VIX bounced out of its Master Cycle low but closed beneath Short-term resistance at 16.49. A rally above Short-term support/resistance may put the VIX back on a buy signal. The next Cycle Top may occur in the next 2 weeks.  

(Bloomberg)  Look out below.

Risk parity funds, a popular strategy that was battered during the volatility shock that rocked financial markets in February, are still the most vulnerable around, said Paul Britton, founder of Capstone Investment Advisors LLC.

“That strategy has been so successful and deserves credit for providing the returns it’s provided, but it’s the weakest hand in the market,” he said in an interview on the sidelines of Wednesday’s Global Volatility Summit in New York. “The strategy has gotten to a size — whether it’s publicly available numbers or what’s embedded within institutions — it’s so enormous that the market’s going to take a run at trying to stress that position.”

SPX is repelled at the Cycle Top and Upper Trendline

SPX made another run up to challenge the upper long-term trendline and Cycle Top resistance at 2804.43. It closed beneath Short-term support/resistance at 2756.04 and at a loss for the week. The Model now calls for a new challenge of the lower supports with possibly different results.  

(ZeroHedge)  One week after US stocks suffered “massive” outflows despite a net inflow into global equity funds while the S&P jumped, everyone is back in the pool as a “wall of money” returned with a vengeance” this week, driving record inflows into both global and US-focused equity funds as concerns around trade dissipated, while billions more were plowed into tech stocks according to the latest weekly fund flow report from Bank of America.

According to BofA CIO Michael Hartnett, a record $43.3 billion was put into equities this week as investors shrugged off trade war risks that had initially sent stocks reeling, even as those very risks returned in the subsequent week and have pressured the S&P lower on four consecutive days.

NDX makes another new all-time high

The NDX peaked at a new all-time high on Tuesday, but sold off the remainder of the week, closing just above round number support (7000). Investors are giddy, but the NASDAQ is neither confirmed by the other indexes nor by its own indicators. The Cycle Model is cautionary should the NDX decline beneath its Cycle Top at 6971.00.  

(Bloomberg)  The rally in the FANG block of tech shares and its megacap brethren just surpassed a dubious milestone.

An index of 10 tech growth shares pushed its advance to 23 percent so far this year, giving the group an annualized return since early 2016 of 67 percent. That frenzied pace tops the Nasdaq Composite Index’s 66 percent return in the final two years of the dot-com bubble.

“Lately, it seems, these stocks can do no wrong,” George Pearkes, a macro strategist at Bespoke Investment Group, wrote in a note. It makes “us wonder if this is a mini-1999 all over again,” he said.

High Yield Bond Index is repelled at a double resistance

The High Yield Bond Index rose early in the week but was stalled under Short-term and Intermediate-term resistance at 194.21. The sell signal remains and the Cycles Model suggests that the trendline and Long-term support at 182.30 may be broken this week. This action is a glaring non-confirmation of the bull market, since high yield bonds normally have had a high correlation with equities.

(Reuters) – Cracks have been surfacing in the junk bond market.

Returns on leading high-yield indexes are down and cash outflows are rising, as are short interest bets against the asset class. In addition, investor protections have shown signs of improvement, suggesting junk bond issuers are being forced to offer better terms to attract interest.

“Valuations are, in aggregate, stretched,” Greg Peters, senior portfolio manager at PGIM Fixed Income, which has $709 billion in assets, said on Monday. “We have definitely taken down our overall risk profile.”