VIX rallied above its Cycle Top support at 19.51in a confirmed buy signal. The Cycles Model shows a likely surge in strength for the VIX through late October.

(CNBC)  Wall Street’s favorite fear gauge, the Cboe Volatility Index, hit its highest level since mid-February as traders accelerated stock selling during Thursday afternoon.

The VIX hit a high of 28.84 after 2 p.m. ET, its highest level since Feb. 12, 2018.

The VIX measures the prices of put options on the S&P 500 versus the prices of call options. A rising VIX theoretically means investors are getting more concerned about the market and placing more bets to protect themselves.

SPX closes above Long-term support

SPX challenged Long-term support at 2763.66 before closing modestly above it but beneath its 2.5-year trendline. This may give stocks a temporary respite from the decline but an important resistance has not been overcome. Failure to maintain that level implies a continuation of the sell signal.  The Cycles Model now implies a powerful decline with increased volatility that may last through late October. Next week is options expiration week which may magnify market volatility.

(Bloomberg)  You could write it off as a fluke in February. When it happened again in March, people got concerned. Now stocks are tumbling a third time in 2018, and investors are starting to sense something has changed.

A smattering of 3 percent plunges may not make a bear market, but it sure is a break from the past, which saw only three such ruptures over six years. Selloffs are getting more common — though no easier to withstand. Tech has been bleeding red, Trump is railing at the Fed, and stocks that sat comfortably at record highs just three weeks ago have had just one up day in seven sessions.

NDX closes between Long-term support and its 2.5-year trendline

NDX broke through its 2.5-year trendline and Long-term support, but was only able to bounce back above support and not the trendline. The 1.5-year throw-over may now be at risk as the next support may be the 7-year Ending Diagonal trendline at 6250.00. The weakest part of the Presidential Cycle often occurs in October. The Cycles Model agrees that October may be especially hard on stocks.

(ZeroHedge)  The sell-off post-mortems continues, and with human action seemingly unable to explain what happened on Wednesday and Thursday, especially at or around the 3pm selling peak observed on both days, attention is now focusing on quants, algos and other machines that may have been involved in indiscriminate selling.

To be sure, we noted on both days that CTAs, or momentum chasing systematic funds, had finally joined in the fray, and once the selling accelerated it was only a matter of time before specific selling triggers were hit on both Wednesday and Thursday. Now old-school – and angry – fund managers are chiming in, with Omega’s Leon Cooperman picking up where the February selloff left, and placing the blame squarely on the machines:

High Yield Bond Index sells down to Long-term support

The High Yield Bond Index appears to have taken out all short-term supports in a two day sell-off, closing just above Intermediate-term support at 197.61. Should it decline further, a sell signal may be confirmed beneath Long-term support at 193.99. High yield bonds are also anticipating further weakness through the end of the month.

(Bloomberg)  Investors pulled $4.9 billion from U.S. funds that buy speculative-grade debt during the past week amid a global sell-off in stocks, rising interest rates and tensions over trade.

The outflow for the week ended Wednesday was the biggest since February, according to Lipper and is the fourth biggest on record.

Investors have grown increasingly concerned over the potential impacts of a trade war. Strong labor markets and economic growth have made them wary of faster-than-expected rate hikes by the Federal Reserve, worsening the pain for speculative-grade borrowers.

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