funds suffered $10.5 billion of outflows last month, the most since December 2015, according to consultancy EPFR Global.

“This is an asset class we have loved for a number of years,” said Percival Stanion, head of multi-asset funds at Pictet Asset Management in London. “Now you have to believe in a very benign outcome for government yields, default rates and recoveries. That is a foolish way to invest.”

USB testing support

The Long Bond may be pulling back to test Short-and Intermediate-term support at 150.79 as 30-year Treasury yields jumped to nearly 3%.  Once the consolidation is accomplished, USB may extended period of strength may extend through mid-May. The mid-Cycle resistance and long-term resistance at 158.38 still appear to be the target, but it may go higher.  

(Barrons)  The U.S. Treasury is apparently giving serious consideration to launching an ultra-long bond — let’s say 40, 50 , or even 100 years to maturity (Barron’s tackled the subject last November, advocating for the U.S. to debut a 100-year Treasury bond).

Treasury Sectretary Steven Mnuchin included a question about such long bonds in his latest survey of bond dealers.

But Goldman Sachs economist David Mericle doesn’t think it’s likely since there may not be enough demand, the huge infrastructure package it would theoretically fund is getting less likely and the details of such an issue are confounding.