E The Punchbowl Just Got Refilled

VIX has been treading water between its 200-day support at 16.58 and 50-day resistance at 21.66 since January 18. ZeroHedge observes, “Traders are becoming increasingly jittery about a potential risk spike in the coming days.

-- The NYSE Hi-Lo Index made an inverted Master Cycle high not seen since last July today as the SPX rally grows long in the tooth.  The Cycles Model suggests that it is overdue for a strong reversal.

(ZeroHedge) From the Mnuchin Massacre lows on Xmas Eve, the US equity market soared on the back of the greatest short-squeeze ('Most Shorted' stocks up a stunning 22%) since the March 2009 lows...

However, the last two weeks have seen 'most shorted' stocks suddenly treading water - providing no underlying lift for stocks which have traded rangebound over the same period...

So did the bulls run out of short-squeeze ammo?

-- The SPX rally surged on Wednesday in a final show of strength. After seven market days of indecision, stocks put in their melt-up rally after the Federal Reserve capitulated to investor demands. A high of 2700.00 may put a stop to the rally if not already complete.  Are the equities markets that fragile?

(Bloomberg) U.S. stocks surged and the dollar tumbled after the Federal Reserve signaled a stark dovish turn in its latest policy statement.

The S&P 500 Index rallied to an eight-week high, the Dow Jones Industrial Average jumped 400 points and the Nasdaq 100 Index added more than 2.5 percent after the Fed said it will be “patient” on future interest-rate moves and signaled flexibility on the path for reducing its balance sheet. Major gauges were already higher on the day as technology shares rallied after Apple Inc.’s results beat estimates and Boeing Co. helped boost industrial stocks.

-- NDX rallied to close just above its 50% retracement value at 6799.00 today. It may go as high as 6880.00, short-term, to complete the Wave structure.   Should it reverse at any time, it will have completed the right shoulder of a new Head & Shoulders formation. If valid, new downside lows may be made. I will publish the target at the break of the neckline.

(Bloomberg) Technology stocks rallied as investors took solace in a forecast from Apple Inc. that suggested the iPhone maker’s sales woes aren’t getting worse.

An exchange traded fund tracking the Nasdaq 100 Index rose almost a percent in extended trading after Apple reported earnings. Semiconductor suppliers such as Micron Technology Inc. and Broadcom Inc. were among the biggest gainers, while tech heavyweights Amazon.com Inc., Facebook Inc. and Microsoft Corp. also rose. Apple jumped 5.9 percent, trading back above where it did earlier this month before warning on weak China sales.

The High Yield Bond Index briefly challenged round number resistance at 200.00 today. The Cycles Model called for a final burst of strength yesterday in the High Yield Index that appears to have shown up today, instead. The new retracement high was not technically confirmed today. 

(ChicagoTribune) Famished and desperate bond bears, starved for what they consider an overdue feast and riled by yet another rally in long-term Treasuries, have lately sniffed out an unfamiliar target: U.S. corporate bonds.

Bond-return tables confirm a dismal year for investment-grade corporate debt. The slice of the market rated BBB by Standard & Poor's trailed junk, municipal and government bond returns in 2018, with a total loss of about 3 percent through early December. Only dollar-denominated emerging-markets bonds did worse.

 

10-Year Treasury Notes tested Cycle Top resistance at 122.22 today. The Cycles Model calls for potential rally over the next week or longer which, in all probability, may exceed the prior high.

(Bloomberg) The U.S. Treasury Department announced plans to issue another record-breaking amount of debt, giving President Donald Trump’s re-election opponents more ammunition as they question whether his tax cuts will pay for themselves.

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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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