SPX Surges At Long-Term Support

VIX extended its Master Cycle low at 12.50 on Friday, giving a nod to options expiration. It is in a similar position as it was on the last week of September after making its Master Cycle low on options expiration day.  

(Bloomberg)  The lack of market volatility -- or swings in the prices of securities -- has claimed one of its most high-profile victims.

Argentiere Capital is returning capital to investors from its flagship $940 million hedge fund after years of unsuccessful wagers on rising market turmoil, according to a person with knowledge of the matter.

SPX surges at Long-term support

SPX reversed above Long-term support to retest the 3-year trendline again. The rally is over 11 weeks long with the Economic Surprise Index at a six-year low. The pattern is known as an Expanded Flat, where Wave (C) reaches maximum resistance when it reaches the top of Wave (A).

(ZeroHedge)  After 13 weeks of near constant selling by institutional and retail investors, which as we noted last Friday resulted in the worst start to a year for equity flows since 2008, paradoxically even as the market was grinding ever higher...

(Bloomberg)  That relief investors felt in January when the Federal Reserve took its dovish pivot is showing signs of turning into something bigger.

A feeling approaching bliss was on display this week when ahead of Wednesday’s rate decision the S&P 500 staged its biggest rally of the year and more money flowed into equity funds than any time in 12 months. Rising 2.9 percent, the S&P 500 posted its largest gain of any pre-rate decision week since December 2016.

 NDX soars on retail inflows

NDX soared above Long-term support at 7034.15 Monday, allowing it to rise to a new retracement high. Retail investors rushed in to buy the dip while institutions lightened their stock allocations.

(CNBC)  Four climbing FAANG stocks could be poised for an even sharper rally.

The frequently tied-together stocks of FacebookAmazonAppleNetflix and Google parent Alphabet are outpacing the broader market for 2019, locking in double-digit gains for the year. Two market watchers see more runway ahead of some of the names.

“This week is very important,” Mark Newton of Newton Advisors told CNBC’s “Trading Nation” on Monday. All five FAANG stocks climbed higher this week as of Tuesday’s close.

High Yield Bond Index soars to a new high

The High Yield Bond Index soared this week to a new all-time high. This puts junk bonds in a class all by themselves. Unfortunately, in the search for yield, investors are ignoring warnings of declining covenant protection.  

(IBD)  As investors search for higher returns amid falling Treasury yields, they're pouring billions of dollars into exchange traded funds that track junk bonds.

The $9.3 billion SPDR Bloomberg Barclays High Yield Bond ETF (JNK) has seen seven straight days of inflows — the longest streak in six months. About $1.1 billion has been injected into the fund since March 5, boosting its assets by 13%.

Similarly, the $15.2 billion iShares iBoxx High Yield Corporate Bond ETF (HYG) has seen three straight days of inflows. Investors piled more than $843 million into the fund through Wednesday.

Treasuries are breaking out

The 10-year Treasury Note Index rose above its recent consolidation high at 122.80 and appears to be approaching its December high for a potential breakout. It is currently on a buy signal with a potential target at the Cycle Top resistance at 127.88.

(ZeroHedge)  With both the Dow, and the broader market saved - for now - from an embarrassing Quad Witch slump by news that Boeing is set to roll out a software upgrade for its 737 MAX airplanes (how a software update will fix what many now see as a hardware issue is unclear, nor is it clear how Boeing effectively admitting guilt for the death of hundreds of people which will unleash billions in lawsuits is bullish), bond yields will have none of it and as we showed earlier, the buying ramp across asset classes is the latest confirmation that equities are not trading on fundamentals (as bonds price in the continued deterioration in the US economy), but merely frontrunning QE4.

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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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