VIX challenged weekly Intermediate-term resistance at 11.96 on Tuesday, then pulled back beneath Short-term support at 11.44 to complete a retracement. An aggressive buy signal may be forthcoming should the VIX rally back above its Intermediate-term resistance. The breakout above its consolidation area may produce a slingshot move.  

(BusinessInsider)  The Federal Reserve said January 22 it is worried about the “low level of implied volatility in equity markets”

• The VIX, a gauge of market fearfulness, has been bouncing around at historic lows

• That seems at odds with the “considerable uncertainty” the Fed expects in US policy

The Federal Reserve is worried that the stock market might be showing signs of complacency. 

SPX reverses at all-time high

SPX rallied through Wednesday, making a new all-time high. A reversal of a throw-over may be a strong indication of a change in trend. A decline beneath the Cycle Top support and Short-term support, both near 2303.00, gives the SPX a sell signal. A break of those supports may send the SPX to its cycle Bottom at 1891.05, or possibly lower.

(RealInvestmentAdvice)  I have a simple question…

If the rally in the market that began following the election was pricing in the expectations for tax reforms, repatriation, building the wall, and infrastructure spending, then what did the rally on Wednesday following Trump’s speech to Congress price in?

With the markets now pushing both a 3-standard deviation extension above the 50-dma AND an almost 9% deviation above the 200-dma, there is little argument of the overbought condition that currently exists.

NDX stumbles

NDX made its all-time high on Wednesday and reversed down on Thursday. NDX is still extended, so a breakdown may not register until it declines beneath Short-term support at 5191.95. However, the Cycles Model suggests weakness through mid-March.

(ZeroHedge)  In yet another awkwardly rational response to government intervention in deciding what’s “fair”, the blowback from minimum wage demanding fast food workers has struck again. Wendy’s plans to install self-ordering kiosks in 1,000 of its stores – 16% of its locations nationwide.

“Last year was tough — 5 percent wage inflation,” said Bob Wright, Wendy’s chief operating officer, during his presentation to investors and analysts last week. He added that the company expects wages to rise 4 percent in 2017. “But the real question is what are we doing about it?”

Wright noted that over the past two years, Wendy’s has figured out how to eliminate 31 hours of labor per week from its restaurants and is now working to use technology, such as kiosks, to increase efficiency.

High Yield Bond Index Slips Beneath Cycle Top Resistance

The High Yield Bond Index also made its high on Wednesday, but slipped beneath its Cycle Top resistance at 170.37 the following day.  A break beneath the Diagonal trendline and Short-term support at 165.33 implies a complete retracement of the rally may occur. The Cycles Model suggests weakness ahead.  

(InvestmentNews)  Your parents probably taught you some basic life lessons. Look both ways before you cross the street. Cover your mouth when you cough. Don’t buy high-yield debt securities when the yield spread between them and Treasuries is too low.

Just as the stock market’s price-to-earnings ratio can be a warning sign, so can the yield spread on junk bonds. And right now, that sign is flashing red.

Junk bonds — or high-yield bonds, the Wall Street name for them when the public is listening — get those high yields because they are issued by companies with suspect credit ratings. The high yields you get are the reward for the possibility, however remote, that the issuer will default and you’ll have to stand in line with other creditors in bankruptcy court.

USB still consolidating

The Long Bond declined beneath Intermediate-term resistance at 150.68, prolonging its consolidation. The Cycles Model now suggests that a period of strength may develop through mid-March. The mid-Cycle resistance at 158.74 still appears to be the target.