VIX challenged the two-year trendline and mid-Cycle support on Friday morning to complete an extended Master Cycle low. The correction finally appears to be complete and a rally above Short-term support/resistance at 15.82 may put the VIX back on a buy signal. The next Cycle Top may occur in the next 2-3 weeks.

(ZeroHedge)  Heading into this morning's payrolls data, a few traders noted the sudden plunge in liquidity (which is normal) but chaotic noise in equity futures trading and even more so in VIX.

As soon as the data hit, VIX suddenly flash-crashed from 16.75 to 13.31...

Which just happens to be the 100-day moving average...

Bloomberg notes that it appears an options trader dubbed the "Elephant" has returned to close out a portion of a March three-way trade.

SPX runs up to the Cycle Top and Upper Trendline

SPX made another run up to challenge the upper long-term trendline and Cycle Top resistance at 2796.71. Last week I suggested that Long-term support may be tested without a breakdown. Instead, Intermediate-term support was challenged, but held. The Model now calls for a new challenge of the supports with possibly different results.

(Reuters) - A marked shift toward protectionism by President Donald Trump caused sharp outflows from U.S. large-cap stocks this week, Bank of America Merrill-Lynch (BAML) strategists said on Friday.

Investors rushed into government bonds and other safer assets amid rising fears of an international trade war after Trump’s plans for tariffs on imported steel and aluminum met barbed responses from allies and trade bodies.

Overall, investors pulled money out of equities, though the damage was mostly in the United States where $10.3 billion flowed out of U.S. equity funds, while global equity funds suffered just $0.4 billion of outflows, according to EPFR data cited by BAML.

NDX makes a new all-time high

The NDX found its legs at Short-term support at 6818.70 to rally back above its upper Diagonal trendline. Investors are giddy, but the NASDAQ is not confirmed by the other indexes nor its own indicators. Either NDX and the other indices make new highs on Monday (confirmation) or the NDX may retest the lows along with the others (non-confirmation) over the next few weeks.   

(CNBC)  U.S. stocks surged on Friday, pushing the Nasdaq composite to a record, after February jobs growth far exceeded expectations.

The tech-heavy advanced 1.8 percent to 7,560.81 and hit intraday and closing records, erasing the losses from last month's correction. The Nasdaq 100, which is made up of the 100 largest companies in the Nasdaq composite, also reached a record high. Friday marked the first time since Jan. 26 that either index reached a record high.

Shares of Facebook, Amazon, Netflix and Google helped lead the gains.

High Yield Bond Index stalls in its consolidation zone

The High Yield Bond Index stalled in its consolidation zone without making a new high. The sell signal remains and the Cycles Model suggests that Long-term support at 181.68 may be broken this week. This action is a glaring non-confirmation of the bull market, since high yield bonds have a high correlation with equities.

(Bloomberg)  In early February, most of the investing world was watching stocks take a tumble. Matt Pasts, the manager of BTS Tactical Fixed Income Fund, which was invested almost entirely in junk bonds, studied a computer model used by his small investment firm in Lexington, Mass. The model gave him a distress signal: Sell. On Friday, Feb. 9, Pasts sold all of his $900 million mutual fund’s high-yield bond investments so that the fund was fully in cash.

BTS Asset Management Inc. employs no credit analysts to study the fundamentals of bonds. Pasts is a market timer, trying to suss out whether the whole high-yield asset class is going to rise or fall in value. He watches trend and momentum measures, such as the moving average of the price of exchange-traded funds that track the junk bond market. When not in junk, BTS is either in Treasuries or cash.

UST may be in danger of losing Cycle Bottom support

The 10-year Treasury Note Index traded in a very narrow band as its hovers close to Cycle Bottom support at 120.21. Normally we may expect a retest of the Head & Shoulders neckline near 122.85. However, the Model shows extreme weakness that may turn into a rout for bonds over the next two or more weeks.

(ZeroHedge)  10Y Treasury yields are back above 2.90% - the highest since spiking on Powell hawkish comments- and back into what some have called the 'danger zone' for stocks...

Last month's payrolls print (blue rectangle) prompted a spike in yields which sparked a drop in stocks and the collapse of XIV and the short-vol trade...

This time is different... for now.

The Euro makes a round trip above the Cycle Top

The Euro appears to have completed a retracement above its Cycle Top at 123.23, then closed beneath it.  A further decline beneath the trendline and Intermediate-term support at 121.13 may issue a sell signal for the Euro. However, should Short-term support at 122.91 hold, the Cycles Model suggests strength may return over the next two weeks, implying new highs.      

(ZeroHedge)  While Mario Draghi succeeded in slamming the Euro today by telegraphing his renewed displeasure at the escalating trade wars between the US and Europe while modestly reducing the central bank's inflation forecast, the unmentioned elephant in the room remained front and center: the ECB is rapidly running out of eligible (German) bonds to monetize.

But while Draghi removed the easing bias language in the ECB's statement - hardly a surprise that the central bank won't be buying more bonds in the coming months - there was no discussion of either the timing, sequencing or specifics of the ongoing taper. Instead the ECB appears to have picked Bloomberg as its "trial balloon" conduit du jour, and in a report published moments ago, Bloomberg writes that according to leaked ECB "internal staff calculations on the future path of monetary policy", the central bank projects that asset purchases will total €30bn in Q4, 2018 "according to euro-area officials familiar with the matter."

EuroStoxx pulls back from the brink

The EuroStoxx 50 Index bounced from a probable Head & Shoulders neckline, delaying a breakdown for another week. European stocks remain on a sell signal. The Cycles Model suggests the decline may continue through the third week of March.  

(Reuters) - A strong jobs report out of the U.S. boosted European shares on Friday after a sluggish start to trading, while U.S. tariffs on steel and aluminum hit steelmakers.

It was strong wage growth last month that fanned speculation of faster rate rises in the United States, causing a rout in the bond market and hammering world equities.

But the jobs report for February showed much slower than expected wage growth, soothing investors who had been concerned about a faster rate of inflation.

The Yen pulls back from the neckline

The Yen pulled back from the Head & Shoulders neckline, possibly to retest Short-term support at 92.33. However, there is a week-long window in which the Yen may still rally. During that time, the Cycle Top resistance may be challenged.  

(ZeroHedge)  Having briefly injected some anxiety into markets over reported comments last week about paring back easing in 2019 (which were swiftly denied), Kuroda is likely to err on the dovish side in his comments after BoJ left all monetary policy levers unchanged.

• likely to keep the short-term rate at -0.1% and target for the 10-year JGB yield at around 0%

• also likely to maintain the current pace of purchases of exchange-traded funds and real estate investment trusts

• The BOJ is likely to retain its guideline on the annual pace of JGB accumulation at 80 trillion yen

• Post-meeting comments by Kuroda are likely to be calibrated to avoid stoking upward pressure on the yen. That means he’s likely to avoid specifics if asked again about how or when the BOJ could manage an exit from extreme stimulus.

And that is what we got. All policy levers unchanged.

Nikkei makes a new low, then bounces

The Nikkei found support at the Long-term line to challenge the two-year trendline as it made a Master Cycle low on Monday.  However, it failed to stay above the trendline and now runs the risk of a potential sell-off. A further decline beneath Long-term support at 21229.75 raises the potential for a significant decline by the end of March.

(EconomicTimes)  Japanese stocks rose on Friday as tensions over North Korea eased after US President Donald Trump agreed to a meeting with Kim Jong Un that could come by May, but gains were capped by caution over the coming US February jobs report.

The Nikkei ended 0.5 per cent higher at 21,469.20, In the morning, it was up as much as 2.4 per cent to 21,884.45, the highest since March 1, on the news about North Korea.

The benchmark index gained 1.4 per cent this week.

U.S. Dollar has an inside week

USD struggled this week to stay above trendline and Cycle Bottom support at 89.14. The last week should have been strong for the USD, but barely made it above Short-term support at 89.98. This suggests that the Broadening Top “Point 7” target near the weekly mid-Cycle resistance at 96.11 may be compromised.  The next two weeks show uncertainty, which may leave the USD flat, provided no crisis appears.

(DailyFX)  - This morning’s Non-Farm Payrolls data out of the United States caps off a busy week in an interesting way. The headline print of +313k crushed the expectation of +205k; but disappointing Average Hourly Earnings has helped to temper any bullish drive in the US Dollar. This highlights the importance of inflation data to near-term USD price action, while the longer-term theme of weakness, driven in-part by fiscal policy in the United States, remains a factor of consideration.

- DXY is testing above the 90.00 level, which has been an area that’s given the currency trouble over the past month, as each test above 90.00 up until now has been soundly faded out of USD.

Gold trades “inside” last week’s range

Gold made some large swings, but traded within the prior week’s range. The bounce may have run out of energy, according to the Cycles Model. A larger decline appears to be probable over the next two or more weeks.

(WSJ)  Gold prices swung between small gains and losses before closing higher Friday after the February jobs report showed U.S. employers hired workers at the strongest pace in a year and a half, but the pace of wage growth eased.

Front-month gold for March delivery inched up 0.2% to $1,322.40 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices finished the week up 0.1%, swinging based on moves in the dollar and investor expectations for higher interest rates.

Friday’s report showed slower-than-expected wage growth last month, easing some analyst concerns about the Federal Reserve raising interest rates more quickly than expected. However, the strength of the headline jobs number likely spooked some traders, said Bill Baruch, president of brokerage Blue Line Futures.

Crude is still consolidating between support and resistance

Crude again found its feet at Intermediate-term support at 60.93.  Last week the Cycles Model suggested some volatile swings in crude over this week. Its strength may have passed without new highs. A break of the Intermediate-term support, however, gives crude a sell signal.

(OilPrice)  Baker Hughes reported another 3-rig increase to the number of oil and gas rigs this week.

The total number of oil and gas rigs now stands at 984, which is an addition of 216 rigs year over year.

Despite the overall increase, the number of oil rigs in the United States decreased by 4 this week, for a total of 796 active oil wells in the US—a figure that is 179 more rigs than this time last year. The number of gas rigs rose by 7 this week, and now stands at 188; 37 rigs above this week last year.

The oil and gas rig count in the United States has increased by 60 in 2018.

Shanghai Index has an inside week

The Shanghai Index rallied up to the two-year trendline at 3310.00 on Friday from last week’s low. It may have some residual strength early next week, but the trend is due to change down again. This may set up the Shanghai to retest the February low and possibly the Cycle Bottom at 2797.43 in the coming weeks.   

(ZeroHedge)  As we highlighted last night, China has threatened to respond to President Trump's steel and aluminum tariffs with unspecified actions that Chinese officials said could "seriously hurt the international trade order."

And as Axios warned in a piece published Friday, investors shouldn't interpret their lack of details as a sign of an empty threat: Rather, China actually has far more leverage with which to retaliate against the Trump tariffs than it did when George W Bush briefly imposed tariffs on imported steel in the early aughts. Back then, Bush rescinded the tariffs, it's widely believed, because the European Union threatened targeted sanctions that would hurt swing states like Michigan and Florida - states that Bush needed to carry during his 2004 campaign. Unsurprisingly, the EU is embracing a similar strategy this time around.

But today, China's ability to retaliate now rivals that of the entire European Union - which means this could be the last time the US can "set the agenda" in terms of its relationship with its largest economic rival.

The Banking Index makes a lower high

BKX rallied back to recover lost territory from last week’s plunge, but could not exceed the prior week high at 116.27.  While BKX could sprint higher on Monday, there is nothing in the Cycles Model suggesting it. A break of Intermediate-term support at 109.49 gives a sell signal.

(Forbes)  Amazon Wants to Make it Easier to Shop its Website Without a Credit Card

Amazon is in early talks with financial institutions including J.P. Morgan Chase to help launch checking account-like products, aimed at younger customers and those without bank accounts. This is the latest move by the e-commerce giant to solve one of the biggest barriers to shopping on its website: lack of a credit card. More than a quarter of U.S. households have no or limited access to checking and savings accounts. These so-called unbanked and underbanked households rely heavily cash or checks to fund their purchases, making shopping online difficult.

(WaPo)  A bipartisan Senate bill quickly moving toward passage could allow two of the nation’s biggest banks to reduce the amount of money they must keep on hand as a buffer against collapse by a collective $30 billion, an internal analysis by a top banking regulator has found.

That reduction in capital could weaken one of the safeguards Congress helped put in place after the Great Recession, some banking experts say.

The analysis by the Federal Deposit Insurance Corporation, a government agency that helps oversee the nation’s banking system, found that JPMorgan Chase, which has $2.6 trillion in assets, could lower its required capital stockpile by $21.4 billion, if federal regulators decide the law applies to it. Citigroup, which has $1.9 trillion in assets, could reduce its capital position by $8.6 billion. The analysis was obtained by The Washington Post.

(ZeroHedge)  An increasingly popular type of identity fraud is exceptionally difficult for banks to prosecute: Why? Because the people stiffing the banks don't actually exist.

That's right: It's called "synthetic identity fraud" and it's become a tool for scammers to siphon off hundreds of thousands of dollars without living with the guilt of ruining the credit scores of all those little old ladies.

The Wall Street Journal explained how it works in a recent story: Scammers apply for loans at dozens of banks using made-up information (names, social security numbers etc.) Because these people have no credit history, the loans are typically rejected - at first. But just by applying for a loan, the credit bureaus - Equifax, TransUnion and Experian - save an individual's information, and after a person applies again and again, eventually, these attempts become enough to seemingly will a credit history into existence.

Essentially, the scam exploits one vulnerability of the credit-check system: It's difficult for banks to tell the difference between a person with no credit history and a person whose identity has been made up.