VIX consolidated for a sixth week beneath Long-term resistance while making a double right shoulder to match the double left shoulder of a potential Head & Shoulders formation. It closed above Intermediate-term support at 10.02 but it may take a break of Long-term resistance at 10.93 to generate a buy signal. A breakout above the Ending Diagonal trendline suggests a complete retracement of the decline from January 2016, and possibly to August 2015.  

(ZeroHedge)  Toward the end of the third quarter, as the VIX was plumbing new all time lows – a trend that has largely persisted ever since – we reported that in the latest striking development involving volatility derivative products, the total outstanding Vega across the entire levered and inverse VIX ETP space had reached $375 million, an all time high.

SPX goes parabolic

SPX continues its parabolic rise in an Ending Diagonal formation. A decline beneath its Cycle Top at 2703.58 suggests the rally is over and profits should be taken. Should it break Intermediate-term support at 2616.92 and the trendline nearby, a sell signal may be generated. Should that happen, the decline may continue through the second half of January.  

(ZeroHedge)  With global equity markets now sprinting higher in a furious meltup to daily record highs, one which will most likely not end until the bubble finally bursts, destroying any shred of credibility the Fed and fractional reserve banking have left (while leading to brisk sales of pitchforks) but not before generating countless headlines such as these.

The term of the week is ‘melt-up’ pic.twitter.com/6phpDc47uW

— Mark Constantine (@vexmark) January 12, 2018

… we said – following Bill Dudley’s surprisingly hawkish speech yesterday – that the odds of a surprise rate hike under Jerome Powell are now especially high.

NDX meets its Channel trendline

The NDX rose to meet its Trading Channel trendline this week. A decline beneath the Cycle Top at 6577.12 suggests that the rally may be over.  A further decline beneath lower Diagonal trendline and Intermediate-term support at 6302.44 may produce a sell signal.    

(IBD)  The major market averages looked to end the week on a high note Friday, even as FANG stock Facebook (FB) sold off in the stock market today after making changes to its News Feed. The tech-heavy Nasdaq rose 0.2%, while the S&P 500 and Dow Jones industrial average moved up 0.3% and 0.5%, respectively.

FANG stock Facebook sold off 4% early Friday after the company announced it was shifting its focus within the news feed from sponsored content to friend content. Shares fell below their 50-day moving average line — a crucial support level — before recovering back above it.The stock is also now mildly below a 184.35 flat-base entry. Volume was relatively light on the Jan. 3 breakout day

High Yield Bond Index extends the rally

The High Yield Bond Index may be losing momentum as it extends its rally.  The Cycles Model calls for a loss of strength over the weekend. Perhaps a reversal may be in the making? The rally may be finished should MUT decline beneath the Cycle Top support at 193.07.  A sell signal may be generated with a decline beneath the lower Diagonal trendline at 183.00.

(NYTimes)  The prospect of a strong economy in the United States and a strengthening one in much of the rest of the world is good news for workers and for many companies. But for bond investors, it is a headache.

“We’re not of the view that there is any sector that stands out as extremely cheap on a valuation basis,” said Ashok Bhatia, senior portfolio manager in Neuberger Berman’s Fixed Income Multi-Sector Group.

UST tests a lower neckline

The 10-year Treasury Note Index declined to a low not seen since April 2014. It may have created a lower neckline than was previously shown of a potential Head & Shoulders formation. The Cycles Model now suggests a potential rally through late January that may be quite strong. Should the rally materialize, the minimum target may be mid-Cycle resistance at 127.16 or higher in a panic situation.