VIX appears to have completed the right shoulder of an inverted Head & Shoulders neckline at 16.28. It is on a buy signal above Long-term support at 13.01.  A breakout above the neckline suggests that the Ending Diagonal formation may also be at risk of a breach. An actual change in long-term trend may occur above the top trendline of the 15-month long Ending Diagonal formation at 18.00.  

(SchaeffersResearch)  Last week, we noted that the CBOE Volatility Index (VIX) was sitting on its second-largest year-to-date percentage gain for this point in the year, going back 10 years. As of yesterday’s five-month high of 16.28, however, the VIX had topped its 2014 high-water mark, racking up its largest January-to-mid-April gain in at least a decade, up nearly 16%, according to Schaeffer’s Quantitative Analyst Chris Prybal. For comparison, the S&P 500 Index (SPX) sports a relatively mediocre year-to-date lead of roughly 5%.

SPX consolidates between support and resistance

SPX bounced from its weekly Intermediate-term support at 2327.20, but was repelled by its Cycle Top resistance at 2354.64 and beneath the trendline of the Orthodox Broadening Top near 2365.00. The SPX is on an aggressive weekly sell signal. A break of Intermediate-term support may send the SPX to its cycle Bottom at 1876.38, or possibly lower. The MACD crossover (below) indicates a probable bearish start to the negative seasonality beginning in April.

(Bloomberg)  U.S. stocks were little changed as investors assessed the French vote this weekend and after the benchmark gained as U.S. Treasury Secretary Steven Mnuchin said plans to reform taxes have progressed.

The S&P 500 lost less than 0.1 percent at 10 a.m. in New York. The benchmark rose 0.8 percent on Thursday as financial and industrial shares climbed. The Dow Jones Industrial Average added 22 points to 20,601.

NDX bounces off its trendline

NDX bounced from Short-term Support at 5391.74 and the trendline of the Orthodox Broadening Top at 5365.00.  A loss of that support may create a sell signal in the NDX with a subsequent decline testing lower supports.  A decline beneath mid-Cycle support at 4630.78 may bring a potential change of trend with it.  

(WolfStreet)  No one knows the full magnitude, but it’s huge.

How big is margin debt really, and how much of a threat is it to the stock market and to “financial stability,” as central banks like to call their concerns about crashes? Turns out, no one really knows.

What we do know: Margin debt, as reported monthly by the New York Stock Exchange, spiked to another record high of $528 billion. But it’s only part of the total outstanding margin debt – which is when investors borrow money from their broker, pledging their portfolio as collateral.

An example of unreported margin debt: Robo-advisory Wealthfront, a so-called fintech startup overseeing nearly $6 billion, announced that it would offer its clients loans against their portfolios.

High Yield Bond Index declines beneath Intermediate-term support

The High Yield Bond Index declined beneath Intermediate-term support at 165.77, further confirming a sell signal. The Cycles Model suggests weakness ahead that may last the entire month of April.  

(MarketRealist)  Bill Gross on high-yield bonds

In the previous part of this series, we saw that Bill Gross believes the equity market is “priced for too much hope.” He also believes that all asset classes are elevated to artificial levels. For the high-yield bond market, he believes it’s “priced for too much growth.”

The high-yield bond market is generally considered risky because those bonds have lower credit ratings than other investment bonds such as Treasury bonds and corporate bonds. High-yield bonds generally pay higher and thus have higher default risks. Startups and capital-intensive companies issue high-yield bonds. Gross believes equity and other riskier assets are priced too high with expectations of growth.

USB breaks out

The Long Bond broke out above its prior 2017 highs and appears to be due for a Trading Cycle low next week. It may pull back to Intermediate-term support at 150.65 before resuming its rally. The Cycles Model now suggests an extended period of strength may extend through mid-May. The mid-Cycle resistance and long-term resistance at 158.36 still appears to be the target, but it may go higher.