December 6, 2019
VIX made a new high not seen since early October, then made an 83% retracement of that rally. It closed above short-term support at 13.45. This allows a resumption of the rally and a potential aggressive buy signal. The Cycles Model suggests new highs may be made by the year-end.
(ZeroHedge) While the VIX still has a fair ways to go before it plumbs the all-time single-digits lows that defined the spectacularly serene equity markets in 2017, FX vol is already there: the JPMorgan Global FX volatility index has dropped to 6 year low levels, and is just shy of all time lows.
SPX Saved (For Now) At The Trendline
SPX sank to Short-term support at 3072.98 and the Broadening Top trendline on Tuesday, then rallied hard back to 3150.33 around mid-day on Friday with only 4 points left to an all-time high. The question is, “Is the cup half full or half empty?” Monday may tell, since the Liquidity Cycle is due to end at its high this weekend.
(CNBC) Stocks surged on Friday on the back of U.S. jobs growth that easily topped analyst expectations as Wall Street wrapped up a choppy week of trading.
The Dow Jones Industrial Average was up 337.27 points, or 1.2% at 28,015.06. Friday’s performance was the Dow’s best since Oct. 4, when it rallied 1.4%. The S&P 500 closed 0.9% higher at 3,145.91 — its biggest one-day gain since Oct. 15 — while the Nasdaq Composite jumped 1% to 8,656.53.
NDX Rises, Closes At A Weekly Loss
NDX found its footing above Short-term support at 8130.14 to rally back through its Cycle Top at 8300.76. Nevertheless, it did not make a new high and closed the week for a loss, despite the rally.
(ZeroHedge) The US and China trade war continues to deepen this week with the increasing chance that a phase one trade deal has been delayed until 2020. In the meantime, we’ve been reporting on a Sino-U.S. technology war developing, something that has been heating up in recent months.
High Yield Bonds Compressed In A Triangle Pattern
High Yield Bonds appear to be trapped in an ever-tightening Triangle formation that may be due for a breakout or breakdown. A decline may take it beneath its 8.2-year trendline.
(Bloomberg) Alan Waxman was just 31 when he made partner on a Goldman Sachs team that bet the firm’s own cash for wild profits. He later co-founded TPG Sixth Street Partners and helped build it into a $33 billion force in credit markets.
In a private conference earlier this week, Waxman, 45, warned investors there’s an epidemic of fake earnings projections that will be exposed in the next economic slump and may even exacerbate it. Too many companies are addicted to making creative accounting adjustments that bump up operating profits known as Ebitda — and investors are turning a blind eye, he said, according to a person with knowledge of his comments.
Have Treasuries resumed their decline?
10-year Treasury Bonds tested their Intermediate-term resistance at 130.16 on Tuesday before selling off for a weekly loss. The Cycles Model suggests some residual strength early next week, then a probable decline through the year-end. Treasury Bonds are on a sell signal.
The yield on the benchmark 10-year Treasury note, which moves inversely to price, rose about 4 basis points to 1.8363% following the jobs report. The yield on the 30-year Treasury bond was also higher at around 2.2813%.
The US Dollar Challenges Long-term Support.
The US Dollar challenged Long-term support at 97.37 before closing beneath Intermediate-term resistance at 97.98. The dollar is on a sell signal with a potential one-month decline ahead. A break of the trading channel trendline at 96.50 signals the beginning of a possible crash scenario.
The Yen Rises Above Long-term Support.
The Yen rose tis week, closing above Long-term Support at 91.84 and Short-term support/resistance at 92.00. This action created a buy signal for the Yen that may last through mid-January.
(Bloomberg) Japan’s Prime Minister Shinzo Abe announced stimulus measures to support growth in an economy contending with an export slump, natural disasters and the fallout from a recent sales tax increase.
The Nikkei Index Struggles Near The Top.
The Nikkei Index attempted a new high on Monday, but could not exceed the high at 26808.08 on November 26. Since the Liquidity Cycle is global, we may see the first reaction to this weekend’s final blow-off in the Liquidity Cycle beginning on Monday. If so, we may see the Nikkei decline in the next month. The possible target may be the 2016 low.
(YahooFinance) Japanese shares closed higher on Friday, a day after its government approved a 26 trillion yen ($239.32 billion) stimulus package to support growth, with the focus shifting to U.S. jobs data that will be out later in the day.
The Nikkei index ended up 0.23% to 23,354.40, buoyed by gains in industrial and financial sectors. The benchmark rose 0.26% this week — its second weekly gain.
The stimulus package is expected to push up GDP by 1.4% through fiscal 2021 and comes as Japan, like other major economies, looks to revive growth through spending as central banks rapidly run out of monetary policy options.
Markets also rose ahead of data expected to show U.S. job creation accelerated last month, which would ease concern about the health of the world’s largest economy.
Gold Fails Its Test Of Short-term Resistance.
Gold challenged its Short-term resistance at 1481.37 on Wednesday before it declined, closing the week at a loss. This action confirms the sell signal that may be in effect through mid-January. Should it decline beneath Long-term support at 1403.79, the decline may accelerate.
(Bloomberg) Goldman Sachs Group Inc. said investors should diversify their long-term bond holdings with gold, citing “fear-driven demand” for the precious metal.
Crude Oil Makes a Three-Month High
Most investors see crude oil prices as a product of supply and demand. However, another view may be that crude prices are easily influenced by liquidity flows. In this case, crude is shown with its Master Cycle peaking with the Liquidity Cycle. If correct, it’s time to prepare for much lower prices, regardless of the news.
(OilPrice) Saudi Arabia shocked the oil market on Friday, with its energy minister Prince Abdulaziz bin Salman pledging to voluntarily cut even more oil production than its new quota, according to S&P Global Platts.
Crop Prices May Be Heading Higher.
Agricultural prices rose above their respective Long-term resistance at 16.05, closing at a new 4-month high. The Cycles Model suggests the new strength lasting through mid-December and possibly the year-end.
(CNBC) A surge in food prices could cause a massive humanitarian crisis as more than half the world’s population is vulnerable to such a risk, Nomura wrote in a recent note.
“The countries most vulnerable to a surge in food prices account for a small portion of the world economy, but make up a much larger share of the world population,” Nomura’s analysts wrote. “A sustained surge in food prices is unlikely to cause a global economic recession, but it could cause a humanitarian crisis on a global scale.”
The Shanghai Index Gets A Short-term Reprieve.
The Shanghai Index got a short-term reprieve rom its decline with a brief burst of strength that carried it toward Intermediate-term resistance at 2923.61. T he Cycles Model suggests that the period of strength may extend through Wednesday before resuming the decline. If so, a possible target may be Long-term resistance at 2948.83.
(ZeroHedge) Chinese Ministry of Commerce spokesman Gao Feng confirmed to reporters on Thursday what the Global Times had already leaked previously, namely that tariffs must be reduced by the US to reach a phase one trade deal, reported Reuters.
“The Chinese side believes that if the two sides reach a phase one deal, tariffs should be lowered accordingly,” Feng told reporters.
The Banking Index Is Riding The Liquidity Wave.
The only problem is that the Wave may be about to crash into the rocks. The Cycles Model shows the Liquidity Surge may be ending the weekend. If so, the top may already be in…or about to peak early this coming week. Good luck with that!
(Bloomberg) As Deutsche Bank AG nears its end-of-year decision on bonuses, one question looms large for Chief Executive Officer Christian Sewing: How much can he afford to pay to keep top investment bankers?
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