VIX rallied to a new 2-month high on Thursday and closed above Intermediate-term support at 15.84, confirming a new buy signal. Analysts don’t seem to be paying much attention to the fact that the VIX is not only above all critical resistance levels (15.84 – 16.34), but also above its 12-month average of approximately 15.90. Things can happen quickly and violently at these levels.

(CNBC) An optimistic jobs report is helping stocks recover from this week’s brutal sell-off, and helping investors shrug off onrushing recession fears as unemployment hits a new 50-year low and payrolls rise by a better-than-expected 136,000.

As the markets breathe a collective sigh of relief, it’s beginning to look like the volatility that flooded in earlier this week might be leaving as quickly as it entered. Just Thursday, the Cboe Volatility Index (VIX) spiked to 21.44 – its highest level in nearly two months – before finishing safely back in the teens.

SPX recovers from a 4.5% decline

SPX declined to 2855.94, with a loss of nearly 4.6% on Thursday before a sharp reversal off the low recovered the bulk of the losses. However, it closed beneath Intermediate-term resistance at 2952.40 and at the trendline of the Diamond formation. This is known as a bearish backtest that may lead to a flash crash with a similar target as “Point 6” of the Orthodox Broadening Top.The Cycles Model suggests a rapid decline ahead. Prepare for a potential “limit down” next week. 

(Bloomberg) U.S. stocks gained along with Treasuries after solid hiring data quelled recession fears without crushing the odds of future Federal Reserve easing. The dollar declined.

The S&P 500 rose the most in seven weeks -- though still suffered its third weekly loss -- after payrolls slightly missed estimates for September, while August’s reading was revised upward. Traders trimmed their bets on the results, but the odds still favored a Fed rate cut this month. Chair Jerome Powell did little to change the speculation, saying Friday the economy “faces some risks” but is overall “in a good place.”

   NDX round trips back to the Diamond Trendline

NDX had a loss of 6.4% in the first three days of the week before flipping higher on Thursday and closing at the Diamond formation for a weekly gain. This action does not nullify the Diamond formation Its target agrees with “Point 6” of the massive Orthodox Broadening Top formation. We seldom have multiple confirmations of the general market direction, but in this case it should put us on high alert for a decline beneath the lower trendline at 7750.00 for a confirmed sell signal.  

(ZeroHedge) A return to macro is on every money managers' mind this week as global equity futures plunge to a one-month low following US manufacturing activity tumbling to levels not seen since the last financial crisis.

And more evidence of global slowdown was found in the latest report from the Semiconductor Industry Association (SIA) on Tuesday, who warned, semiconductor sales are plunging around the world. SIA said worldwide sales of semiconductors were $34.2 billion in August, a 15.9% drop YoY. 

High Yield Bond Index bounces at Diamond trendline support

The High Yield Bond Index declined to test trendline support at 200.00 where it bounced. A decline beneath it invokes a sell signal. The Cycles Model warns the next step down may be a large one.   

(ETFTrends) In recent weeks, Sage has become more cautious on lower-quality corporate bonds. Our caution is based on the following signals.

1. Abnormal Performance – High-yield bonds have performed well on an absolute-return basis this year, returning nearly 12% in 2019. Years of double-digit returns for high yield are rare and are typically followed by much weaker returns the following calendar year.

2. Relative Value – High-yield bonds have dramatically outperformed investment grade corporate debt this year, and particularly in the past few months. The spread premium paid by high-yield bonds compared to investment grade bonds has narrowed to its lowest level in 2019 and is near historic lows.

Treasuries make a steep retracement

The 10-year Treasury Note rallied within 7 ticks of its previous high in a very extended Master Cycle. It appears that the UST Cycle is lining up with the equities Cycle and this rally may be a trap for unwary investors.The Cycles Model suggests the decline may resume through mid-October.

(Bloomberg) The world’s biggest government-debt markets are sending a clear signal that global economic growth is stalling and inflation expectations are fading fast.

That sobering message is evident in tumbling yields on Treasuries and German bunds, in bond-market inflation metrics projecting further declines in price pressures and in a gauge that shows investors see no need for extra compensation to load up on long-term debt. The theme was reinforced Thursday as a surprisingly weak reading on the American service industry compounded the angst from reports showing manufacturing already faltering around the globe.

The Euro probes the Neckline

The Euro declined beneath the Head & Shoulders neckline at 108.50 but closed back above it for the week. It remains on a sell signal that may get further confirmation as it crosses beneath the neckline again. The Cycles Model suggests a period of weakness stretching through the end of October.

(Bloomberg) Russia’s state oil giant Rosneft tendered to sell a cargo of crude, asking would-be buyers to pay in euros for the consignment, just weeks after doing the same for refined fuels.

The company is seeking to sell 100,000 tons of Urals crude from the Baltic port of Primorsk, with delivery late this month, according to a notice on its website. The default currency for the transaction is the euro. Since late August, Rosneft has also sought payment in euros for cargoes of marine diesel and fuel oil.

 EuroStoxx bounces off Long-term support 

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

The EuroStoxx 50 SPDR declined to Long-term support at 36.06 on Thursday. A bounce brought it back above Short-term support, but beneath Intermediate-term resistance at 37.32, setting up for a major decline. The Cycles Model suggests a probable decline through the end of October. 

(CNBC) European stocks recovered ground late Thursday afternoon even as weak economic data compounded uncertainty arising from the U.S. announcement that it would impose billions of dollars’ worth of tariffs on exports from the European Union.

The pan-European Stoxx 600 was 0.01% lower by the close of trade on Thursday. The FTSE 100 in London shed 0.6 percent to finish at 7078.

The Yen rallies above Intermediate-term support

The Yen rallied above Intermediate-term resistance at 93.21, and closed the week above it. It has been a longer than usual shakeout, but may now support a resumption of the rally through mid-October.  

(FXEmpire) Risk aversion is dominating financial markets today after disappointing data from the United States and gloomy outlook from the World Trade Organization (WTO) spooked investors and reinforced concern over decelerating global growth.

Market concerns over the largest economy in the world experiencing a slowdown is sending shockwaves across financial markets, with risk aversion boosting appetite for safe-haven currencies. The Japanese Yen was a trader’s best friend today after appreciating against every single G10 currency. With risk-off the name of the game, the Japanese Yen could take a shot at claiming King Dollar’s throne.

Focusing on the technical picture, the USDJPY is under pressure on the daily charts. An appreciating Yen has sent the USDJPY below 107.50. A solid weekly close below this level is likely to encourage a decline towards 106.90.

Nikkei slammed beneath mid-Cycle support

The Nikkei Index fell beneath mid-Cycle support at 21737.88. A sell signal was given beneath that level. The subsequent decline may last through the end of October,according to the Cycles Model.  

(Xinhua) -- Tokyo stocks ended sharply lower Thursday, with the benchmark Nikkei stock index closing at a three-week low, as sentiment was dented by worse-than-expected U.S. employment data, a comparatively firm yen versus the dollar and concerns over a brewing trade spat between the United States and the European Union.

The 225-issue Nikkei Stock Average dropped 436.87 points, or 2.01 percent, from Wednesday to close the day at 21,341.74.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, fell 27.42 points, or 1.72 percent, lower to end at 1,568.87.

U.S. Dollar falls short of a new high

USD rallied 2 ticks short of its September 3 high, making a probable Master Cycle high on Tuesday. Later in the week it pulled back, testing Short-term support at 98.14. Upon reversing beneath that support, we may see the USD decline through the end of October.

(CNBC) The dollar slipped on Friday after earlier posting gains following a U.S. jobs report that underperformed expectations but was solid overall, as investors remained cautious about political risk in the United States and ongoing trade negotiations with China.

The greenback hit session highs against the yen and euro following the jobs report, after trading lower for most of the session. But by afternoon trading, the dollar’s rally faded.

Data showed that U.S. nonfarm payrolls increased by 136,000 jobs last month. August data was revised to show 168,000 jobs created instead of the previously reported 130,000 positions. Economists polled by Reuters had forecast payrolls would increase by 145,000 jobs in September. The unemployment rate dropped to a near 50-year low of 3.5%.

Gold bounces at Cycle Top support

Gold declined 4% early in the week to 1465.00 before a rescue rally brought it back up above round number support at 1500.00. Gold is currently on a sell signal beneath Short-term support at 1516.00. This may set a more serious decline in motion that may have bigger implications with a possible four weeks of a bear market.  

(KitcoNews) - Gold bulls are keeping the drive alive as both Wall Street analysts and Main Street investors remain firmly bullish on the yellow metal as the price has managed to regain the $1,500 level heading into the weekend, according to the latest Kitco News Weekly Gold Survey.

For many analysts, gold’s ability to recoup a 2% loss at the start of the week and regain what became a critical psychological level is a sign of strong resilience in the marketplace. Many analysts have noted that growing recession fears and financial market uncertainty continue to support gold prices in the near term.

“Everywhere investors look there is another worry,” said George Gero, managing director with RBC Wealth Management. “The U.S. dollar remains the biggest headwind for gold, but this uncertainty should continue to support prices around $1,500.”

Crude declines nearly 20% in three weeks

West Texas Crude continued its decline through the Broadening Wedge trendline at 52.50 by mid-week. It recovered in the last two days to close above the trendline. The Cycles Model suggests that the decline may continue through October options week.

(OilPrice) The US oil and gas rig count fell for the seventh week in a row this week, decreasing by 5, according to Baker Hughes, but US oil companies are still pumping oil at record rates.

The total oil and gas rig count now stands at 855, 197 down from this time last year.

The total number of active oil rigs in the United States decreased by 3 according to the report, reaching 710. The number of active gas rigs decreased by 2 to reach 144.

Oil rigs have seen a loss of 151 rigs year on year, with gas rigs down 45 since this time last year, compared to 858 and 187 active rigs, respectively, at the beginning of the year.

Agriculture Prices break out of the consolidation

The Bloomberg Agricultural Subindex broke above its consolidation level and is on a buy signal above Short-term support at 38.00. This action proposes a potential “buy the dip” opportunity as the rally develops legs.

(AgWeb) The grain markets jumped higher this week. November soybeans leaped 33¢ for the week ending Oct. 4, while December corn jumped 13¢. December wheat was up nearly 4¢.

Part of this week’s boost in prices was the quarterly Grain Stocks report USDA released on Monday, Sept. 30. USDA reported old-crop corn stocks in all positions on Sept. 1, 2019, to be 2.11 billion bushels, which is down 1% from a year ago. At 753 million bushels, on-farm stocks are up 22% from last year, while off-farm stocks, at 1.36 billion bushels, are down 10%.

Old-crop soybeans stored in all positions on Sept. 1, 2019, totaled 913 million bushels, up 108% from Sept. 1, 2018. On-farm soybean stocks are at 265 million bushels, up 162% from a year ago, while off-farm stocks, at 648 million bushels, are up 92% from last September. 

Shanghai Index wraps up Golden Week celebration

The Shanghai Index declined beneath Intermediate-term support at 2929.29, closing beneath it for the week. It has given a potential sell signal after giving up all near-term strength. The Cycles Model suggests another two weeks of decline  

(ZeroHedge) We saw a mix of headlines last week that indicated the Trump administration was reviewing investment limits for China. Bloomberg first reported on Sept. 27 that Trump wanted to delist Chinese companies from US stock exchanges. Then by Sep. 29, the White House denied the story. 

The uncertainty triggered the head of the New York Stock Exchange (NYSE) on Oct. 3 to comment on the threat of delistings, reported Reuters.

Stacey Cunningham, president of Intercontinental Exchange Inc-owned NYSE, warned delisting Chinese companies from US exchanges would be disastrous for Wall Street banks because it would suggest these multinationals would gravitate to other exchanges in the world.  

The Banking Index declines beneath the Diamond trendline

BKX began its decline at the lower trendline of the Diamond formation at 101.00, triggering that pattern and a 7.4% decline. The decline bottomed on Thursday, producing a 50% retracement to Intermediate-term resistance at 97.22. It has given a sell signal that may last through the end of October. 

(Bloomberg) They’re the big dogs of modern mergers and acquisitions—rapacious dealmakers that have devoured mighty corporations, bankrolled young disrupters and upended entire industries. And they’re not looking so tough anymore.

Since 2014, when the latest wave of mergers and acquisitions began to build, three names have inspired fear and envy in the M&A world. In doing so, each has been totemic of a particular vogue in the capital markets:

• 3G Capital, the Brazilian investment firm that has picked off some of America’s most famous brands and aggressively squeezed out costs and jobs

• Valeant Pharmaceuticals, the ill-fated Canadian company that gobbled up drugmakers, drove up prices and fueled outrage over high prescription costs

• And SoftBank, the big-dreaming—and big-spending—Japanese conglomerate that has backed the likes of Uber and WeWork and remains one of the most powerful forces in Silicon Valley

From the start, the three M&A powerhouses adopted wildly different strategies. But for any investor, the similarities deserve attention. Wall Street believed them and their many imitators to be exceptional. Turns out, they weren’t, and aren’t. 1

(ZeroHedge) SoftBank Group founder and CEO Masayoshi Son is having tremendous difficulty attracting new investors to his Vision Fund 2 amid new developments that his current Vision Fund is taking a beating after the WeWork implosion and sliding valuations of its other major investments, according to several of Reuters' sources. 

Despite the implosions of Vision Fund's investments in the last several months, Son's top advisors are urging the billionaire to halt Vision Fund 2, two people with information of SoftBank's internal discussions told Reuters.

The spectacular implosion of WeWork's valuation over the last month has severely damaged Son's reputation and leads Reuters to believe that Vision Fund will experience a significant writedown in the coming quarters.

SoftBank/Vision Fund plowed nearly $10 billion into WeWork, investing some of that capital at a $47 billion valuation in 1Q19. But since WeWork's IPO was shelved, the startup is now only worth $10-12 billion.

 (ZeroHedge) Back on July 1, almost a month before the Fed, Goldman first indicated what is coming when it cut the the interest rate on its popular Marcus savings account from 2.25% to 2.15%. 30 days later, Fed Chair Jerome Powell followed.

Two months later, and less than three weeks before the September FOMC meeting, Goldman cut rates again from 2.15% to 2.00% in the process assured a second rate cut from the Fed. Sure enough, when the FOMC followed in mid-September, Powell dutifully did precisely what Goldman hinted a few weeks earlier it would do.

Fast forward a little over a month to today, 4 weeks before the October 29-30 FOMC meeting, when moments ago Goldman's Marcus cut rates for the third time, from 2.00% to 1.90%, - hardly just a "mid-cycle adjustment" - and telegraphing that not only is a third rate cut from the Fed now 100% assured, but more will follow.