VIX had a wide-ranging but inside week as it consolidated the gains from the previous week. The Cycles Model suggests Cyclical strength may dominate through the end of the month.

(Bloomberg)  No more easy optimism.

After four months of cruising ahead, stocks are facing choppy waters. UBS Wealth Management on Friday advised its clients to buy protection against trade war-fueled volatility, which it says is here to stay. Nomura Holdings Inc. in turn warned that this week’s recovery in global equities could be short-lived and price swings will return in late May.

SPX claws back a large loss, but may have lost the battle

SPX began the week making a new low, but clawed back nearly 61.8% of the losses from the beginning of May. But that may not have been enough. The algos were put to work, attempting to move the SPX above 2900.00 where Dealer/Institutional Gamma Hedging would force the market even higher, but to no avail. SPX closed beneath weekly Short-term support at 2878.92, leaving it on a sell signal. The next potential target, known as “Point 6” lies beneath the December 26 low.

(Bloomberg)  Need a reason to sell? There’s plenty. Seduced by prospects for a big year, a lot of stock investors don’t want to hear them.

While drops like Monday and Friday are getting common, just as notable has been the S&P 500’s resilience. Consider the last two weeks, when five times the index has clawed back more than half of its overnight losses. Instead of bailing, traders are splurging on hedges. Volume in bearish puts is jumping.

NDX caught between Intermediate-term support and Short-term resistance

NDX declined to Intermediate-term support at 7327.07, bouncing back and closing under Short-term resistance at 7567.11.  It is on a sell signal. Cyclical weakness may dominate through mid-June.

(ZeroHedge)  Despite the S&P 500 having made a new all-time high just a few weeks ago, many of the supposed market leaders have not kept pace.

Instead, almost all of the FAANNGs (Facebook, Apple, Amazon, Netflix, Nvidia, Google) peaked out either in the summer or fall months of 2018 and have meandered under those previous highs since then. Why is this important?

For one, these are some of the biggest companies in the world, with four of them occupying a top 10 spot in terms of market cap. Beyond that, it calls into question the significance of the modest new high made in the S&P 500. After all, if the leadership group of the cycle is now all of a sudden struggling to lead, what does that portend for the broader market?

High Yield Bond Index closes above Intermediate-term support

The High Yield Bond Index made a new low on Monday, then proceeded to rally back above Intermediate-term support/resistance at 207.18. It is on a sell signal but needs confirmation beneath that support. Point 6 may be the Cycle Bottom at 161.95. The Cycles Model warns the decline may have legs.    

(Bloomberg)  Goldman Sachs Group Inc. has shifted money to the sidelines of the municipal junk-bond market, waiting for it to crack.

The company’s $7.3 billion High Yield Municipal Fund, the third biggest focused on the riskiest state and local government debt, had about 62 percent of its assets in investment-grade securities by the end of April. It marks the fund’s biggest move ever away from the lowest-rated bonds and a wager that the run-up in prices will reverse as speculative projects start to run into distress, said Ben Barber, head of municipal bonds at Goldman Sachs’s asset management arm, which oversees $62 billion of the securities.

Treasuries gap higher

The 10-year Treasury Note Index gapped higher on Monday and hasn’t looked back. It remains on a buy signal with a potential target at the Cycle Top resistance at 127.85.  The Cycles Model suggests the rally may continue through mid-June.

(MarketWatch) Data on foreign holdings of U.S. government bonds released late Wednesday drew attention amid worries that Beijing could move to sell a chunk of its Treasurys stockpile as a retaliatory measure against the Trump administration’s tariffs.

But market participants say the U.S. Treasury Department’s March data on foreign holdings, in fact, demonstrated why China dumping U.S. government paper would be one of the more ineffective forms of retaliation in a trade dispute. Instead, a rise in overall foreign holdings underlined the appetite for haven assets such as government paper during periods of uncertainty or turmoil.

The Euro trend is still driven by weekly Short-term resistance

The Euro challenged weekly Short-term resistance at 112.37 on Monday but was beaten back, closing beneath it. This may have been the final challenge to resistance before turning down hard, according to the Cycles Model.

(Reuters) - The dollar rose on Friday as concern about next week’s European parliamentary  elections dented demand for the euro, while the British pound dropped to a four-month low on worries about Britain’s exit from the European Union.

The dollar has been favored as a safe-haven currency even as the trade war between the United States and China escalates.  The euro has been hurt this week by Italian Deputy Prime Minister Matteo Salvini's comments that European Union rules harm his country.

Salvini said on Thursday that he would "tear apart" rules that are "strangling" Italy if his party scores well in the elections.

EuroStoxx bounces off Intermediate-term support

Note:  StockCharts.com is not displaying the Euro Stoxx 50 Index at this time.

The EuroStoxx 50 SPDR bounced from Intermediate-term support at 36.71 but was stopped by Short-term resistance at 37.57. A sell signal may have been given this week. The Cycles Model suggests that a probable 2-month decline lies dead ahead.

(Reuters) - European stocks snapped a three-day winning streak on Friday amid global trade jitters after Beijing ratcheted up its war of words with Washington, while the end of Brexit talks between British political parties put a lid on risk sentiment.

The Chinese Communist Party’s People’s Daily used a front page commentary to say the trade war would never bring China down, while talks on Brexit between Britain’s opposition Labour Party and the governing Conservatives ended without agreement.

The pan-European STOXX 600 index fell 0.4%, sliding from Thursday’s 10-day closing peak. The benchmark posted a 1.2% weekly gain, however, its best performance since early April.

The Yen advances briskly

The Yen advanced to 91.73 on Monday before pulling back and closing at a loss for the week. The Cycles Model suggests a rally in strength through the end of May, possibly longer.

(Reuters) - The Japanese yen strengthened on Friday, attracting safe-haven buying amid concerns over trade tensions and impending European Parliament elections.

U.S.-Chinese trade hostilities have had little effect on currencies, but traders have bought the yen, a refuge in times of stress because of Japan’s status as the world’s largest creditor.

“Despite yesterday’s rebound, we are still reluctant to trust a long-lasting reversal in risk appetite. With the U.S. (verbally) attacking China, and China willing to respond, we cannot assume that the worst is behind us,” said Charalambos Pissouros, a senior market analyst at JFD Brokers.

The Japanese currency was up 0.3% on Friday against the dollar at 109.58 and is up around 1.3% this week.

Nikkei makes a new two-month low before bouncing

The Nikkei made a new low on Monday before rallying back to challenge Intermediate-term resistance at 21325.41, closing beneath it. The Nikkei Index may be considered to be on a sell signal. Chart patterns show a potential loss of the past three years’ gains.

(NikkeiAsianReview)  Japan's companies are expected to earn less in combined net profit for the year ending March 2020, as the weakening Chinese economy and the yen's strength take their toll on machinery makers and other exporters.

Total net profits are forecast to fall 1.4% to 28.45 trillion yen ($259 billion) for a second straight year of decline, according to Nikkei, which gathered data from the 1,564 listed non-financial companies that released earnings outlooks through Friday.

Net profit for the manufacturing sector is projected to slide 6% to 15.18 trillion yen, offsetting an expected 4% increase in non-manufacturers' profit to 13.27 trillion yen.

U.S. Dollar rising

USD rose this week, but didn’t tackle any new highs.  However, a decline beneath Short-term support may produce a sell signal.  The Cycles Model suggests a potential decline lasting up to three weeks..

(DailyFX)  The US Dollar accelerated higher last week. A five-day winning streak marked the longest run of consecutive gains in two months, bringing the currency’s value against an average of its major counterparts within a hair of the 2019 high.

The advance ran parallel to rising Treasury bonds while the priced-in 2019 Fed policy outlook moved to a more dovish setting, signaling the markets now see a higher probability of a cut (now pegged at 75 percent). That points to haven demand against the backdrop de-risking as the impetus for gains.

Gold declines from intermediate-term resistance

Gold challenged Intermediate-term resistance at 1300.34 before declining beneath mid-Cycle support at 1277.90, closing beneath it. The infamous 1300.00 was finally tested and found wanting. The neckline at 1267.30 has been repositioned for a new sell signal beneath it.

(KitcoNews) - For some investors the weekend can’t come fast enough, as the gold market has given up all its earlier gains and is preparing to end the week near a two week low.

What started out as a positive week for gold, as investors piled into safe-haven assets due to an across-the-board 2% drop in equities, has ended in shambles with gold prices looking to end the week down nearly 1% since last Friday. June gold futures last traded at 1275.90 an ounce.

According to some analysts, the renewed bearish sentiment for the precious metal could push prices to a new low for the year in the near-term.

“Gold inability to break above $1,300 is an indication that the market is really fragile and I think investors should expect to see lower prices in the near-term,” said Fawad Razaqzada, technical analyst at City Index.

Crude bounces from combination support

Crude bounced at Long-term support at 60.63 and Short-term support at 61.86 to retrace some of its losses but eased back on Friday. Confirmation of a sell signal lies beneath Long-term support. The ensuing decline may last another month once supports are broken.

(Fortune)  Oil markets do not have a reputation for being particularly zen.

Volatile and quick-to-react, crude oil futures have a tendency to swing wildly and sometimes irrationally, often going in exactly the opposite direction oil analysts expect—sometimes for years at a stretch.

So when crude was hit with a “perfect storm” this week—from alleged attacks on Saudi ships in the world’s most important oil chokepoint, to the acceleration of the U.S.-China trade war, to name but two highlights—the market surprised observers once again: by more or less shrugging it all off.

Shanghai Index declines from Intermediate-term resistance

The Shanghai Index could not find a foothold at Intermediate-term support/resistance at 2951.49, selling off on Friday. There was a consolidation during options week, the longer term direction is down. The Cycles Model suggests the decline may last through the end of June.  

(ZeroHedge)  A letter written by He Tingbo, president of HiSilicon, a semiconductor company owned by Huawei, was published on Friday in China. In the letter, which the Global Times described as "touching and which has won public support", He said that employees of the company embarked on the "most stirring journey in technology history in recent years" to make backup products for Huawei and now these products will finally be put to use.  

Or maybe not if Trump gets his way and Huawei is barred from operating in the US, something which the bond market is increasingly concerned about, sending the price on Huawei's dollar bond plunging the most in history overnight.

The Banking Index drops beneath its trendline

BKX fell 4% by Wednesday before a rally to test the trendline granted a slight reprieve from the decline. The Master Cycle low fell on Wednesday, causing a likely short-lived bounce. Caution is the byword. The breakdown in the Diamond formation points to a substantial decline over the next two months.   

(NYT)  The European Commission said Thursday that it had fined Barclays, Citigroup, JPMorgan Chase, Mitsubishi UFJ Financial Group and the Royal Bank of Scotland a combined 1.07 billion euros, about $1.2 billion, for their roles in foreign exchange trading cartels.

The penalty followed billions of dollars in fines that various government regulators levied on major banks in 2014 and 2015 over their participation in the manipulation of the foreign currency market.

The commission’s action stemmed from what it deemed to be anti-competitive practices by two cartels that operated from 2007 to 2013. Previous related investigations by the Justice Department, and by regulators in the United States, Britain and Switzerland, examined criminal misconduct and civil violations and had increased scrutiny of currency trading desks.

(Bloomberg)  The middleman who confessed to paying bribes over trades he helped arrange between Deutsche Bank AG and a Dutch housing firm said he was also getting commission payments from other major lenders, including Barclays Plc, Citigroup Inc., Societe Generale SA and BNP Paribas SA  

Greeven -- who’s at the center of a London lawsuit that turns on what Deutsche Bank knew about the bribes -- said the other firms would also pay commissions to his company on trades they carried out for Stichting Vestia.

Until 2010, he paid Marcel De Vries, Vestia’s treasury and control manager, a share of those fees “on all Vestia trades with all of the banks where I was involved in the Vestia/bank relationship,” he said in filings. Greeven and De Vries -- who was in charge of Vestia’s derivatives trading -- were convicted of bribery in the Netherlands last year. Both are appealing.

(NYT)  The authorities in Germany raided homes and banks around the country on Wednesday in a tax evasion investigation that originated with Deutsche Bank but has widened to involve other lenders.

The raids targeted 11 financial offices in Bonn, Cologne, Düsseldorf, Frankfurt and other cities, prosecutors said. They did not name the banks, but said that some were local public-sector savings banks known as sparkassen, indicating that Deutsche Bank is not the only institution involved.

Deutsche Bank, which the German police raided in November for possible links to tax evasion, said its offices had not been searched on Wednesday.

“The investigations are not directed against Deutsche Bank,” it said in a statement. “Deutsche Bank cooperates with the public prosecutor’s office and voluntarily submits all requested documents.”