SPX Bounces From The 7-Year Trendline

VIX rallied to a new high on Monday, then pulled back to challenge the inverted Head & Shoulders neckline. The Cycles Model suggests that, while it may take a brief rest, strength may recover in the VIX through the end of January.

(MarketWatch)  It shouldn’t come as a surprise to anyone paying attention that stock-market volatility is on the rise. But here’s a statistic that underlines the phenomenon.

The Cboe Volatility Index VIX, -5.41% commonly known as the VIX and often, if not sometimes derisively, referred to as Wall Street’s fear gauge, was on track Thursday to close above 30 for the fourth day in a row. The index, an options-based measure of expected volatility over the coming 30-day period, traded at 32.92 in recent action, up 2.51 points.

SPX bounces from the 7-year trendline

SPX bounced from the 7-year trendline, avoiding the Bear Market for now. A Bear Market is defined as having a 20% or larger loss. By that definition, the Bear Market begins at 2352.73. More importantly, the 7-year uptrend from the October 2011 low may also be broken at 2350.00, changing the long-term trend as well. It appears that pension rebalancing and others may have saved the day for now.

(ZeroHedge)  Update: and there it is - at precisely 2:39pm, a TICK print of 1775 was registered, signifying the biggest buy program of all time. Now, the only question - is this the real "pension buying" deal... or someone trying to fake out the algos into buying and trapped shorts into covering. The one problem with today's buying fury: a burst of record buy orders only managed to push the Dow Jones 200 points higher, far less than yesterday's 800+ point frenzy, which means that there are far more sellers into this ramp than yesterday.

NDX also bounces from its 7-year trendline

NDX bounced off its 7-year Trendline and out of bear market territory which it closed in last week. The bounce took it back to retest the Head & Shoulders neckline at 6442.36. It appears for now that the Long-term trendline is stronger than a Head & Shoulders formation. There will certainly be a retest of the Long-term trendline very soon.

(Reuters) - U.S. stocks rose on Friday, with gains in defensive sectors including consumer staples and real estate helping extend a two-day rally, although weakness in technology companies capped gains.

The final week of 2018 has seen wild swings in equities, starting off with Wall Street’s worst-ever Christmas Eve drop, followed by Dow Jones Industrial Average’s record 1,000-plus point surge on Wednesday and a stunning rally late on Thursday.

The defensive consumer staples and real estate stocks rose 0.81 percent and 0.65 percent, respectively, to lead the gainers among 11 major S&P sectors.

Technology stocks, which had powered the rally earlier this year and were at the center of the recent pullback, were flat. Energy stocks dipped 0.38 percent, suggesting caution.

High Yield Bond Index bounces at the 7-year Trendline

The High Yield Bond Index challenged mid-Cycle support on Monday, but bounced from its 7-year Trendline on Wednesday. MUT continues to be on a sell signal. The Cycles Model suggests that whatever year-end strength it may have may have been used up by pension rebalancing. The 7-year Trendline is sure to be retested as early as January.

(Bloomberg) Pummeled by expectations of slower growth, outflows and dropping oil prices, junk bonds are poised for their worst returns in more than seven years.

High-yield bonds are returning -2.64 percent in December, on track for the worst month since September 2011. The asset class has lost 2.59 percent so far this year, set for the biggest loss since returns fell 4.47 percent in 2015, according to the Bloomberg Barclays High Yield Total Return Index.

UST rallies on market uncertainty

The 10-year Treasury Note Index rallied during the equities sell-off last week and held those gains even when stocks rallied later in the week. The Cycles Model suggests waning strength next week. Should supports be broken, we may see treasuries tumble for up to 5 weeks.

(MarketWatch)  Treasury yields capped a weeklong decline on Friday after volatile trading in stocks sent investors into the perceived safety of bonds over the holiday-shortened week.

This is the last full trading day of the year for the bond market. The Securities Industry and Financial Markets Association recommends that it close early on Monday, at 2 p.m. Eastern, ahead of New Year’s Day.

The 2-year Treasury note yield TMUBMUSD02Y, +0.00% fell 1.4 basis points to 2.534%, its lowest since July 3. The short-dated maturity logged a weeklong decline of 10.7 basis points, its largest such move since Nov. 16.

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Disclaimer: Nothing in this article should be construed as a personal recommendation to buy, hold or sell short any security.  The Practical Investor, LLC (TPI) may provide a status report of ...

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