The internet has prevailed over bricks and mortar. One startling example has been highlighted by ZeroHedge, “The Macy’s at the Landmark Mall in Alexandria, Virginia used to be an iconic and historic building. In what is now undoubtedly a sign of the times, it has been converted into a homeless shelter until the property can be razed and its owner, the Howard Hughes Corporation, can repurpose the property and build something new at its location.
Even more telling, this homeless shelter houses many of those who used to work at the very same Macy’s.”
Food for thought.
VIX consolidated between the mid-Cycle and weekly Long-term support at 13.24 and the two-year trendline support at 11.95. It completed the week closing at the trendline. It appears to have had a belated Master Cycle low on June 7.
(Bloomberg) “50 Cent” is back. Or at least, a pretty convincing impersonator who spent $5 million on volatility hedges this week.
The mysterious buyer, or buyers, earned the nickname — a play on the rapper Curtis Jackson, known as “50 Cent” — after relentlessly purchasing huge lots of call options tied to the VIX at around 50 cents a pop.
A nearly identical trade was put on over the past two days, likely intended as a hedge, betting that equity-price swings will rip higher with the Cboe Volatility Index sitting below its two-year average.
SPX still battling the two-year trendline.
SPX continues to rally along its 2-year trendline at 2785.00, closing slightly beneath it. The rally is very stretched and may be prone to a sudden reversal. Equities are entering their negative season, so care should be taken to protect profits.
(Bloomberg) Clinging to their own version of “America First,” global investors are tilting further away from European and Asian assets.
Fresh money poured into U.S. equity and bond funds during the week ended June 13, extending the longest net inflow streak for the country’s stocks “since the aftermath of President Donald Trump’s election victory” in 2016, according to a report from EPFR Global. The findings strike a similar note as Bank of America Merrill Lynch’s June survey, which showed fund managers overweight U.S. stocks for the first time in 15 months.
“With growth slowing in China, Japan and Europe while a number of emerging markets wrestle with sharply depreciating currencies, attractive alternatives to the U.S. are in short supply,” Cameron Brandt, director of research at EPFR, wrote in a note.
NDX tests the Cycle Top.
The NDX tested its Cycle Top resistance at 7312.37, but did not challenge it. The Cycles Model suggests that Thursday may have been the last day of strength in equities. If so, the period of weak seasonality may be about to begin.
(ZeroHedge) The last few years have seen the so-called FANG stocks (Facebook, Amazon, Netfliz, & Google (Alphabet)) have dominated the markets…
Which has dragged technology stocks to dot-com peak levels relative to financials…
And this momentum has done what it always does – spark mom-and-pop to chase the quick buck as Tech stocks have seen record inflows as they have emerged as the “defensive growth” sector of the late market cycle…
But while ‘average joe’ is busily loading up on hyper-valued tech in his 401k like never before, insiders at the FANG stocks have been puking their own shares at a record pace this year…
High Yield Bond Index repelled by the trendline.
The High Yield Bond Index peaked on Monday short of its long-term trendline, then proceeded to decline toward its Long-term support at 188.21. MUT remains on a sell signal beneath the trendline. The rally appears to have been a false flag.
(Forbes) The Federal Reserve is tightening monetary policy. U.S. bond yields are rising. The European Central Bank is ending quantitative easing. Italian yields are soaring. Emerging market currencies and bonds are tumbling. European credit markets are cracking. Fixed income investors around the world are nursing hefty losses. Yet the U.S. high yield bond market is acting as some sort of safe haven. How is that possible?
Many factors influence the level of credit spreads. Monetary policy, liquidity, supply relative to demand, and risk sentiment all play a role in determining where credit is priced in the market. The fundamentals of the borrowers, such as corporate leverage, interest coverage and earnings growth, also influence the level of credit spreads. Most of these factors, though, tend to follow the normal economic business cycle. If you know where you are in the business cycle, you can make a good guess as to the direction in which the credit spreads are heading.
UST bounces at Short-term support.
The 10-year Treasury Note Index challenged Short-term support at 119.51, then bounced. The expected test of technical support was expected. If so, we may see UST rally back to the Head & Shoulders neckline near 123.00.
(Sputnik) – Russia sold roughly half of the US Treasury bonds it owned bringing the total to $48 billion, Treasury Department data revealed.
In April, Russia sold $47.5 billion worth of Treasury Bonds, according to the data released on Friday. The sale puts Russia at 22nd place from 16th in the list of US Treasury bondholders.
The sale comes following the two previous decreases. In March, Russia reduced the amount of US Treasury securities it holds, shedding $1.6 billion of treasury holdings.
In February, Russia reduced its US Treasury bond portfolio by a massive $9.3 billion from the previous months. Previously, Russia had been increasing its treasury holdings, which increased from almost $70 billion in March to more than $92 billion in December.
The Euro consolidates.
The Euro pulled back from its bounce last week. It may be gearing up for a higher, more complex bounce toward Long-term resistance at 120.08 after the pullback. Normally a bounce like this may last 2-3 weeks. However, a rally above Long-term resistance may lengthen the retracement.
(Reuters) – The euro on Friday was headed for its worst weekly loss in 19 months after a cautious European Central Bank signalled it will keep interest rates at record lows well into next year.
Following a closely-watched meeting on Thursday, the ECB said it will end its massive bond purchase scheme by the end of this year, taking its biggest step towards dismantling crisis-era stimulus.
The euro briefly spiked to a one-month high of $1.1853 following the announcement.
EuroStoxx loses the challenge at resistance.
The EuroStoxx 50 Index rallied to challenge Long-term resistance at 3515.19, but closed beneath it. It remains on a sell signal beneath Long-term support.
The pan-European Euro Stoxx 600 closed down by 0.8 percent, with all major bourses and most sectors in negative territory. The FTSE 100 in London closed lower by 1.7 percent.
Basic Resources stocks fell the furthest, finishing the Friday session over 3 percent lower. Meanwhile, the Banking, and Oil and Gas sectors were both over 1.8 percent lower. Food and Beverages was the top performer, ending 0.4 percent above the flat line.
Looking across Europe, Rolls Royce led the gains, closing up by 7.6 percent though it had been trading higher earlier in the day. The British aircraft-engine maker raised its cash flow forecast.
The Yen fails to hold at Long-term support.
The Yen gave way at Long-term support at 90.89. A reversal here may spark a possible bounce to Intermediate-term resistance at 92.67 over the next week or so before a resumption of the decline toward “point 6.”
(MarketWatch) The Japanese yen would have been expected to weaken on the Bank of Japan’s cautious policy update, but instead it defended its modest gains against the dollar, as traders deemed trade war fears more important the ultraloose BOJ status quo.
The yen is not just any currency, but one of the world’s favorite havens in times of volatility and uncertainty. On Friday, the U.S. announced new tariffs on Chinese imports, and in turn China promised to retaliate, sending ripples through currency markets. Fears over trade wars stem from the potential hit global growth.
“U.S. and China ‘tariff’ cries usually mean that it’s time to buy the yen,” wrote Viraj Patel, FX strategist at ING earlier. With more tit-for-tat trade rhetoric on deck, “expect dollar-yen topside to run out of steam,” Patel said.
Nikkei rides above the two-year trendline.
The Nikkei continues to challenge the two-year trendline at 22650.00, closing above it. A decline beneath the trendline and Short-term support at 22551.12 renews the sell signal. The potential for a decline over the next two months to the Cycle Bottom is very high.
(Reuters) – Japan’s Nikkei share average rose on Friday after the European Central Bank announced it would avoid raising rates until mid-2019, but chip-related stocks tumbled as a brokerage slashed the target price of Tokyo Electron.
The market had little reaction to the outcome of a Bank of Japan meeting, which kept its short-term interest rate target at minus 0.1 percent, as widely expected, and a pledge to guide 10-year government bond yields around zero percent.
Traders said that investors were cautious about a global trade war, as U.S. President Donald Trump gets ready to impose “pretty significant” tariffs on Chinese goods.
The Nikkei .N225 ended 0.5 percent higher at 22,851.75.
U.S. Dollar may make a new attempt at a retracement high.
USD leaped higher on Thursday after the ECB announcement. The Cycles Model is at a crossroads. A breakout early next week implies a potential inverted Master Cycle near the end of the month. If so, the mid-Cycle resistance at 95.43 may be challenged.
(Reuters) – Speculators’ net short dollar bets rose in the latest week, its second straight week of
increases, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.
The value of the net short dollar positions, derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and
Australian dollars, was $7.42 billion in the week to June 12.
That compares with a net short position of $5.54 billion the previous week.
To be short a currency means traders believe it will fall in value.
.Gold breaks down.
Gold challenged Long-term resistance at 1309.29 on Thursday. It reversed on Friday, crossing the lower trendline of the Broadening Wedge and mid-Cycle support at 1279.45 implying a much deeper low may be in store.
(Bloomberg) Hedge funds just mistimed their gold bets.
Money managers as of Tuesday pushed their wagers on a bullion rally to the highest in seven weeks. The next day, Federal Reserve policy makers signaled more interest-rate increases this year than earlier projected. Gold ended up posting a weekly loss as the dollar rallied.
Bullion has been stuck in the doldrums for most of this year as the outlook for higher borrowing costs dimmed prospects for the metal, which doesn’t pay interest. Even rising trade tensions between the U.S. and China that sent equities and bond yields tumbling Friday weren’t enough to boost gold’s haven appeal as the metal fell the most in 18 months. Geopolitical risks that previously supported prices are also fading after President Donald Trump met with North Korean leader Kim Jong Un.
Crude tests the tendline, loses.
Crude retested the Broadening Top trendline on Thursday as mentioned last week, then declined beneath its Intermediate-term support at 66.02, confirming a sell signal. The Cycles Model now suggests a probable month of decline in oil.
(Reuters) – Oil prices fell more than $2 a barrel Friday after two of the world’s biggest producers indicated they might increase output at next week’s OPEC meeting, while U.S. exports were threatened by potential Chinese tariffs on crude oil and refined products.
Oil investors have been nervous ahead of the coming OPEC summit in Vienna. Saudi Arabia and Russia have already boosted production modestly, and have indicated they were prepared to increase output at that meeting.
Brent crude oil LCOc1 fell $2.50, or 3.29 percent to settle at $73.44 a barrel. U.S. crude CLc1 settled $1.83 lower at $65.06 a barrel. In post-settlement trading, U.S. crude retreated further, falling 2.25, or 3.4 percent, to $64.64 a barrel.
Shanghai Index finally beaks down.
The Shanghai Index is now making new lows, per the sell signal. While the decline is late in the Cycle, the probability of a sell-off is high. High-value pivots are potentially pulling the decline into mid week.
(ZeroHedge) It was just yesterday when we noted the sharp collapse in the Chinese credit impulse, when in May, the PBOC reported that Total Social Financing grew at the slowest pace since July 2016, as a result of a full-blown crackdown on China’s shadow credit system.
Barely 24 hours later, China served not one but two major surprises that were the direct result of the sharp slowdown in China’s credit dynamo.
On Thursday China reported activity data including industrial production, fixed asset investment and retail sales, which missed across the board – in the case of fixed investment the weakest on record – and were the most definite confirmation yet that China’s economy is finally starting to get hurt under the weight of a multi-year crackdown on risky lending that has pushed up borrowing costs for companies and consumers, and has led to a surge in corporate defaults.
The Banking Index bounces at Long-term support.
— BKX challenged Intermediate-term resistance at 109.04 on Monday, temporarily negating the sell signal. However, it fell back through that support on Wednesday and declining further to test Long-term support at 109.07 on Thursday before a short bounce into the close.
(ZeroHedge) Since the Federal Reserve hiked rates, “big” US banks have dramatically underperformed “small” US banks, continuing a trend that has been going on since February…
But it’s broader than that this “big” bank blow-up is global.
The stock prices of 16 of the most ‘Systemically Important Financial Institutions’ (SIFIs) in the world are now in bear market territory (down by 20% or more from their recent highs in dollar terms); and as the FT reports, this has caused Ian Hartnett, chief investment strategist at London-based Absolute Strategy Research, to issue his first “Black Swan” alert since 2009.
(MishTalk) The Fed upped the interest it pays on excess reserves to 1.95% today. This is free money (taxpayer funded) to banks.
The Fed bumped up the interest it pays on excess reserves today to 1.95%. Currently, excess reserves sit at $1.894 trillion.
The math is simple enough. At the current rate, the Fed will hand over approximately $36.93 billion of taxpayer money to banks. That assumes the status quo, but things will change.
Have a great weekend!
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