E Weekend Update – May 13, 2016

VIX bounced from its Pennant formation trendline closing above its Short-term support at 14.60.  This maintains a potential aggressive buy signal (NYSE sell signal). A breakout above the weekly high at 17.09 may confirm the signal.  Further confirmation lies above the mid-Cycle resistance at 15.87 and Intermediate-term resistance at 17.33.

(ZeroHedge)  Over the past two weeks we observed two curious, vol-related phenomena. First, it was Tom DeMark cautioning that even as stocks have surged, the amount of VXX shares outstanding has soared to record highs, a seemingly contradictory confluence of events because it suggested that investors, traditionally “going with the market flow”, are betting on a major vol reversal and furthermore the move contradicts historical shifts in VXX holdings at times of extreme market upside.

SPX retests its “shelf of support”

After having broken through its 4.5-year trendline, SPX came to rest at the Broadening Top trendline at 2044.00, another critical shelf of support.  Among other things, it is the December 31 closing value for the SPX at 2043.94.   A decline beneath the “shelf of support” it implies may constitute a sell signal on the SPX.  Trendlines are important support areas that often attract, then repel the markets.  

(Reuters)  U.S. stocks fell on Friday as a decline in oil prices added to pressure from consumer companies after gloomy earnings reports from Nordstrom and J.C. Penney overshadowed upbeat April retail sales data.

The decline in the department stores’ shares marked the end of a week that highlighted the expanding clout of Amazon.com and the plight of brick-and mortar retailers struggling to keep up.  Crude prices slipped on Friday as a strong dollar weighed and investors cashed in on gains from a three-day rally.

NDX declines, closing at Intermediate-term support.

NDX closed at the bottom of its two week trading range just above Intermediate-term support at 4324.23.  NDX continues to be on a sell signal after declining through Long-term support at 4426.52.  The Head and Shoulders formation may be in play once NDX declines through its mid-Cycle support at 4232.90.

(ZeroHedge)  On April 28, the catalyst the sent the stock price of AAPL to its post-August 25 flash crash lows, and launched a tremor not only within the Nasdaq but the broader market, was news that after several years of being AAPL’s biggest cheerleader, even coming up with price targets north of $200, Carl Icahn had suddenly cooled on the China-focused growth company, and had liquidated his entire stake.

But as Icahn was selling, or just before as we don’t know precisely when Icahn, who has since indicated he has turned massively bearish on the overall market, one entity was buying every AAPL share it could find. In fact, according to its latest 13F, everyone’s favorite central bank that openly admits it is also a wholesale buyer of stocks (with a portfolio of some $100 billion), the Swiss National Bank reveals that in Q1 it bought another 4.1 million in AAPL shares, bringing its total to a record 14.5 milion shares.

High Yield Bond Index is making new lows.

The High Yield Index retested its Cycle Top support at 151.01, then declined to a new weekly closing low.  It has also completed an important reversal pattern.  This may be construed as a sell signal for High Yield Bonds.  

(MarketRealist) High-yield bond issuance activity slowed down last week. However, the tone of the Market remained firm. According to data from S&P Capital IQ/LCD, dollar-denominated high-yield debt amounting to $3.8 billion was issued in the week ending May 6—the lowest since March 25, 2016. In the previous week, high-yield issuance was at $6.3 billion. The number of transactions was down to five last week from seven in the previous week.

Last week brought the total US dollar-denominated issuance of high-yield debt to $66.5 billion in 2016 year-to-date. This is 47.0% lower compared to the same period in 2015.

The Euro’s uptrend may be in question.