SPX Rally Stopped At Short-Term Resistance

VIX tested Long-term support at 16.80, closing above it. This has provided a confirmed buy signal.

(Barrons) All hail VIX $20 calls.

With the near-term outlook for the S&P 500 index clouded by the risk of presidential tweets, potential interest-rate cuts, and other factors that could whipsaw equity prices, it’s no wonder this call option has become increasingly popular with investors.

SPX Rally stopped at short-term resistance


SPX rallied to Short-term resistance at 2946.62, but could not surpass it. SPX remains on a provisional sell signal, awaiting a close beneath Intermediate-term support at 2911.25 for confirmation. “Point 6” remains beneath the December 26 low.  

(CNBC) Stocks could be in for a rough second half.

While the major averages are stuck in consolidation mode, spending much of August swinging back and forth on trade and Federal Reserve developments, the sideways action is likely to end soon, says widely followed Wall Street strategist Sven Henrich.

Anything can change at any moment,” Henrich,  founder and lead market strategist of NorthmanTrader, told CNBC’s “Trading Nation” on Tuesday.

NDX rally also rejected at short-term resistance

NDX rallied this week, but was rejected at short-term resistance at 7740.66. From the July 26 peak, there were 6 days of decline followed by 18 days of retracement. NDX was stopped very near the 61.8% Fibonacci retracement level.  

(Bloomberg) Wall Street was a very conservative place politically when I started working in the capital markets in 1999, but it seems to have lurched to the left lately. It’s not only that many of the people who work there have become more liberal, but more importantly, left-leaning behavior by publicly traded companies is being rewarded by the stock market.

The decision by the Business Roundtable, which is an organization led by JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, to explicitly state that the purpose of a publicly traded company is social responsibility and not creating value for shareholders is just the latest example of this lurch to the left. 

High Yield Bond Index bounces off mid-cycle support

The High Yield Bond Index bounced off mid-Cycle support at 198.31, but stopped short of its Long-term resistance at 204.77. It remains on a sell signal. The Cycles Model warns the next step down may be a large one.   

(Bloomberg) Junk-bond investors are pilling onto the safest rung of the U.S. corporate high-yield market, pushing yields to their lowest level in almost two years.

The average yield on BB rated notes fell to 4.05% Monday, the lowest since October 2017. Growing concerns about a shift in the credit cycle are driving traders toward lower-risk securities, according to Lale Topcuoglu, senior fund manager and head of credit at J O Hambro Capital Management.

“Investors are sort of hiding out in these BBs,” Topcuoglu said. “They’re still earning something, but not necessarily taking the biggest credit risk by being in the CCCs.”

Treasuries consolidate

The 10-year Treasury Note Index rallied to a high (131.83) not seen since September 2016, where it consolidated. The Cycles Model suggests the rally may continue through options week. It appears that the bullish impulse is so strong that investors are buying call options to boost returns.

(Bloomberg) It's a subject that just won't go away: Should the U.S. Treasury issue 100-year bonds?

With yields on 30-year U.S. bonds below 2% and much of the yield curve inverted, the conditions for issuing such debt couldn't be more favorable. So it’s no surprise that Treasury Secretary Steven Mnuchin is once again talking up the possibility. In an interview Wednesday, he said issuing ultra-long U.S. bonds is “under very serious consideration.”  

But what about the buyers?

The Euro tests the neckline

The Euro declined to test the Head & Shoulders neckline at 109.60 on Friday. It remains on a sell signal that may get further confirmation as it crosses beneath the neckline. The Cycles Model suggests a period of weakness stretching through the end of October.

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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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