VIX expanded its retracement to 81% in the two week period since its high. While this has allowed market participants to relax about risk, the fact remains that, should it turn higher, it will be immediately back on a buy signal. The downtrend in the VIX is broken. The next Cycle Top may occur in the next four weeks.  

(Bloomberg)  China stopped updating its homegrown version of the VIX Index, taking another step to discourage speculation in equity-linked options after authorities tightened trading restrictions last week.

State-run China Securities Index Co. didn’t publish a value for the SSE 50 ETF Volatility Index on its website Thursday. An employee who answered CSI’s inquiry line said the company stopped updating the measure to work on an upgrade. The move was designed to curb activity in the options market, said people familiar with the matter, who asked not to be identified discussing private information. It’s unclear when the index will resume.

SPX closes flat for the week

SPX began its descent early this week but retraced most of its losses on Friday. It closed just above Short-term support/resistance at 2743.07.  However, it closed beneath last week’s high at 2754.42 leaving this week as an “inside week, denoting uncertainty. The retest of the lows may still be in the cards..  

(Reuters) – U.S. stocks advanced on Friday, buoyed by gains in technology stocks and a pullback in Treasury yields as the Federal Reserve eased concerns about the path of interest rate hikes this year.

The central bank, looking past the recent stock market sell-off and inflation concerns, said it expected economic growth to remain steady and saw no serious risks on the horizon that might pause its planned pace of rate hikes.

Investors largely expect the Fed to raise rates three times this year, beginning with its next meeting in March, the first under new Chair Jerome Powell. Traders currently see a 95.5 percent chance of a quarter-point hike next month, according to Thomson Reuters data.

NDX pushes through its Cycle Top

The NDX closed above its weekly Cycle Top at 6844.05 after finding support at the Short-term support level.  A decline beneath Cycle Top resistance allow the NDX to do a retests of the lower supports. A failure here allows the NDX to decline to mid-Cycle support and the 7-year trendline at 5280.57. A breakthrough at that point suggests a further decline to the October 2011 low.  

(Reuters) – U.S. stocks rallied on Friday, lifted by gains in technology stocks and a retreat in Treasury yields as the Federal Reserve eased concerns about the path of interest rate hikes this year.

The U.S. central bank, looking past the recent stock market sell-off and inflation concerns, said it expected economic growth to remain steady and saw no serious risks on the horizon that might pause its planned pace of rate hikes.

Investors largely expect the Fed to raise rates three times this year, beginning with its next meeting in March, the first under new Chair Jerome Powell. Traders currently see a 95.5 percent chance of a quarter-percentage-point hike next month, according to Thomson Reuters data.

High Yield Bond Index has an indecisive week

The High Yield Bond Index pulled back in an inside week that left no clue what it will do next. The sell signal remains and the Cycles Model suggests additional weakness going forward.

(ZeroHedge)  Despite rebounds in US (and less so European) equities and drops in both regions’ ‘VIX’ measures, the last few days have seen an ominous reawakening in credit markets that is far more systemically concerning than a volatility ETN…

European credit spreads are back near cycle wides…

And it’s not just HY credit, US investment grade credit spreads are starting to crack wider.

UST may have started a bounce

The 10-year Treasury Note Index extended its Master Cycle low to Wednesday and appears to have started a bounce. The target for this bounce may be a retest of the Head & Shoulders neckline near 122.50. The bounce may last 2-3 weeks.