SPX Makes A New All-time High

VIX completed a 78.6% retracement from its August 15 high, a normal retracement for the VIX. The probe above critical support at 13.10 triggered a probable buy signal in the VIX. The Cycles Model shows a likely surge strength for the VIX through late August and mid-October.

(Bloomberg)  Financial markets are god-like in their ability to shrug in the face of extreme policy shifts. The conflagrations of Donald Trump’s election and the U.K. Brexit vote were quickly smothered by faith in “synchronized” economic growth, low inflation and central bankers’ willingness to keep interest rates low.

February’s spike in market volatility seemed finally to prove the complacent hordes wrong, only for it to nosedive once more — just as populism kept spreading.

SPX makes a new all-time high

SPX made a new all-time high on Friday, beating out the January 26 high by 3.3 points, earning the title of the longest bull run in US stock market history. This begs the question, what will the markets do for an encore? The last time the SPX made this high, it had a 10-day sell-off. Food for thought.

(Reuters) – The benchmark S&P 500 stock index clinched its longest bull-market run on Friday, closing above its previous January high, as Federal Reserve Chairman Jerome Powell affirmed the U.S. central bank’s current pace of rate hikes.

The S&P had last reached a new closing high on Jan. 26, then retreated more than 10 percent, a correction that lasted until Feb. 8. Friday’s new closing high confirmed that the index’s bull run remained intact.

Speaking at a research symposium in Jackson Hole, Wyoming, Powell said the Fed’s gradual interest rate hikes were the best way to protect the economic recovery, maintain strong job growth and keep inflation under control. His comments did little to change market expectations of a rate hike in September and perhaps again in December.

NDX makes a lower high

NDX continues to drift just beneath the July 25 high at 7511.39. This may be inferred as a non-confirmation to the new highs in the blue chips.  The Cycles Model suggests that the next several months may bring pain to equities. The period of weak seasonality may be about to begin.

(Bloomberg)  U.S. stocks are vaulting back to all-time highs. But the smart money isn’t celebrating.

Instead, they’re nursing pain. Hedge funds have seen returns dwindling even as the S&P 500 Index marches forward in what has become, by some measures, the longest bull market ever. An index tracking the performance of funds focusing on equities has fallen in five of the past six weeks, wiping out gains for the year, according to Hedge Fund Research data compiled by Bloomberg.

How is that even possible? Blame it on a defensive stance and bad-luck bets. Net leverage, a measure of risk appetite among hedge funds, has fallen to the lowest level this year. While the posture would have curbed losses during a market selloff, right now it’s prevented managers from reaping bigger gains.

High Yield Bond Index up against trendline resistance

The High Yield Bond Index continues to rally beneath the trendline to a marginal new 72.6% retracement of the February decline. A sell signal is confirmed beneath Intermediate-term support at 192.46. “Flag” consolidations such as this imply a continuation of the previous trend.

UST resumes its rally

The 10-year Treasury Note Index edged higher this week. UST is on a confirmed buy signal. Should it remain above critical support at 120.04, we may see UST rally back toward the Head & Shoulders neckline near 123.00. This rally may be painful for the speculative short sellers in treasuries.

(ZeroHedge)  The US Treasury curve has (infuriatingly for policymakers) refused to reflect any growth hype narrative at all, with the spread between 2Y and 10Y maturities back in the teens – for the first time since 2007.

However, in what Deutsche Bank calls a “landmark moment” the US yield curve has tumbled back below the Japanese yield curve for the first time since Nov 2007…

We are sure the ‘smartest men (and women) in the room’ in Jackson Hole will be doing their best to shrug off this yield curve collapse as ‘different this time’, but we suspect deep down they all realize that one more hike priced into the short-end and the curve is inverted.