SPX: Challenges Intermediate-Term Support
Anthony M. Cherniawski | Sep 18, 2016 05:44AM ET
CBOE Volatility Index broke out higher on Monday, but went into consolidation mode for the duration of options week. It closed beneath mid-cycle support/resistance, but remains on a buy (SPX sell) signal.The next important milestone is cycle top resistance at 24.21 where a long-term breakout and a change of trend may occur.
(ZeroHedge) Following our myriad of “narrowest range ever!” posts from late July through early September, it is nice to observe a pickup in volatility in the stock market. At least, for those who view volatility as opportunity. That said, the fact that stock volatility shifted directly from 1st to 5th gear (e.g., 3 straight daily moves of more than 1%) has made for an uncomfortable ride for investors this past week. In fact, in some ways, this shift has been unprecedented in market history.
S&P 500 challenges its Intermediate-term support.
SPX probed lower on Monday, but closed just above its intermediate-term support at 2136.05. It is on a sell signal with weekly MACD confirming it. Long-term support and mid-cycle support between 2058.13 and 2048.03 appear to be the next targets for the decline. However, the more important targets may be those of the two orthodox broadening/tops. Once near-term support is taken out, the declines may become steeper and longer.
(Bloomberg) U.S. stocks rallied after the biggest rout since June wiped about $500 billion from the value of equities, while the dollar weakened as the Federal Reserve’s Lael Brainard remained dovish in her approach to tighter monetary policy. Emerging-market assets slumped.
(ZeroHedge) 8 years ago, Lehman's bankruptcy exposed the reality of the global financial system and equity markets collapsed. While the events of that weekend are still in many memories, we suspect few remember the events of September 16th 1929...
As S&P's chief investment strategist, David M. Blitzer explains, On September 16th 1929, The Standard & Poors 500-stock index (calculated retroactively) hits 31.86, its peak for the Roaring Twenties bull market.
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NDX probes lower, then swings back to challenge its cycle top.
NDX also probed lower on Monday, then swung back to challenge its cycle Top at 4823.62.The next time NDX crosses beneath its weekly Short-term support at 4764.75 give it a sell signal. Stay on the lookout for more supports being broken
(ZeroHedge):
Over the past year or two, someone has been probing the defenses of the companies that run critical pieces of the Internet. These probes take the form of precisely calibrated attacks designed to determine exactly how well these companies can defend themselves, and what would be required to take them down. We don’t know who is doing this, but it feels like a large nation state. China or Russia would be my first guesses.
Dow Jones High Yield Select 10 has a selling climax, may go higher.
The High Yield Bond Index appears to have had a selling climax, with massive withdrawals earlier this week. It also closed beneath intermediate-term support at 159.52. However, the selling climax preceded a master cycle low on Thursday suggests another probable rally.
(ZeroHedge) "Easy come, easy go."
That saying was certainly accurate when it comes to the recent extremely volatile flows in and out of junk bonds. Following weeks of "scramble for yield", the recent mini tantrum (which may morph into a maxi one yet), has resulted in rising rates and volatility, which in turn has prompted an outflow from high yield US HY funds to the tune of $2.84 billion (-1.3%) net outflow last week, the first negative print in the last 6 sessions.
USB stalls above long-term support, may reverse higher.
The Long Bond stalled above long-term support at 164.46, warning of a probable reversal. The cycles model suggests a probable 3-week rally that may challenge the cycle top at 175.14. Should it remain beneath it, it would suggest that the 34.4-year uptrend may be broken.
(ZeroHedge) One month ago, when we last looked at the Fed's update of treasuries held in custody, we noted something troubling: the number dropped sharply, declining by over $17 billion, bringing the total to $2.871 trillion, the lowest amount of treasuries held by foreigners at the Fed since 2012.
One month later, we refresh this chart and find that in the latest weekly update, foreign central banks accelerated their liquidation of US paper held in the Fed's custody account, which tumbled by $27.5 billion in the past week, the biggest weekly drop since January 2015, pushing the total amount of custodial paper to $2.83 trillion, the lowest since 2012.
The euro is still above Intermediate-term support.
The euro declined to its Intermediate-term support at 111.44 and the lower trendline of the broadening wedge. The cycles model suggests an abrupt and very strong decline may be just ahead. A significant low may be realized in the next week.
(ZeroHedge)Two weeks ago we reported that chancellor Angela Merkel was facing humiliation, political defeat in in an election in her home state. Sure enough, she lost by a wide margin, with the anti-immigrant AfD party soaring in the first shock result of the current political cycle. That, however, was only the beginning because as Reuters writes today, still reeling from the state election rout, Angela Merkel's conservatives "are bracing for further losses in the Berlin city vote on Sunday."
Euro Stoxx 50 lose all near-term support.
The EuroStoxx 50 Index declined last week, losing all near-term support.The master cycle low appears to be extending into next week.
(Bloomberg) A tumble in Deutsche Bank AG (DE:DBKGn) spread to the industry, deepening a selloff that dragged European equities to their biggest weekly plunges since before the U.K. secession vote.
Shares of the German lender sank 8.5 percent, the most since the aftermath of the British referendum, after rebuffing the $14 billion claim from the U.S. Justice Department to settle a probe. Royal Bank of Scotland Group (LON:RBS) Plc and Credit Suisse (SIX:CSGN) Group AG also fell more than 4 percent, along with some Italian and Portuguese firms. That highlighted the vulnerability of the recent rebound, with a gauge tracking the region’s lenders down 5.6 percent this week, erasing about a third of its gain from the past two months.
The yen consolidates above its trendline.
The yen consolidated this week above its trading channel trendline, closing above Short-term support at 97.63.This is a good indication that the uptrend may resume. There appears to be a new period of strength emerging through late September, giving it time to attempt to make its Cup with Handle target.
(Bloomberg) Just when the world is most craving clarity on the future of Japan’s monetary policy, currency markets show it has become particularly hard to predict.
With so little consensus on what Bank of Japan Governor Haruhiko Kuroda will come up with for the Sept. 21 policy decision, Eaton Vance Corp. and a unit of Bank of New York Mellon (NYSE:BK) Corp. are abstaining from any positions in the yen, while JPMorgan Chase & Co (NYSE:JPM). says some investors have closed out bets on declines in the dollar versus the Asian currency. Such is the consternation that the options premium on contracts to buy the yen in a month’s time, disappeared for the first time since November, before reversing course this week.
The Nikkei 225 declines to Intermediate-term support.
The Nikkei sold off to challenge Intermediate-term resistance at 16329.24, closing the week above it. A selloff may send the Nikkei back to the Head & Shoulders neckline. The cycles model suggests the decline may last through the end of October.
(Bloomberg) Nicholas Smith of CLSA Ltd. says he’s “absolutely certain” the Bank of Japan will stop buying exchange-traded funds tracking the Nikkei 225 Stock Average amid criticism its use of the measure is distorting the market.
The central bank will make the change at its meeting next week, shunning ETFs following the price-weighted stock gauge in favor of those linked to more modern indexes, Smith said. He says he’s been talking to BOJ officials within the last three days, while declining to name them. BOJ board members have made no public indication of an impending shift in the ETF program ahead of announcing their monetary policy review on Sept. 21.
U.S. dollar challenges long-term resistance.
USD challenged long-term resistance in narrowing trading range that belies indecision. However, the cycles model suggests work to be done on the downside.The next month may unhinge the dollar bulls.
(Bloomberg) Dollar bulls counting on a surge in the greenback should the Federal Reserve raise interest rates this year are fighting with historical precedent.
The U.S. currency reached its strongest level since July on a report showing above-forecast inflation before next week’s central-bank meeting. The greenback pared its decline this year following the Fed’s rate increase in December. That mirrors the Intercontinental Exchange Inc. U.S. Dollar Index’s average 6 percent drop during the six months after the start of the Fed’s previous three central-bank tightening cycles.
Gold prepares for its final surge.
Gold challenged its September 1 Cycle low, but did not exceed it. The cycles model now projects a period of strength that may last as long as mid-October. The September 20-21 FOMC meeting may shed some light on the final outcome for gold.
(WSJ) Gold prices hit a two-week low on Friday, as a stronger U.S. dollar and jitters over the path of monetary policy weighed on demand.
Gold for December delivery settled down 0.6% at $1,310.20 a troy ounce on the Horizons BetaPro COMEX Gold (TO:HUG) division of the New York Mercantile Exchange, closing out its second consecutive day of losses to its lowest level since Sept. 2.
Crude reverses down from Intermediate-term resistance.
Crude reversed down from Intermediate-term resistance at 46.24. That leaves only long-term support between it and the Lip of the Cup with Handle formation.There is now the probability of a month-long decline that may test the February low.
(WSJ) Oil prices slid Wednesday on rising U.S. stockpiles of refined products and news Libya plans to resume oil shipments from a long-closed port.
U.S. crude for October delivery settled down $1.32, or 2.9%, at $43.58 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell $1.25, or 2.7%, to $45.85 a barrel on ICE Futures Europe.
Oil prices have held roughly between $40 and $50 a barrel for months on continued uncertainty about how long the global glut of crude is set to persist. Production from the Organization of the Petroleum Exporting Countries remains high and inventories in the U.S. and elsewhere stand near record levels.
Shanghai Composite declines to Intermediate-term support.
The Shanghai Index declined to Intermediate-term support at 2985.18, while still trading in a narrow range.The fractal model suggests the Shanghai is due for another 1,000 point drop, possibly starting next week. The next master cycle low is due in mid-October.
(ZeroHedge) When one month ago China announced that it had created just Rmb 488 billion in total new credit as per its broadest credit aggregation metric, Total Social Financing, there was concern among the liquidity addicted community that the PBOC had again hit the brakes on the country's rampant credit expansion. Those concerns were more than allayed, however, overnight, when the PBOC released its latest August credit data, which not only saw a surge in new yuan bank loans, but a dramatic jump in TSF - the second highest since 203 - with indications that the shadow banking pipeline, in the form of Bankers Acceptances, which had been shut for most of 2016, is slowly reopening.
The Banking Index breaks below mid-cycle support.
--BKX declined beneath mid-Cycle support this week after last week’s reversal.The cycles model suggests a significant low may occur this week.
(reported at the time , by mid-August, Goldman has netted $1.8 billion in new deposits thanks to its overly generous 1.05% interest rate which is among the highest on offer anywhere. Some 33,000 people who’ve opened accounts, although since Goldman does not have any retail branches or ATMs, these new depositors can’t write checks from their accounts or take cash out of ATMs.
(CNBC ) The "Fast Money" traders debated whether it's time to buy the banks after the SPDR S&P Bank (NYSE:KBE) ended the week down 2.1 percent.
Bad news for the sector came from Wells Fargo (NYSE:WFC), which will be investigated by the House Financial Services Committee for opening about 2 million accounts without customer authorization. The Justice Department also issued Deutsche Bank an opening settlement figure of $14 billion for a set of cases related to mortgage securities. The bank said in a statement it "has no intent to settle these potential civil claims anywhere near the number cited."
Wells Fargo shares fell more than 6 percent this week, while Deutsche's Frankfurt-listed shares fell 12 percent during the same period.
(Fortune) As Donald Trump might say: Pocahontas is on the warpath.
This week, Senator Elizabeth Warren (D-MA) launched a multi-front attack against her favorite target, America’s big banks. The offensive signals that Warren—who’s enthusiastically supporting Hillary Clinton—will expect strong backing in return for her progressive regulatory agenda if the Democratic nominee wins the election.
Candidate Clinton, however, has shown little inclination to endorse Warren’s signature goal of breaking up America’s big banks. But if the Democrats take back the Senate, Warren will gain a powerful platform to a promote a radical revamping of financial services. And Warren will exert immense power in matters of personnel by blocking, or threatening to bar, Wall Street veterans and establishment financial officials from leading the new president’s economic team.
(ZeroHedge) As a result of the righteous outrage following news that Wells Fargo rewarded Carrie Tolstedt, the head of the group that was recently exposed as creating some 2 million fake credit card and bank accounts so it could churn late fees, and was in charge of what the bank's employees called "sandbagging", was leaving the bank with a $125 million package, this morning a panicked Wells Fargo, Warren Buffett's favorite bank and the largest U.S. bank by market capitalization, said that it would eliminate all product sales goals in retail banking, starting next year.
(ZeroHedge) As a result of the ongoing "massive" customer fraud scandal at Wells Fargo, which culminated not with prison time for anyone but with a $125 million bonus for the executive who oversaw the criminal practice, life for CEO John Stumpf, who as reported yesterday lost the top market cap spot for a US bank to JPM, just got more complicated, because not only is he set to testify in Congress in a few days, but as Dow Jones reports the Feds are now involved.
(ZeroHedge) One month ago, when tracing the contagion from the recent surge in Libor rates, we tracked it down in an unexpected location: Japan.
As we reported at the time, "some Japanese lenders have been trying to pre-empt the Libor blow out. Sumitomo Mitsui Financial (NYSE:SMFG) cut its global CP and CD funding by $7 billion in the year to June, while a $28 billion jump in deposits outpaced a $19 billion increase in lending globally, according to Deutsche Bank. As a result, its loan-to-deposit ratio shrank from 149.6 percent in March 2015 to 135.5 percent at end-June. Mitsubishi UFJ Financial Group Inc (NYSE:MTU) also saw its ratio fall to 115.1 percent from 117.8 percent in March 2015 on the back of a rise in deposits."
(ZeroHedge) Blowback? Just a few weeks after the EU slapped Apple (NASDAQ:AAPL) with a $14 billion bill for "back taxes," the U.S. has apparently responded with a $14 billion fine of their own to Deutsche Bank to settle an outstanding probe into the company's trading of mortgage-backed securities during the financial crisis.
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