VIX rallied to challenge the mid-Cycle resistance at 14.14 before closing beneath it.  VIThe Cycles Model suggests an approximate three week period of strength ahead. A rally above the mid-Cycle resistance may result in a buy signal.

(Bloomberg)  As equities surge to all-time highs, volatility has all but vanished. Hedge funds are betting the calm will last, shorting the Cboe Volatility Index, or VIX, at rates not seen in at least 15 years.

Large speculators, mostly hedge funds, were net short about 178,000 VIX futures contracts on April 23, the largest such position on record, weekly CFTC data that dates back to 2004 show. Commonly known as the stock market fear gauge, aggressive bets against the VIX are, depending on your worldview, evidence of either confidence or complacency.

SPX continues challenging the trendline

SPX continues testing the 2.5-year trendline originating from the 2016 election for a third week. It has not breached the September 21, 2018 high on an intraday basis. Strategists consider that point as a breakout to more all-time highs. However, it may be forming “Point 5” in the Orthodox Broadening Top formation, with or without a new high.  A sell signal may be generated beneath Short-term support at 2844.21. “Point 6” lies beneath the December 26 low.

(Bloomberg)  U.S. stocks capped the week with a record close on better-than-forecast earnings. Treasury yields fell after data signaled tepid inflation.

The S&P 500 Index set an all-time high as positive surprises from Amazon and Ford overshadowed disappointments for Intel and Exxon Mobil. Ten-year government bond yields dipped to 2.5 percent following a report showing underlying weakness in the economy even amid faster growth in the first quarter. The dollar pared its second consecutive weekly increase. Oil tumbled.

NDX reaches a new all-time high

NDX has reached a new all-time high under Cycle Top resistance at 7896.31. The Orthodox Broadening Top is still in play. Be aware that this formation occurs at a Primary Degree level which involves some very large moves, as we have already seen. A sell signal awaits beneath Short-term support at 7399.31.

(MarketWatch) A marathon week of earnings from Wall Street’s biggest names is all but over, and what have investors learned?

One big takeaway is that investors have gotten largely what they needed from U.S. results coming in ahead of expectations, says Michael Treherne, portfolio manager at Johannesburg-based Vestact Asset Management.

“These numbers also show just how cheap the market was just before Christmas. The numbers showed us that there is still money to be made by global companies,” added Treherne, in an email.

High Yield Bond Index on a sell signal

The High Yield Bond Index has has begun its decline beneath its Cycle Top resistance at 216.30.  A further decline beneath Short-term support at 209.39 confirms the signal. This concludes a probable point 5 of an Orthodox Broadening Top. Point 6 may be the Cycle Bottom at 160.68. The Cycles Model warns of a probable decline through mid-April.

(Bloomberg)  Every once in a while, there’s a market anomaly that simply hits investors over the head. The latest such episode comes from the riskiest corners of the U.S. corporate debt market.

The yields on junk bonds have collapsed relative to those on leveraged loans. Bloomberg News’s Lisa Lee and Sally Bakewell published their analysis on Thursday at 6 a.m. New York time:

While high-yield bond prices have been surging, loans to junk-rated companies have been lagging, leaving the gap in yields between the two types of debt at just 0.39 percentage point through Tuesday, around the narrowest since 2014. Investors are now willing to accept little or no extra compensation for buying bonds, which are in theory riskier than loans to similar corporations.

Treasuries bounce above supports

The 10-year Treasury Note Index bounced off Intermediate-term support at 122.85 to resume its rally. It remains on a buy signal with a potential target at the Cycle Top resistance at 127.83. The Cycles Model suggests the rally may continue through mid-May.

(EconomicCollapse)  Are you ready to cough up $220,000 to pay your share? One of the reasons why a day of reckoning for the U.S. economy is inevitable is because we are in way too much debt. The 22 trillion dollar debt that the federal government has accumulated gets most of the attention, but the truth is that we would still be 50 trillion dollars in debt even if the national debt was eliminated somehow. Today, debt levels are exploding on every level of society. Corporate debt has more than doubled since the last financial crisis, U.S. consumers are more than 13 trillion dollars in debt, and state and local governments are piling up debt as if tomorrow will never come. According to a Federal Reserve chart that you can find right here, the total amount of debt in the U.S. financial system has now reached an astounding 72 trillion dollars.

The Euro plunges lower

The Euro plunged even lower this week and may be capable of breaking down beneath its Head & Shoulders neckline at 110.00.  If so, the Euro may continue its decline to its target in mid-May.

(Reuters) - After the euro’s slide to 22-month lows against the dollar, investors are scrambling to shield themselves from more weakness as Europe’s poor data contrasts with an upbeat U.S. economy that is sending the dollar surging.

Options markets suggest investors this week bought sizeable downside protection against further euro weakness against the dollar, after the single currency broke below its 2019 low of $1.1177, a level that has opened the door to more selling.

On Thursday, the pair traded as low as $1.1117, the lowest since May 2017. The dollar, meanwhile, soared against a basket of currencies as robust data on jobs and durable goods orders took its year-to-date gains to 2.2 percent.

EuroStoxx declines, tests mid-Cycle Support

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

The EuroStoxx 50 SPDR tested mid-Cycle support at 37.74 it its first show of weakness in a month.  A sell signal awaits beneath Short-term support at 37.15. The Cycles Model suggests 3 to 4 weeks of decline may lie ahead.

(Bloomberg)  So much for an exciting end to the month.

Last week, the Stoxx 50 and the DAX were nearing bull market levels, but after traders returned from the Easter break, it’s as if all the air got sucked out of the market. The Stoxx Europe 600 gauge hasn’t had such a small weekly move this year and the lack of direction is reminiscent of the final few days of 2018.

You’d think the non-stop earnings stream would give the market a direction but, alas, the positive and negative results in Europe were split roughly in half. One thing remained constant: European stock funds continued losing money, with $1.9 billion leaving, according to Bank of America Corp. data.

The Yen makes a new low

The Yen exceeded its March low, making a Master Cycle low on Wednesday.  While making it difficult for the recent investors, the structure of the uptrend has not been violated.  The Cycles Model suggests a rally in strength through the end of May.

(Bloomberg)   Japan’s retail investors have propelled their net long yen positions against the dollar to near a record ahead of the nation’s extended Golden Week holidays.

Margin traders’ net long yen positions were at 208,613 contracts as of April 23, near a record reached just last week, according to the latest data from the Tokyo Financial Exchange Inc. That’s worth $2.09 billion.

As local markets approach a 10-day break, everyone from traders to fund managers has been fretting about the potential for wild gyrations in the yen as liquidity in Asia thins considerably in the absence of bulk of the almost $400 billion daily turnover that Japan witnesses. That’s raised fears of a repeat of the flash crash seen during Tokyo’s New Year holidays.

Nikkei market action forms an “island”

The Nikkei consolidated in an “island” formation above Long-term support at 21897.72.  There is some concern that the island may have been formed by an exhaustion gap. If so, the Nikkei may gap down beneath Long-term support, creating a sell signal.

(Reuters) - Japan’s Nikkei fell on Friday following disappointing earnings from high-tech firms and as market players wound down for a 10-day holiday to celebrate the enthronement of Crown Prince Naruhito.

The Nikkei share average lost 0.22 percent to 22,258.73 points. For the week, the index rose 0.26 percent, its fourth straight week of gains.

Anritsu, one of the best performing shares in the past two years on hopes of 5G-related demand, tumbled 12.8 percent after its cautious earnings guidance disappointed investors.

U.S. Dollar tests the 98-handle

USD rallied to its 98-handle on Friday before easing back for the weekly close. The USD may have yet another week of strength before reaching an inverted Master Cycle high.  

(Bloomberg)  The dollar is defying predictions it would lose its currency crown in 2019.

A gauge of greenback strength compiled by Bloomberg climbed to its highest level this year as most major currencies lost ground against the dollar. U.S. data later this week are expected to show the world’s largest economy is humming along and the rally in the dollar comes as American stocks trade around record highs and investors pile into Treasuries. At the same time, the picture in other major developed economies from Europe and Canada to Australia is looking gloomier.

Gold retests the neckline

Using the mid-cycle support, gold bounced back to test the Head & Shoulders neckline. The Cycles Model suggests another potential week of strength that may propel gold back to round number resistance at 1300.00.  If so, the neckline may be repositioned at this week’s low.

(Kitco News) - Gold investors have something to celebrate heading into the weekend as the yellow metal remained resilient and overcame a difficult week, according to some analyst.

Ole Hansen, head of commodity strategy at Saxo Bank, noted that a lot of negative news was thrown at gold including the U.S. dollar trading at a two-year high and better-than-expected economic data. U.S. gross domestic product grew at 3.2% in the first quarter of 2019.

Despite all the negative news, the yellow metal managed to hold critical support at its 200-day moving average, which currently comes in at $1,267 an ounce. Now analysts see the potential for gold to rise back to $1,300 in the near term.

Crude makes a weekly Key Reversal

Crude made a new retracement high on Tuesday, then sold off, making a weekly Key Reversal. Confirmation of a sell signal lies beneath Short-term support at 61.24.  The Cycles Model suggests the period of strength may go another week, however. Since this is an inversion, it may be strength on the downside.

(S&P GlobalPlatts)  China's crude oil imports from Iran hit a seven-month high in March of 2.3 million mt, or 543,367 b/d, before the expiry of its waiver on the US' sanctions against Iran, the latest data from the General Administration of Customs showed. The highest previous monthly level was 3.28 million mt, recorded in August.

The March volume rose 6.2% from February on a barrels-per-day basis, despite dropping by a quarter from the same month of last year.

The White House announced Monday that the US would end all waivers from Iran oil sanctions when they expire May 2.

Shanghai Index plunges beneath support

The Shanghai Index plunged beneath Short-term support at 3108.10 this week, putting it on a potential sell signal. While there is an opportunity for a bounce next week, it should be used to offload any long positions. The Cycles Model suggests the decline may last through the end of May.  

(Bloomberg)  The worst rout in months for Chinese stocks showed the influence that Beijing’s economic policies still hold over the bull market.

Investors this week got a taste of how much equities are worth without the prospect of additional measures that had helped restore $2.3 trillion to share values since January. Shanghai stocks lost 5.6 percent, the most since October, after the government signaled it will pare back support for the economy amid evidence of a recovery. Sovereign bonds, which are rapidly turning into Asia’s worst performers, also slumped.

It’s a pivotal moment for a world-beating rally in China that’s been underpinned by expectations of more stimulus and ample liquidity. A barrage of earnings from the nation’s largest firms could swing sentiment either way, though the picture isn’t encouraging so far. Traders are also eyeing next week’s trade talks with the U.S., though the closure of China’s markets for a three-day holiday from Wednesday will likely dampen trading.

The Banking Index tests mid-Cycle resistance

BKX challenged mid-Cycle resistance at 100.84, closing above it. However, it fell short of bettering it March 4 high at 102.13. The Cycles Model suggests a probable decline lasting through mid-May.  

(CNBC)  When Apple announced its credit card last month with a big, splashy announcement, Goldman Sachs was a major reason behind it. But you wouldn’t know that based on where the bank’s CEO was standing.

David Solomon wasn’t on stage in Cupertino, California, sharing the spotlight during the product announcement on March 25. Instead, it was Apple’s Tim Cook touting their effort as the most “significant change in the credit card experience in 50 years.” Goldman Sachs’ chief executive stood clapping in a crowd with the other onlookers. The 150-year-old Wall Street bank — responsible for the actual lending part of the credit card — was just a footnote in the presentation.

(Forbes)  The marriage is off. The church has been cancelled, rings have been returned, and the guests have been turned away. Deutsche Bank and Commerzbank have refused to tie the knot.

We don’t know who called it off, though Commerzbank can’t have been exactly comfortable about hitching itself to a bank with more skeletons in its cupboards than Bluebeard’s castle. Both banks merely said that the proposed merger did not make financial sense. “After careful analysis it became apparent that such a combination would not be in the interests of either bank’s shareholders or other stakeholders,” said Commerzbank’s press release. And in an interview with CNBC, Deutsche Bank’s Chief Financial Officer, James von Moltke, said:

We were looking for a compelling financial case in addition to the strategy of pursuing an in-market merger, and over the course of the last several weeks that case just didn’t emerge…it’s a combination of net synergies, implementation costs, the capital impact, and ultimately return for shareholders, and the business case simply wasn’t there.

(ZeroHedge)  Many have wondered if the Fed is ignorant to the problems their policy prescriptions cause, or if they've just resigned to walking society down the path to destruction knowingly. It increasingly looks like the latter. Indeed, the Fed may very well understand that its "lower for longer" policy is leading the economy and global markets straight into disaster. However, as the same time, the central bank - feeling trapped after 10 years of unprecedented stimulus which if undone would result in a historic crash - is backed into a corner and has no choice but to accept this growing risk, as the world's punch drunk central bankers continue to try at all costs to keep the bloated economic "expansion" going.

Indeed, the Fed itself acknowledges this risk, because according to the minutes of the FOMC policymaking meeting from March 19 and March 20. "A few participants observed that the appropriate path for policy, insofar as it implied lower interest rates for longer periods of time, could lead to greater financial stability risks" the minutes read. 

Chairman Powell himself understands very well the risks that he is taking: he has previously pointed out publicly that the last two "expansions" ended in the dot com bubble burst and then the housing bubble burst, according to Bloomberg.