E SPX May Pull Back As Gold And Dollar Remain Rangebound

After challenging its mid-Cycle resistance at 14.39 last week, VIX declined to an 85% retracement.  A breakout above the Ending Diagonal trendline suggests a complete retracement of the decline from January 2016, and possibly to August 2015. The December target may be the Cycle Top at 23.46.

(WSJ)  A summary of markets this year requires only two words: Low volatility.

Stocks climbed to repeated record highs at such a leisurely pace that 2017 may be among the least choppy years in history. The Cboe Volatility Index, the market’s so-called “fear gauge,” hit an all-time low and the S&P 500 observed its longest streak without falling more than 0.5% in five decades. There have been zero daily 2% price swings; last year, there were eight.

SPX testing its Cycle Top support

SPX tested its double trendlines and weekly Cycle Top support at 2637.03, closing above the 6-year upper trendline. The Cycles Model proposes a pullback next week. Should it break Intermediate-term support and the trendline at 2543.08, the decline may be severe.  

(Reuters) – Wall Street ticked higher on Friday after a stronger-than-expected jobs data for November showed that the world’s largest economy has gained strength, ahead of a near certain interest rate hike next week.

The Labor Department’s closely watched employment report showed job growth increased at a strong clip in November and wages rebounded.

Nonfarm payrolls rose by 228,000 jobs last month amid broad gains in hiring as the distortions from the recent hurricanes faded. Economists polled by Reuters had forecast payrolls rising by 200,000 jobs last month.

Average hourly earnings rose 0.2 percent in November after dipping 0.1 percent the prior month. That lifted the annual increase in wages to 2.5 percent from 2.3 percent in October.

NDX stalls beneath Cycle Top resistance

NDX declined to challenge Short-term support at 6269.51 then rallied to close beneath its Cycle Top at 6372.23.  A decline beneath the lower Diagonal trendline at 6180.00 and Intermediate-term support may produce a sell signal.    

(NorthmanTrader)  No period is worse for bears than when it’s the best time to sell stocks. It’s the polar opposite of when conditions are worst for bulls, right when it’s the best time to buy as it was in January-March 2009. The exhaustion factor is enormous. It’s called capitulation as moves get stretched to the extreme even though the set-up is valid.

November’s close marked the 13th consecutive month straight up for global markets. Nothing but up with fewer and ever smaller dips in between. Deutsche Bank’s Reid illustrated the point: “We’ve never had such a run with data going back over 90yrs”. I’d say that qualifies as the worst of time for bears.

Yet we could be sitting on a generational opportunity to sell equities as it could be argued that conditions will never be better for bulls as the game of offering carrots of free money is coming to an end. Indeed it could be argued that the prospect of tax cuts is the final carrot the free money scheme has to offer. The carrot top. No more carrots.

High Yield Bond Index stalls at the high

The High Yield Bond Index made a new high on Monday, then declined through Wednesday, closing the week at a nominal new high. A break of the Cycle Top at 187.46 may tell us the rally is over.  A sell signal may be generated with a decline beneath the lower Diagonal trendline at 179.00.

(CFAInstitute)  The Doomsday Moment in Jochen Felsenheimer’s presentation at the 2017 CFA Institute European Investment Conference came during the question-and-answer session, but if you’re new to this game and weren’t in attendance, you’re forgiven for thinking it came earlier.

Felsenheimer, a high-yield and distressed portfolio manager with XAIA Investments, began by warning that his presentation, “The Devil in Disguise,” would be pessimistic. Then he made a strong case that risk in high-yield markets is as high as it has ever been.