SKEW is a little known indicator of the desire for “crash protection” by institutional and professional investors. On Monday it hit its highest point…ever. You may wish to read this ZeroHedge article to get the lowdown. Good luck and good trading.
VIX rallied and closed above the 50-day Moving Average at 13.21, confirming the buy signal. The Head & Shoulders formation was negated, but replaced by a Broadening Wedge formation with an appropriate target.
— The NYSE Hi-Lo Index has been on a sell signal since Friday. The decline appears to be underway through October. As of today, there are more NYSE stocks are making new 52-week lows than highs.
- Peak Housing, Peak Autos, a Pivot in Monetary Policy Spell Peak Global GDP and an Economic Slowdown in late 2018 and in 2019
- Watch the Fixed-Income Markets (and the flattening yield curve) That Are Providing the “Tell” that Slower Growth Lies Ahead
- The Buzz of Synchronized Global Growth Has Faded
- What Makes Equities Even More Vulnerable is that the Leading Component of the Markets, ‘FANG,’ Has Become Diminished and Is Now ‘GA’
- Tops Are Processes, and We May Be in That Process Now
— After being repelled at its Cycle Top, SPX declined through the upper 2-year trendline, bouncing from Intermediate-term support at 2803.41. A sell signal may result should the SPX decline beneath that support. Should it do so, the next target may be the lower Diagonal trendline and 200-day Moving Average at 2712.62.
(Bloomberg) U.S. stocks had their worst day in seven weeks Wednesday amid a broad decline in global equities as technology shares were roiled by disappointing results from Chinese internet giant Tencent Holdings Ltd. and copper sank into a bear market, weighing on commodities. Crude oil slipped below $65 a barrel following a report that American stockpiles rose the most since March 2017.
The S&P 500 Index declined for the fifth time in six sessions, while the Nasdaq 100 Index posted the weakest performance among major U.S. benchmarks. Strong retail sales figures did little to mollify investors, as Macy’s Inc.plummeted 16 percent, the most since May 2017, despite beating expectations. Tencent’s first profit decline in at least a decade also rattled emerging-market equities.
— NDX declined from a near-retracement of its all-time high, bouncing from its Intermediate-term support at 7317.40. The COMPQ declined to its 50-day Moving Average before it bounced. The 50-day Moving Average at 7273.53 is critical support. A break there may start a waterfall decline.
(ZeroHedge) In addition to growing fears about Emerging Market contagion (where despite the Turkish Lira’s latest surge, we have seen the Chinese Yuan tumble to fresh one year lows amid a surge in the US Dollar), this morning traders were stunned by Chinese tech giant Tencent, which came out with numbers that were simply awful, missing on the top and bottom line, reporting revenue of CNY 73.7BN, below the CNY 77.7BN expected, More importantly, its profit of CNY 17.867BN was far below the CNY 19.3BN expected, and down from CNY 18.231BN a year ago: Tencent’s first profit drop in a decade.
The news sent Tencent ADRs tumbling to the lowest level since August 2017.
The High Yield Bond Index challenged Intermediate-term support at 194.07, but bounced, closing above that level. A decline beneath its critical supports may invoke a sell signal.
(ZeroHedge) Despite a headline beat on the back of ‘hope’ rising, Empire Fed data shows two disturbing trends – slowing new order growth and collapsing margins as price pressure bites.
Empire Fed New Orders were unable to reach the peak of 2017 and have now faded lower for two straight months…
Additionally, Bloomberg notes that the spread between the New York Fed prices paid index minus the prices received index widened in August for the first time in three months, a sign firms remain under considerable profitability pressure, according to today’s Empire State Survey.
UST may be attempting to rally to mid-Cycle resistance at 120.89 by the end of the week. Should it succeed, a pullback to the 50-day Moving Average at 119.81 may be in order. Should a breakthrough occur, US may continue its rally through the end of August.
(CNBC) U.S. Treasury bond yields have been on a tear this year, and with the Federal Reserve on track to continue raising short-term interest rates, it looks like the trend will continue. But when bond yields rise, prices fall, which has investors worried. “The conventional wisdom on both Wall Street and Main Street is that U.S. Treasuries are one of the worst possible asset classes to own right now,” said CNBC’s Jim Cramer.
However, Cramer thinks that investors shouldn’t be too quick to follow the crowd. The “Mad Money” host enlisted the help of technician Carley Garner, co-founder of DeCarley Trading and author of “Higher Probability Commodity Trading,” to reassess the state of the bond market. Garner believes that “the bears in the Treasury complex have gotten overconfident,” said Cramer.
– The U.S. Dollar may have made its Master Cycle high today. Both time and price have been met or exceeded for “Point 7.” That may trigger the decline toward the Orthodox Broadening Top average target at 70.75.
(CNBC) The dollar has been strengthening so much that some market pros are wondering when the White House will start tweeting about it.
The dollar index was flattish Wednesday but trading near its highest level in more than year, as various currencies, like the South African rand and Mexican peso, were pummeled. But the currency that might get the most attention in Washington is the Chinese yuan, which was weakening on China’s softer economic reports and fears about the economic effects of its trade battle with the U.S.
Dollar/yuan was at 6.93 Wednesday, and it is edging closer to the 7 level that strategists say is technically and psychologically important in the market. It was last at that level in May 2008, and stirred up speculation that the People’s Bank of China could step in to stem its decline by dipping into the offshore market.
–The Yen rallied back above the 50-day Moving Average at 90.15, but ran through the period of strength in the process. “Point 6” may be next on the agenda as the decline resumes.
(Bloomberg) The dollar-yen carry trade just got more appealing for investors, thanks to the Bank of Japan.
The U.S.-Japan policy divergence has gained more prominence with Governor Haruhiko Kuroda’s adoption of forward guidance to convey that rates in the Asian nation will stay extremely low for an extended period. That burnishes the appeal of the arbitrage trade, say Mitsubishi UFJ Kokusai Asset Management Co. and Mizuho Securities Co., given the Federal Reserve’s projection of raising interest rates five times through end-2019.
The carry-to-risk ratio — which compares interest-rate differentials with implied currency volatility to gauge attractiveness of a carry trade — is the best for the dollar among G-10 exchange rates versus the yen.
The Nikkei tested mid-Cycle resistance at 22394.62. Failing that, it reversed course. A Panic Cycle may develop that could be significant should the decline continue beneath mid-Cycle support. Be advised that the decline may not be complete until mid-September.
(Reuters) – Japan’s Nikkei dropped on Wednesday morning as profit-taking hit after the previous day’s sharp gains, though the drops were limited as the yen’s weakness against the dollar aided investor sentiment.
Gaming sector stocks fell due to concerns over delays in new games releases in China, as Beijing halted approvals for licences.
Nintendo Co tumbled 3.0 percent and was the second most traded stock by turnover, while Square Enix and Capcom Co Ltd, which developed “Monster Hunter: World,” slid 2.6 percent and 2.7 percent, respectively.
The Nikkei share average ended 0.7 percent lower to 22,204.22, after soaring 2.3 percent – its biggest one-day percentage gain since March – on Tuesday.
— The Euro declined through its Head & Shoulders neckline after its bounce fizzled. Today it bounced, allowing it to test the neckline at 115.00 in a short bounce. Once accomplished, the decline may resume with a new low by the end of the month.
(Bloomberg) The euro’s bad year could be about to get worse.
The common currency has fallen more than 5 percent in 2018, and analysts see the downward trend continuing even if the market turmoil in Turkey eases. As euro-area growth slows and rate differentials lead investors to unwind bullish euro positions from earlier in the year, Deutsche Bank AG and Nomura International Plc see a possibility the currency will drop as low as $1.10.
“I think $1.10 is the next stop, and we are underweight the euro,” said Alessio de Longis, an OppenheimerFunds money manager, in an interview on Bloomberg TV. “It’s this confluence of factors of weakening growth and rising credit risks that makes this a bit of a vulnerable situation.”
EuroStoxx 50 Index broke below critical support on Friday, setting up the prospects for a decline through the Head & Shoulders neckline. The Cycle Bottom at 3315.50 may offer little or no support as it has already been challenged multiple times.
(CNBC) Shares in Europe closed lower on Wednesday afternoon as concerns over the Turkish currency crisis continued to impact investors’ appetite.
The pan-European Stoxx 600 slipped throughout the day to finish trade 1.5 percent below the flat line. The region’s major bourses were around 1.5 percent lower. Trading flows were sluggish with a number of European markets closed due to a public holiday, including Italy, Greece and Austria.
Europe’s basic resources tanked to close 4.1 percent down. Stock prices have taken a hit as gold fell to a more than 18-month low Wednesday while the U.S. dollar has pushed towards its highest in over a year. This is down to the Turkish lira‘s recent free-fall sparking broader currency market contagion. The ongoing saga of import tariffs being implemented by the world’s major economies has also hit investor sentiment.
— Gold continues to accelerate its decline beneath its Cycle Bottom at 1215.26. The decline may persist through late August. The Head & Shoulders target appears to be a high probability reversal point.
(Forbes) Gold can’t seem to catch a break. The yellow metal normally acts as a safe haven in times of political and economic strife, but in the face of Turkey’s lira meltdown, investors have taken cover instead in the U.S. dollar. On Monday, the stronger greenback pushed gold to end below $1,200 an ounce for the first time since January 2017.
The lira fell to its lowest level ever recorded against the dollar Monday, mainly in response to President Donald Trump’s call to sanction and double steel and aluminum tariffs on Turkey. This sent gold priced in Turkey’s currency to all-time highs. If you recall, we saw the same thing happen recently in Venezuela, where inflation is expected to hit 1 million percent by the end of the year.
Turkey’s faith in gold was on full display this week as President Recep Erdogan urged his fellow Turks to convert their gold and hard currencies into lira in an effort to prop up the country’s hammered currency. The same strategy was used in December 2016, a month after Trump’s election sent the lira tumbling against the dollar..
West Texas Intermediate Crude retested its Diagonal trendline on Monday before resuming its decline to mid-Cycle support at 64.99. WTI is on a sell signal for all investors with a potential low by the end of next week. A likely target appears to be the Cycle Bottom support at 55.95.
(CNBC) Oil prices plunged on Wednesday after government data showed a big, unexpected jump in stockpiles of U.S. crude, compounding pressure as the outlook for global economic growth darkened and the stock market slumped.
U.S. light crude ended Wednesday’s session down $2.03 a barrel, or 3 percent, at $65.01, it’s lowest closing prices since June 6. The contract hit an eight-week intraday low at $64.51.
Global benchmark Brent crude oil fell $1.68, or 2.3 percent, at $70.78 by 2:26 p.m. ET, after hitting a four-month low at $70.30.
The Shanghai Index resumed its decline, but found possible support at the Cycle Bottom at 2716.17. The Cycles Model calls for a brief bounce by the end of the week. The next significant low may not occur until the end of August where it is likely the Head & Shoulder target may be met.
(Bloomberg) From President Donald Trump’s trade deficit complaints to Chinese counterpart Xi Jinping’s concerns about U.S. efforts to contain his country’s rise, a lot divides the leaders of the world’s two largest economies.
But if you lay aside the overarching disputes, five specific sticking points come up over and over among the diplomats, executives and trade negotiators seeking to end the trade war between Washington and Beijing. Problem is, resolving any one of them would require China to rethink a development model that has made the country rich and kept the Communist Party in power long past the Cold War.
— BKX appears to have bounced from its 50-day Moving Average at 107.88 today. A breakdown here puts the BKX on a sell signal. The long consolidation may be finished, allowing the decline to resume through the end of October. European contagion appears to be shrugged off so far.
(Bloomberg) Banks are on alert for new attacks targeting cash in ATMs after the Federal Bureau of Investigation warned U.S. lenders last week of a potential threat.
“The FBI routinely advises private industry of various cyber-threat indicators observed during the course of our investigations,” Lauren Hagee, an FBI spokeswoman, said in an emailed statement. “This data is provided in order to help systems administrators guard against the actions of persistent cyber criminals.”
The method, known as jackpotting, involves installing malware on machines that causes the ATM to dispense all the money it has. Jackpotting has been around for almost a decade and is common in emerging-market countries. It differs from most cybercrime in that it requires physical access.
Until next week…
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