VIX revisited its 2-year Ending Diagonal trendline one week after punching through it during Options Expiration. The move appears reflexive, but this time the VIX did not go beneath the trendline. Re-crossing the mid-Cycle resistance at 13.62 confirms the VIX buy signal.
(ZeroHedge) One of the catalysts cited for the recent breakout in the S&P was the corresponding breakdown in the VIX, which as we noted on Wednesday breached the triangle formation in which it had been trapped since February, sliding to the downside and erasing the elevated levels seen in the post Feb 5 panic.
However, while the VIX has tumbled, the realized vol in the market continues to be surprisingly high. That's the take of Goldman's derivatives strategist Rocky Fishman, who writes today that “the VIX closed yesterday at its lowest level since January”, a level which as he shows in the chart below, is “too low given how much the SPX is moving.“
SPX hits trendline resistance
This week SPX continued its rally toward the 2-year trendline at 2730.00, tagging it on Friday. Some would debate whether it remains on a sell signal. If so, a close beneath Intermediate-term support at 2705.61 re-confirms the sell signal.
(ABCNews) Health care companies led U.S. indexes modestly higher on Wall Street, closing out the market's biggest weekly gain since March.
Drug makers and other health companies ended broadly higher Friday after President Donald Trump announced plans to rein in drug prices that didn't seem to pose immediate threats to health care company profits.
CVS Health rose 3.2 percent and Merck climbed 2.8 percent.
Those gains outweighed losses in technology companies. Chipmaker Nvidia fell 2.2 percent.
The S&P 500 index rose 4 points, or 0.2 percent, to 2,727.
NDX also at the trendline
The NDX also tagged its 2-year trendline, making a 73% retracement of its decline. A decline beneath Intermediate-term support/resistance at 6754.49 restores the sell signal. Declining through Long-term support at 6528.47 confirms the sell signal.
(ZeroHedge) “This is not a time to be rewarded for long market exposure…”
Those are the warning words from yet another billionaire hedge fund manager as expectations of further market disruptions loom.
A day after the largest hedge fund in the world shifts to a net short equities position, as
Ray Dalio's Bridgewater no longer “feels pretty stupid” about being out of US stocks
; Dan Loeb's Third Point puts his money where his mouth is and dramatically increases his short bets.
Market shifts are inherently difficult to anticipate and when they happen, they do not ring a bell but they do blow a dog whistle, as we have said in the past. Our job is to listen carefully and to take decisive action when we suspect change is afoot. We believe that the increase in our short book and our reduced net and gross reflect what we are hearing.
High Yield Bond Index bounces back to the 2-year trendline
The High Yield Bond Index bounced back to the two-year trendline, closing above Intermediate-term support/resistance at 190.13. However, Long-term support may not hold, since the rallies are getting progressively weaker. A broken Diagonal trendline infers a complete retracement to its origin.
(SeekingAlpha) “High yield” is one of those topics that many authors and readers seem to love to wring their hands over. A recent example is this article, on which I commented in an effort to provide some perspective: The High Yield ‘Fear Factor' – Hype Or Harbinger? And this one: Leveraged Loans Major Concern for Janney's Fixed income Chief.
Credit risks abound in all credit investments, like high yield bonds, senior secured loans (sometimes called “leveraged loans”), collateralized loan obligations (“CLOs,” which are securitized vehicles that buy loans), business development companies (“BDCs,” which are companies that lend to small and medium sized companies). But they are nothing new and are the sort of risks that bankers and credit professionals have been analyzing, modeling, managing and projecting for years.
