E Master Cycle Highs

VIX confirmed the second Master Cycle low on February 25 with a Key Reversal. While VIX appears to be calm, a rally above mid-Cycle resistance at 16.73 puts it on a buy signal. 

-- The NYSE Hi-Lo Index also put in its Master Cycle high on February 25. A decline into negative territory may spell trouble for equities. 

(Bloomberg) The rally thundering across markets has done more than just drive up prices, it’s pushed down volatility.

Markets around the world have started the year on a tear encouraged by easing trade tensions, a more dovish-sounding Federal Reserve and signs that China is bolstering its economy. And volatility gauges have responded. The CBOE Volatility Index touched its lowest level in four months last week, while the Merrill Option Volatility Index, which monitors Treasury options, is near a four-month low. The JPMorgan Global FX Volatility Index ended Tuesday at the lowest reading since April.

“Volatility instruments have all but completely normalized,” Richard Franulovich, head of FX strategy at Westpac Banking Corp., wrote in a report Tuesday, noting that relative levels of equity, bond, currency and high-yield credit volatility all declined significantly from late last year.

-- The SPX is likely to have made an (inverted) Master Cycle high on Monday above the trendline of its Broadening Wedge Formation. The turn came precisely at the “last chance” .786 Fibonacci retracement level. Today it closed beneath that trendline, suggesting a probable reversal has been made. 

(ZeroHedge) Just days after Warren Buffett lamented in his latest annual letter that prices for businesses possessing decent long-term prospects are "sky high", an insider transaction-based model constructed by University of Michigan finance professor Nejat Seyhun predicts that the S&P 500 will be 3.9% lower in one year as a result of a recent surge in insider selling.

Seyhun, one of academia's "leading experts" on insider transactions, and his trading model were profiled in a recent Barron's article. Barron's had previously covered his work back in May 2017. At the time Seyhun's model was bullish and the S&P has, since then, risen by more than 20%. His model also gave the market "the benefit of the doubt" back in October, during a correction. Since then, the market is about 1% higher. 

What is more notable, is that Seyhun's model has been found to be statistically significant by peer reviewed research. He claims that insider buying and selling data, when researched properly, "does a better job predicting year-ahead returns than almost all of the better-known indicators that are popular on Wall Street."

-- NDX also made its Master Cycle high on Monday, retracing 70% of its decline. Today it challenged its 200-day Moving Average at 7063.44, but closed above it. If it continues to decline lower, this may be an ideal “sell the rally” scenario.

(ZeroHedge) President Trump has made no secret of the fact that he believes tech behemoths like Amazon are anti-competitive, job-killing monstrosities that should be broken up or at least see their influence curbed by regulators. And now, after stocking the FTC with critics of big tech, it appears the committee might be taking the first steps toward breaking up the big tech firms - or at least ensuring that they can't get any bigger.

With the committee still prepping what will reportedly be a "record breaking fine" over Facebook's failure to uphold a guarantee to safeguard user data, Bureau of Competition Director Bruce Hoffman and FTC Chairman Joe Simons announced the formation of a new task force that will scrutinize mergers in the tech space - and even review consummated deals.

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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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Gary Anderson 2 weeks ago Contributor's comment

This arguement linking MMT to socialism is misleading. MMT was also a favorite of capitalist and totalitarian Richard Cheney when he was at war. Remember, it was a Republican who popularized the notion, as Cortez was growing up, that deficits don't matter. So, making it all on the left is just not honest. Cortez is 29. She would have been 14 when Cheney said that in 2002. MMT is wrong, period, on both sides of the aisle.