VIX challenged its mid-Cycle resistance at 14.54 this week, breaking out above its November 15 high at 14.51. It has since made a 62% retracement. A further breakout above the Ending Diagonal trendlne suggests a complete retracement of the decline from January 2016, and possibly to August 2015.  

(Bloomberg)  The “VIX Elephant” has awakened. And “50 Cent” is back.

At a moment when political tumult is roiling markets, volatility trading patterns closely associated with two high-rolling, but unknown, investors have re-emerged.

First, the trader who’s known as the Elephant for making big moves in the VIX — but who’s been surprisingly quiet in recent weeks — returned with a vengeance to start December, buying and selling more than 2 million contracts Friday to continue betting on a modest rise in the Cboe Volatility Index. That’s three times the average daily volume for all VIX options.

SPX throws over two trendlines

SPX ramped to a new all-time high on Thursday, but gave some of its gains back in a high volume throw-over formation. It appears to have closed beneath the shorter trendline near 2650.00 while still above the long-term trendline at 2630.00.  A decline beneath both trendlines and the Cycle Top support at 2625.68 may break the uptrend.  

(Bloomberg)  Financial markets turned defensive, with U.S. stocks sliding and Treasuries advancing with gold after Michael Flynn pleaded guilty to lying to federal agents. Equities rebounded from the worst of the losses as Senate Republicans edged closer to passing tax cuts.

The S&P 500 Index fell as much as 1.5 percent on news that Special Counsel Robert Mueller’s investigation had pierced the White House inner circle. Equities clawed back more than half the plunge after the Senate said it had the votes to slash corporate taxes, finishing the day lower by 0.2 percent and notching the best weekly advance since early September. The 10-year Treasury yield fell five basis points Friday and Bloomberg’s dollar index slid as investors flocked to the yen.

NDX reverses from a new high

NDX made a new high on Wednesday, but it was downhill from there with a weekly close beneath its Cycle Top and Short-term support/resistance, suggesting the rally may be finished.  A decline beneath the lower Diagonal trendline at 6180.00 and Short-term support are at 6238.40 may produce a sell signal.    

(Forbes)  With the rash of stories about sexual harassment by male media personalities such as Harvey Weinstein, Charlie Rose, and Matt Lauer this month, testosterone-driven events have been making the headlines. While not as well reported in the media, testosterone has also been impacting financial market movements.

Some people think that overconfidence is related to testosterone levels. Certainly, surprise is the hallmark of overconfidence, and the sharp decline in technology stocks this past Wednesday caught many investors off guard. The Wall Street Journal’s coverage of the event emphasized that analysts could find no fundamental explanation for the drop. Trouble is, the magnitude of the tech stock rise over the last two years has also lacked a fundamental explanation.

High Yield Bond Index throws over Cycle Top resistance

The High Yield Bond Index threw over its Cycle Top at 186.64 making a new all-time high.  A break of the Cycle Top and upper Diagonal trendline may tell us the rally is over.  A sell signal may be generated with a decline beneath the lower Diagonal trendline at 178.00.

(SeekingAlpha)  One of my favorite market anomalies is well underway, and it likely has meaningful implications for Seeking Alpha’s fixed income investors. Since the advent of the modern high-yield debt market in the early 1980s, there has been a bankable calendar trade that has persisted. In the table below, readers can see that the highest excess returns over Treasuries in the high-yield market have historically been experienced in January (1.74%). December is not far behind at 1.26% and is the month that most frequently has produced positive excess returns at 85% of observations.