SPX Closes At Short-Term Support

VIX rallied above its Long-Term resistance and bullish flag formation at 14.45, confirming a buy signal. The Cycles Model shows a likely surge in strength for the VIX through late October.

(Bloomberg)  The scariest Halloween costume imaginable pales in comparison to a Friday inversion of the VIX futures curve.

A severe sell-off in technology stocks has pushed the front-month VIX futures contract to a premium relative to the second-month contract.

VIX futures are based off the Cboe Volatility Index, a measure of 30-day implied volatility for the S&P 500 Index that’s often called the “fear gauge.”

SPX closes at Short-term support

SPX challenged Short-term support at 2880.58 before closing modestly above it. A decline beneath that level implies a sell signal may be given. Both price and time targets appear to have been met. The Cycles Model now implies a powerful decline that may last through early November. The last time this has happened was in 2008.

(Bloomberg)  The longest bull market in history could be showing worrying echoes of one of the greatest crashes Wall Street has ever seen.

Robert Shiller, professor of economics at Yale University and a Nobel laureate, says the steep run-up in this market rally is similar to the excesses of the 1920s before the October 1929 market crash and Great Depression.

“The 1920s is quite a legend that people are often thinking about,” Shiller said Friday on CNBC’s “Trading Nation.” “I look at 1929 particularly as the end of the roaring ’20s and it ended in a bout of speculation. Between May and September of ’29 the stock market went up over 30 percent in just a few months.”

NDX opens October with a new high but stumbles badly

NDX hit a new all-time high on Monday, but stumbled badly, breaking through Short-term support at 7495.48 and giving a sell signal. It closed above Intermediate-term support at 7387.00. The next target may be the seven-year trendline at 6250.00 or mid-Cycle support at 6055.49. The weakest part of the Presidential Cycle often occurs in October. The Cycles Model agrees that October may be especially hard on stocks.

(Fortune)  Yesterday’s bombshell Bloomberg Businessweek report, about the Chinese military sneaking spy chips onto server components used across the U.S., had an immediate and major impact on Asian tech stocks.

Apple FortuneAAPL, -1.54%) suppliers Taiwan Semiconductor (TSM, -1.91%) and Largan Precision—the latter makes camera lenses for iPhones—fell by 1.6% and 7.3% respectively. LG Display, which was recently reported to be a new supplier of iPhone screens, fell by more than 1.8%. And component suppliers TDK FortuneTTDKYFortune and Murata FortuneMRAAYFortune dropped by 4.8% and 3.9% respectively.

Also hit hard was Lenovo (LNVGY, -13.07%), the Chinese PC manufacturer that makes ThinkPad and Yoga laptops. The Beijing-based company’s shares fell by almost 23% at one point on Friday, before recovering to a mere 15% drop by the end of the day’s trading.

High Yield Bond Index Makes a new all-time high

The High Yield Bond Index appears to have made a new all-time high on Thursday, but may have been repelled by its Cycle Top at 207.67. Should it decline further, a sell signal may be confirmed beneath Long-term support at 193.92. It appears to have finally joined its passive ETF brethren that have made new highs.

(Forbes)  For fixed income investors, 2018 has been a bit of a rocky road. While the S&P 500 is up 10.3% year-to-date, the fixed income landscape has had its share of difficulties. U.S. high yield has managed to quietly miss much of the pain that has hit Emerging Market Bonds, as well as higher quality U.S. corporate bonds and U.S. treasuries. U.S. high yield, as represented by the iShares iBoxx High-Yield ETF (HYG), is up +2.09% year-to-date. Meanwhile, unhedged emerging market bonds, as represented by the VanEck Vectors JP Morgan Local Currency Bond ETF (EMLC), are down year-to-date around -11.2%. U.S. dollar-hedged emerging market bonds, using the iShares JP Morgan U.S.D Emerging Market Bonds ETF (EMB) as a proxy, while faring better were still down almost -5.6%. The difference between hedged and unhedged emerging market bonds shows how strong the U.S. dollar has been recently.