For those who wish

For those of you who wish to support a spiritual message during the Lenten Season I recommend looking up theholyfaceproject.com.  As a Catholic Christian I find this project worthy of support.  In fact, I have gone on a limb and have contracted 4 billboards in the Lansing area, with an option to expand to 12 until June 30.  I have found other communities who also have an interest in promoting this message and I am coaching them in setting up their own projects.  These billboards contain no advertising.  They simply have the face of Christ as seen on the Shroud of Turin with theholyfaceproject.com beneath it.

Lansing has its own support page on the website.  As I am not currently charging for my blog, I would appreciate your support of a project dear to my heart that I have committed my own support.  Thank you.

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Juune 23, 2021

7:05 am

Good Morning!

My eldest daughter is getting married tomorrow and, being the father of the bride, I have a lot of responsibilities over the next two days.  I may not be able to comment as often as I would like.

NDX futures continued to make new all-time highs at 14312.62 in the overnight market in what appears to be an extended Wave [v].  While the futures are coming back down from their peak, there is a long way to decline before a chart sell signal is reached.  Each of the previous two declines have met with push back in the overnight markets, quite possibly from the Bank of Japan, which is buying equity ETFs.

 

SPX futures peaked at 4248.12, short of yesterday’s high at 4255.84.  The two day rally met all the requirements for a retracement, short of a new all-time high.  Short-term support at 4227.7 is the first level at which we go on alert for a sell signal.  Should the SPX make new highs, we could see SPX reach for the Cycle Top resistance at 4281.88 over the next two days.  The next Fibonacci/Wave relationship level is 4300.00.

ZeroHedge reports, “S&P 500 futures erased earlier gains, and after rising as much as 0.3% when they traded at all time highs, Eminis were last seen down 4 points or 0.1% to 4,232, as European stocks also struggled to gain momentum on Wednesday despite reassurances from U.S. Federal Reserve Chair Jerome Powell that the Fed is not rushing to hike rates contrary to the market’s post-FOMC freakout last week. Treasuries fell, the dollar was flat and bitcoin soared after tumbling on Tuesday.

On Tuesday, Powell sought to reassure investors on Tuesday, saying that the central bank will watch a broad set of job market data to assess the economic recovery from COVID-19, rather than rush to raise rates on the basis of fear of inflation. New York Fed President John Williams echoed Powell, saying that a discussion about raising interest rates is still “way off in the future.”

 

 

VIX futures are consolidating within yesterday’s trading range.  It has made a 91% retracement and may be ready for a reversal.

 

TNX still lingers near the Master Cycle low as I write.  However, the Cycles Model implies a sudden burst of strength today and more to come by the end of the week.  It may be that the Fed cannot keep a lid on this kettle despite all the jawboning.

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June 22, 2021

8:25 am

Good Morning!

SPX made the 61.8% retracement level, but may not be finished.  SPX futures are mildly positive, but no breakout above yesterday’s futures high at 4224.88.  Friday’s low appears to be the bottom of Wave 1.  Yesterday’s rally may only be Wave (a) of 2, leaving Waves (b) and (c) to go.  Should that be the case, we may see a pullback to the mid-Cycle support at 4193.45 [Wave (b)], then another attempt at a retracement.  The maximum retracement may be as high as 4238.00.  Keep in mind that this market is an accident waiting to happen.  I am only giving the standard version of the Elliott Wave process.

ZeroHedge reports, “U.S. stock-index futures were little changed, trading just 1% below their all time high, while global shares extended their recovery on Tuesday from four week lows, as investors focused on prospects for post-pandemic economic growth, putting fears of a hawkish Fed in the rearview mirror even as they awaited Fed Chair Jerome Powell’s testimony before Congress. Nasdaq 100 futures extend increase to as much as 0.3%, the highest for Tuesday’s session, with contracts on the S&P 500 rising 0.1% as of 7:15am in New York.”

 

NDX futures made an overnight high of 14177.88.  Last Thursday’s high at 14205.40 is too close for comfort to call yet.  Should NDX go higher, resistance may be the Cycle Top at 14244.10.  The key here is investor confidence, which is waning.

ZeroHedge comments, “Traders of a certain age may recall that back in 2013, around the time the Fed’s “Taper Tantrum” sparked a surge in yields and led to a risk asset selloff, a big (if entirely artificial) debate emerged within financial media, where the Fed muppets and their media puppets would argue that “tapering is not tightening” while anyone with half a brain realized knew that this was total BS.

Fast forward to today when Morgan Stanley’s Michael Wilson opens up an old wound for clueless Fed apologists, saying in his latest Weekly Warm Up note that “Tapering is Tightening”… but then adds that contrary to the market’s shocked reaction to last week’s Fed meeting, tightening actually began months ago.”

 

VIX futures sagged beneath the 50-day Moving Average at 18.29 as investors mistake a normal retracement as a possible relenting of the Fed.  A 61.8% retracement would drop to 17.33, which is what appears to be happening this morning.

 

TNX is on the rise as it approaches the 100-day Moving Average at 15.25.  Intermediate-term resistance and the 50-day both reside at 15.74 to 1584.  The Cycles Model projects rapidly rising strength yet this week which may encourage a breakout (i.e. an “accident”).

ZeroHedge remarks, “Merrie Melodies

Just like that, all was well with the world again: bond yields up; equities up; commodities mainly up; and the dollar mainly down. What a merry market melody! This was despite a confusing barrage of Fed-speak which, as the headlines initially came in, had me thinking of ‘Elmer Fed’, and a silly little man in a deerstalker hat with a shotgun saying: “Be vewy, vewy quiet. I’m hunting 2% infwation and wo unempwoyment with high asset pwices and wo ineqwality. Huh-uh-uh-uh-uh-uh-uh-uh.

 

USD futures are still consolidating within the last two days’ trading range.  The rally may not be over yet.  The Cycles Model suggests about two more weeks of growing strength into the next Master Cycle peak.

 

 

 

 

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June 21, 2021

2:10 pm

SPX tested Short-term resistance at 4224.12 and pulled back.  That may be a sufficient move for a reversal.  Make sure that you have at least a partial short position, although I would venture to say that this is an “accident waiting to happen.”  The Hi-Lo Index has  risen to 75, but its a far cry from the 200+ readings we were seeing a week ago.  Be sure to add short positions beneath the 50-day Moving Average at 4180.77.

 

8:00 am

Good Morning!

SPX futures declined further over the weekend to 4126.75 before rebounding back to the 50-day Moving Average at 4178.13.  While the retracement guidelines allow the SPX to retrace 61.8% of its decline back to Short-term resistance at 4223.82, it must fight back above the 50-day to accomplish this.  Should the SPX remain beneath the 50-day Moving Average, the next downside target appears to be the 2-hour Cycle Bottom at 4106.98.  “Point 6” of the Orthodox Broadening Top lies at 3898.00, beneath the 1987 trendline.

ZeroHedge reports, “US equity futures and global stocks recovered some of their Friday losses after hitting a four-week low earlier in Monday’s session, as investors dipped their toe and bought risk after last week’s surprise hawkish shift by the Fed even as the dollar hovered below a 10-week high. S&P 500 futures rebounded after spending most of the Asia session in the red, while Europe’s Stoxx 600 Index also recovered from an earlier loss, with U.K. grocer Wm Morrison Supermarkets surging 32% after rejecting an unsolicited takeover bid, sending shares of peers Tesco Plc and J Sainsbury Plc higher.

“It just looks like a bit of relief rally following last week’s heavy sell-offs,” said MUFG analyst Lee Hardman. “Market participants will be watching closely comments from Fed officials in the week ahead to see if any push back against hawkish market repricing following last week’s FOMC meeting”

 

The NYSE Hi-Lo Index appears to be on a sell signal, but must stay beneath Friday’s range to confirm.  What’s causing the Hi-Lo to go down is the blackout period during earnings season that prevents stock buybacks.  The Cycles Model suggests the Hi-Lo may continue to decline through the end of June.

ZeroHedge give a more technical explanation of what happened, “Just over a week ago, Nomura’s Charlie McElligott warned – amid volatility doldrums and incessantly dip-buying stock gains – that the party could end next Friday (today) as the quad witch combined with realized risk windows shifting would lead to a notable increase in volatility.

Given the surge in vol and chaotic trading of the last three days (and more to come today), he nailed it…

 

 

VIX futures spiked to a weekend high at 21.76 last night before easing back down beneath Friday’s close.  It is on a confirmed buy signal that may extend through mid-July before ending at a Master Cycle high.

ZeroHedge comments, “Last week, or at least post the Fed-meeting, was wild. 2-year US Treasury yields spiked as 10 and 30-years tumbled (the latter to below 2%), dramatically flattening the curve; the dollar leaped; commodities and gold slumped; and equities just about held on. Even given the possibility the US long-end reflects the Fed buying more Treasuries than the Treasury is (currently) issuing, the overall impression is still of the market screaming “POLICY ERROR!” at the Fed. And why not? Doing nothing for 2.5 years as asset bubbles roar, and *then* hiking rates into what would logically be far closer to the end than the beginning of a recovery cycle is the embodiment of monetary policy error.

Will the Fed respond? Perhaps not short term – so more of this market action could yet be seen. Indeed, it will likely take equities tumbling to get the Fed’s full attention. But even so, last week’s volatility could *potentially* be a sign that US policy tightening is over even before it began – unless we get a shift of fiscal policy and supply chains.”

 

NDX futures dipped beneath 14000.00 to 13985.75, but bounced back near Friday’s close.  While on a chart sell signal beneath its short-term trendline, it has not yet violated other supports such as the 50-day Moving Average at 13721.16.  The NDX Hi-Lo Index closed at 25.00 on Friday.  We should see it close below zero for a confirmed sell signal.  Finally, the Shanghai Composite was mildly positive over the weekend, offering no direction from that parallel indicator.  Nonetheless, selling may continue, as the Cycles Model is negative through the month of July.

 

TNX extended its Master Cycle low to Friday at a new low of 14.38.  This morning it appears to be back on the rise, but it must rally above the 100-day Moving Average at 15.02 to give a buy signal.  The Cycles Model calls for rising rates through early August with a potential target of 19.71.

ZeroHedge reports, “Short-dated Treasury yields are extending their rise from Friday’s bloodbath as the collapse of the long-end of the term structure accelerates in early Asia trading.

2Y is back above the Fed Funds rate…

Source: Bloomberg

and 30Y yields are back below 2.00%…

… for the first time since March…”

 

USD futures consolidated this weekend.  It still has 2-3 weeks of rally ahead with growing strength in early July.

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June 18, 2021

7:45 am

Good Morning!

NDX futures remained glued to the Cycle Top at 14197.84 during most of the overnight session.  Tis morning near 6:30 am the futures began their descent, but remain above 14100.00 as I write.  The trendline at 14000.00 may still be significant while Short-term support at 13824.15.  Today’s options expiration is heavy with calls down to 13750.00 and puts dominate beneath that.  The 50-day Moving Average at 13707.54 is the final line of defense against a sell-off.  This morning’s expiration may release the pin holding NDX near 14000.00.

ZeroHedge comments, “At the start of the week, we warned of the potential for upheaval in markets that today’s near-record-breaking options-expiration (and quad witch) could cause as a massive amount of gamma and delta expire and are de-risked, in the process eliminating one of the natural downside stock buffers (see “4 Reasons Why The Market Doldrums End With Next Friday’s Op-Ex“).

Anyone who ‘traded’ yesterday’s markets knows that is true and today could be even more wild as Goldman points out that today will be the second largest single stock options expiration in history, with $818bn of single stock options set to expire (only Jan-2021 was larger).

Broadly, total open interest on single stocks has increased to nearly $3tn, the highest level since January of this year, as daily options trading activity continues to exceed shares traded (single stock options volumes have been 104% of shares volumes over the past month). Volumes are concentrated in short term contracts, with 71% of all contracts traded in options with less than 2 weeks to expiry; this compares to the long-term average of 57%.”

 

SPX futures have declined beneath 4200.00 and are testing mid-Cycle support at 4191.52 as I write.  The last level of defense is the 50-day Moving Average at 4176.32, beneath which a major sell-off awaits.

ZeroHedge remarks, “US equity futures were already sliding this morning as option expirations loomed, but when St.Louis Fed Chair Jim Bullard appeared on CNBC and admitted that “it’s natural that [The Fed] has tilted a little bit more hawkish,” losses accelerated…

Bullard then added some more FUD by admitting that there “is some upside risk on the inflation forecast,” and confirmed that “Fed Chair Powell has opened the taper discussion this week.”

So much for transitory!!”

ZeroHedge reports further, “With traders on edge ahead of today’ massive quad (or triple for the anal purists) witching opex, in which over $2.2 trillion in index option gamma is set to expire potentially unleashing a burst of volatility across risk assets…

… worlds stocks were stuck just below record highs on Friday, with investors left looking for direction after digesting the U.S. Federal Reserve’s more hawkish stance (which has since been re-evaluated as bullish), while S&P futures are deathly calm with the emini trading unchanged following Thursday’ turbulent session, which saw the unwind of reflation trades resulting in a huge divergence between soaring growth (QQQ) and sliding value (IWM) stocks as markets repriced inflation expectations and as yields tumbled following Wednesday’ hawkish shock.”

 

VIX futures broke out above the prior highs of the month and rose as high as 20.77 this morning.  It may be on a confirmed buy signal this morning with the Cycles Model showing growing strength through mid-July.

ZeroHedge observes, “Just over a week ago, Nomura’s Charlie McElligott warned – amid volatility doldrums and incessantly dip-buying stock gains – that the party could end next Friday (today) as the quad witch combined with realized risk windows shifting would lead to a notable increase in volatility.

Given the surge in vol and chaotic trading of the last three days (and more to come today), he nailed it…

And now he is warning that “Reflation” expressions are being de-grossed and even outright liquidated, as the tidal wave of the Fed’s own perceived “FIAT flinch” crescendos into a reversal of YTD macro-trends – with “official taper” pile-on from Fed’s Bullard just now (*BULLARD: CHAIR POWELL OFFICIALLY OPENED TAPER DISCUSSION AT LAST MEETING, MORE IN DEPTH DISCUSSION TO FOLLOW) adding into what we already anticipated to be a potential “Op-Ex unclenching,” thanks to today’s outlier $Gamma and $Delta declines in US Equities Index / ETF options.”

 

TNX futures are on the rise again as it bounces off the 100-day Moving Average at 15.12.  The next move is to overcome the 50-day Moving Average at 15.83 as it gathers strength over the next week.  The Cycles Model indicates a triple dose of strength that may take the UST longs by surprise.

ZeroHedge reports, “After spiking significantly immediately after The Fed’s so-called “hawkish” statement, the long-end of the yield curve collapsed today with 30Y yields down 17bps from the post-FOMC highs before finding some support as investors may be interpreting the Fed’s hawkish tilt Wednesday as a sign that an extended US post-pandemic economic expansion may be a bit harder to achieve in a potentially emerging environment of less accommodative monetary policy….

Source: Bloomberg

Why buy long-dated US risk-free bonds if the US central bank just indicated that it may want to raise its benchmark Fed funds rate earlier than previously expected?

Goldman’s Chris Hussey explains that the answer may lie more in duration than anything else.

Shorter-term US Treasuries are little changed today. But the longer-term view for US growth seems to be taking on a bit more of a cautious complexion with the bid for long-dated yield.

Given the post-Great Financial Crisis history of anemic US growth, investors may be saying today that they are uncomfortable with how strong the US economy can grow without monetary accommodation once we have reached out beyond this current post-pandemic reopening bounce period.”

 

USD futures made a new high this morning at 92.21 as the USD continues to add strength through early July.  The Master Cycle low was made on May 25 and it appears that this new Cycle may be on of the strongest for the record.  This appeas to be quite unexpected by market pundits.

 

Gold futures are hovering near yesterday’s low at 1767.90.  There may be a small bounce today, but the decline may not be over.  Gold is especially prone to stories to keep investors’ hopes alive, which may be crushed.  This decline has the potential of extending through mid-August which gives it plenty of time to meet the doubly-indicated targets listed on the chart.

FXEmpire comments, “The direction of the gold market on Friday will be determined by trader reaction to the technical retracement zone at $1798.80 to $1770.40.

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Comex Gold

Gold futures are trading higher, but well off the high of the session with the price action being influenced by Treasury yields and the U.S. Dollar. The early strength is likely being fueled by aggressive counter-trend value buying with the market currently testing a key 50% to 61.8% retracement zone.”

 

 

 

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June 17, 2021

7:45 am

Good Morning!

NDX futures sold off to 13842.12, then bounced to 13939.88 ion a partial recovery.   It is on a sell signal with further confirmation at the 50-day Moving Average at 13689.74.  The immediate target is the March 7 low at 12208.40.  While recognizing the need for a “correction,” most pundits are talking down the potential magnitude of it.  “It’s only a flesh wound.”

ZeroHedge reports, “Well, the Fed blinked: with virtually nobody expecting a hawkish surprise from Powell on Wednesday, the Fed chair shocked the world and sparked a bond rout and dollar surge when he unveiled that the median Fed dot now showed not one but two rate hikes in 2023…

… confirming that inflation is indeed non-transitory (at least until we get another major deflationary burst). And yet, despite the 4th largest bond selloff in 5Y TSYs since 2011…

… futures have already largely recovered from any residual surprise and the Emini rebounded from an overnight slump, even was European and Asian markets all traded lower on concerns what the newly-hawkish Fed means for risk assets. S&P 500 futures were down just 0.3%, trading at 4,200 after dropping as low as 4,183 earlier and down from 4,230 before the FOMC announcement.”

 

SPX futures recovered from their low at 4202.4, but remain beneath Short-term resistance at 4225.26.  It is on an aggressive sell signal with further confirmation at the mid-Cycle support at 4190.76 and the 50-day Moving Average at 4173.39.  The June 18 options show the dominance of calls at 4200.00 and higher, while the puts prevail at 4175.00 and lower.  Should SPX close beneath 4175.00 today, a gamma-induced sell-off may result.

 

VIX futures have moved solidly higher above the 50-day Moving Average at 18.23 this morning, but no breakout, yet.  VIX is on an aggressive buy signal with confirmation at the breakout at 9.13.

 

TNX appears to be hovering just beneath its 50-day Moving Average at 15.95.  S breakout above that level confirms the buy signal.  The Cycles Model suggests an approximate 2-moth rally while the proposed target is 19.71, its November 2019 high.

 

USD futures appear to have risen above the mid-Cycle resistance at 91.47 in a startling reversal that has taken the USD short sellers by surprise.  The Cycles Model suggests the USD may rally in strength through the month of July.  Its target appears to be the Broadening wedge trendline at 96.00.

 

 

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June 16, 2021

3:14 pm

TNX has broken above its 100-day Moving Average and is testing the 50-day Moving Average at 15.98.  With the Master Cycle low last Friday, an aggressive buy signal (Sell UST) with confirmation at the 50-day.  Friday appears to be particularly vulnerable to a sell-off in 10-year bonds.

 

3:00 pm

VIX staged a breakout above its 50-day Moving Average, then pulled back.  This is good positioning for a buy signal.  Most will not recognize the risk-off signal until the VIX rises above the trendline at 25.00.  The Cycles Model suggests that the bottom is in.

 

2:50 pm

NDX fell through the short-term trendline, giving a sell signal.  Generally, the target on an Ending Diagonal break is the source of the trendline.  Confirmation comes at the crossing of the 50-day Moving Average at 13689.33.

ZeroHedge remarks, “The dollar spiked immediately after The Fed admitted it was more than just thinking about thinking about tapering… and raising rates….

Gold dumped as the dollar spiked…

Bonds were hammered…

And stocks tumbled…

How quickly will Powell walk back and de-emphasize all of this?

 

 

9:20 am

VIX futures are in a consolidation/correction mode after rising to 17.39 in the overnight session.  Monday’s low appears to be the final Master Cycle low at day 271.  It’s not likely to stretch further.  The Cycles Model calls for rising strength through mid-July and possibly into the last week of July.

ZeroHedge writes, “Sell in May didn’t work. The only thing that worked in May was to be long gamma/vol going into the May panic (recall our late April long “VIX guy” note here). The VIX collapse that occurred later was not as “sexy” from a trading perspective, sure protection collapsed post mid May, but you did not want to be short gamma those moves as the initial upside panic was almost as violent as the sell off.

Source; Refinitiv

Here we are, waiting for Fed and Powell’s “grand” meeting. VIX is up some from “panic must sell lows” last week, but protection remains overall low(er).

Low VIX does not necessarily mean it is cheap. Nobody has, missed the low realized vols lately, with SPY realized vols at “depressed” levels.”

 

7:00 am

Good Morning!

The Shanghai Composite Index is in the news this morning as it appears to be the first global index to break down in June.  Recently I have connected the relationship with the tech-heavy Shanghai Composite to the NDX.  As it turns out, The Shanghai put in its (lower) Master Cycle high on Friday, while the NDX made its high on Monday.  Today it made an intraday low of 3513.56 and closed at 3518.33, beneath Intermediate-term support/resistance at 3524.23.  This puts the Shanghai on a sell signal.

ZeroHedge reports, “Chinese stocks tumbled on Wednesday, as fears that the government plans to rein in commodity prices weighed on metals shares, while foreign investors continued to sell ahead of a policy decision from the U.S. Federal Reserve. An across the board miss across all economic data merely confirms that the deflationary tidal wave sparked by China’s plunging credit impulse is getting worse by the day.

China’s benchmark CSI 300 Index closed down 1.7%,as declines in material and technology stocks offset a rally in financial and energy companies. The tech-heavy ChiNext tumbled more than 4%, dropping below the 3,200 level that had supported the gauge’s rally this month. Hong Kong’s Hang Seng Index slipped 0.7%, led by automakers and technology shares.”

 

 

NDX futures are flat after a close just above the short-term trendline at 14000.00.  A decline beneath that level offers an aggressive sell signal that would be confirmed beneath the 50-day Moving Average at 13669.21.

 

SPX futures are also flat after a potential Master Cycle high on Tuesday, day 249 of the Master Cycle.  This leaves the rest of the week for a revision of the Cycles, but today’s Fed decision may be the deciding factor.

ZeroHedge observes, “US equity futures rebounded from a modest overnight drop in a rangebound session, coiled as investors turned cautious ahead of a policy decision from the Federal Reserve which some such as DB’s Jim Reid have called the “most important for Powell’s career” (preview here). Oil extended a powerful rally and the dollar fell. Emini S&P futures were unchanged at 4,236.5 following Tuesday’s modest drop which snapped a three-day winning streak amid weakness in technology and real estate; Nasdaq 100 futures rose 0.2%. The 10-year Treasury yield hovered around 1.5%. The dollar edged lower versus major peers, and bitcoin dropped back under $40,000.

“The FOMC meeting is unlikely to offer any surprises today as the Fed has painted itself into a corner,” Kaia Parv, head of investment research at FXPRIMUS, wrote in emailed comments. “The Fed is clearly hesitant to disturb the markets since an increasing portion of U.S. household wealth is tied to equity investments.”

 

USD futures continue to consolidate this morning with downside support at 90.31 and overhead resistance at the 50-day Moving Average at 90.79.  The Cycles Model suggests a brief probe to the 50-day, then a possible pullback.  Cyclical strength may reappear toward the end of the month with a particularly strong push into a Master Cycle high in early July.

 

TNX still hovers beneath its 100-day Moving Average at 15.00 this morning.  The Cycles Model suggests a period of strength may be imminent.

ZeroHedge remarks, “FOMC Preview – Taper to be discussed but quickly dismissed 

Key highlights:

  • Tapering very likely to be discussed and dismissed, unlikely to be mentioned in the statement
  •  UST market unlikely to see major moves; ongoing absence of 2023 hike in dots may be read as dovish
  •  Soft recent data discourages a hawkish signal until the FOMC has more clarity on growth and inflation

 

 

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June 15, 2021

3:45 pm

TNX remains fixed at the 100-day Moving Average during a 20-year auction which just closed at 1:00 pm.  This comes in the category of, “What were they thinking?”

ZeroHedge reports, “Coming several days after the trifecta of benchmark auctions when both the 10Y and 30Y auctions demonstrated solid demand despite a blistering hot CPI print, moments ago the Treasury sold another $24BN in 20Y paper in the form of a 19Y-11M reopening of Cusip SY5 which, too, was greeted with stellar demand.

The high yield of 2.12% was not only far below last month’s 2.286% but was also the lowest since February’s sub-2% auction; it also stopped 1.7bps through the When Issued, the biggest stop through since March’s 2.0bps.

The bid to cover of 2.40 was also a solid improvement to the 2.24 in May and the 2.33 6-auction average, while the internals were perhaps the most impressive, with Indirects taking down 62.1%, the highest since October and far above the 58.0% recent average, and with Directs taking down 20.4%, or the most since the 20Y auction restarted in May, Dealers were left with just 17.5%, the lowest Dealers takedown on record.”

 

3:33 pm

The GSCI Ag Index may have extended its Master Cycle low to day 270 today.  What seems to have caused this plunge just beneath the Head & Shoulders neckline was a weather report suggesting cooler weather ahead.  However the drought still lingers and worldwide shortages of grain and soybeans are growing.  It just goes to show you this is a global market…and that weather reports may live up to their reputations of unreliability.

ZeroHedge reports, “Corn and soybean futures started the week off on the wrong foot after weather forecasts improved crop conditions in the Midwest, including cooler temperatures and the possibility for rain later this week, according to Refinitiv’s commodity desk.

On Monday, it was a slaughterhouse for corn and soybean futures, Chicago Board of Trade (CBOT) July corn futures settled down 3.7% at $6.59-1/4 per bushel, and CBOT July soybeans were down 2.4%, at $14.72-1/4 a bushel. By Tuesday morning, corn futures are lower by half a percent, and soybeans are up by half a percent. ”

 

 

7:20 am

Good Morning!

SPX futures made a fresh new all-time high at 4258.12 this morning.  It may be targeting the Cycle Top resistance at 4269.69 before reversing.  You will notice that all of the gain made yesterday was in the final half hour, which suggests retail investors (mutual funds) are still participating, although institutional investors appear to have been selling most of the day.

ZeroHedge observes, “Last week, when discussing the bizarre summer doldrums in the market which pushed the VIX to the lowest level since the onset of the covid pandemic, we said that this period of abnormal market quiet is likely to last until this Friday’ quad-witch, when a massive amount of gamma and delta expire and are de-risked, in the process eliminating one of the natural downside stock buffers (see “4 Reasons Why The Market Doldrums End With Next Friday’s Op-Ex“).

So picking up on the topic of Friday’ potentially market-moving opex, Goldman’ in-house derivatives expert, Rocky Fishman, previews June’s upcoming expiration which he dubs as “large – comparable to a typical quarterly.” Specifically, there are $1.8 trillion of SPX options expiring on Friday, in addition to $240 billion of SPY options and $200 billion of options on SPX and SPX E-mini futures.”

 

NDX futures rallied to the Cycle Top resistance at 14154.46 in the overnight market.  This may represent the final push to the top before the reversal.

ZeroHedge reports, “World stocks and S&P futures hit another record high on Tuesday, with European stocks poised for their longest record streak since 1999 as investors bet likely “transitory” inflation pressures will stay the U.S. Federal Reserve’s hand from signalling a shift in policy settings. After a powerful ramp in the last 30 minutes of Monday trading, pushing them to new all time highs, S&P 500 futures pared an early gain and were up 0.1% last at 4,250 while as European equities were led higher by chemical firms, despite a sharp drop for European miners after copper touched the lowest level in seven weeks over concerns over U.S. monetary tightening and a pull-back in Chinese demand. The 10-year Treasury yield pulled back under 1.5%, nd the dollar was steady and bitcoin traded just over $40,000.”

 

VIX futures remained steady in the overnight session.  I am showing the weekly chart to illustrate that VIX has incrementally moved higher from its all-time low in November 2017.  From this perspective one can easily ascertain that Primary Wave [3] should rise above 100.00.  The preliminary target date for this accomplishment appears to be in mid-October.

 

TNX appears to be hovering just beneath the 100-day Moving Average at 15.00.  A breakout above it may get the attention of investors who are short TNX (long UST).  The correctio to the Master Cycle low may have been put in on Friday, as the pattern is complete.

 

USD futures resumed their march to higher ground as they rose to 90.66 in the overnight session.  The change in direction may be noticed above the 50-day Moving Average at 90.84, as there is a very large short-USD position.

 

 

 

 

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June 14, 2021

10:30 am

That resolved quickly.  VIX made a new Master Cycle low this morning at 15.04 and quickly reversed on a belated day 271 of its Master Cycle.  While SPX and NDX haven’t made any sizeable moves yet, the VIX appears to be moving with strength out of its low.

 

8:00 am

Good Morning!

SPX futures remain elevated, but there is some evidence that Thursday’s high may be the top.  The squiggles on the chart are almost too painful to count, since 34.4 days had elapsed from the previous high with only a 11.7 point gain.  Unfortunately, this week is FOMC week, so the indices may remain flat until Wednesday.

But the uncertainty of the Fed Taper may be an explosive (implosive?) factor in the current Master Cycle, which may decline over the next two weeks.

ZeroHedge reports, “S&P futures hit a record high on Monday in a muted session which saw several Asian countries on holiday (China, Hong Kong and Taiwan are enjoying an extended weekend for the Dragon Boat Festival) as focus shifted to the Federal Reserve’s meeting this week, where the central bank is expected to maintain its accommodative stance on monetary policy although there is some debate whether the Fed will hint at tapering and/or hike its administered rates (IOER/RRP). At 730 a.m. ET, Dow e-minis were down 14 points, or 0.04%, S&P 500 e-minis were up 3 points, or 0.07%, to 4,239 and Nasdaq 100 e-minis were up 45 points, or 0.33%. 10Y yield rose as the rally in bonds lost steam while the dollar was flat, and the VIX traded below 16. Bitcoin traded near $40,000 after Musk tweeted over the weekend that Tesla had not sold more of the crypto.”

 

NDX futures are marginally higher, having made a high of 14043.25.  It is likely that a new high may be near the Cycle Top at 14145.61.  Today is day 248 in the current Master Cycle.  This week (options week) may be a good time for a Cycle high.

RealInvestmentAdvice notes, “Over the last couple of months, the Fed started its campaign to prepare markets for a “taper” of its asset purchases.

Michael Lebowitz noted that Jerome Powell repeatedly affirmed the Fed “isn’t even thinking about thinking about tapering.”

“As Chairman of the Fed, his opinions take precedence over those from other Fed members. Regardless, other Fed members are not entirely on the same page as Powell.” – Lebowitz

As CNBC noted, the voices of other Fed members are becoming more prominent.

“Comments by Fed officials in the past several weeks suggest the issue of tapering looks likely to be discussed as soon as the Federal Open Markets Committee meeting next week. The Fed may be on track to begin asset reductions later this year or early next year.”

 

 

VIX futures are higher this morning after having made a matching low to the previous low on June 8.  Remember, a Wave 2 may go to, but not exceed, the Wave 1 low.  It appears to be the case, which gives warning that fear levels may be rising.  This is especially explosive during options expiration.  In addition, the Cycles Model suggests rising strength this week  in the VIX.

 

TNX ix higher this morning after a potential Master Cycle low on Friday at day 255.  IT is too early to tell if that is indeed the low.  A rally above the 100-day Moving Average at 14.99 is a likely indicator that the low is in.

ZeroHedge comments, “Just one “Markets” topic today, but an important issue so it needs our full attention:

What if everyone is wrong about US inflation’s impact on interest rates? I (Nick) have never seen a stronger consensus around a macroeconomic topic in my +30-year career in finance. Fed money printing plus fiscal stimulus/debt issuance plus economic reopening is supposed to equal high and likely lasting inflation. The 10-year Treasury will go to at least 2 percent and maybe 3 percent or higher. And you can’t swing the proverbial dead cat without hitting even direr warnings …”

 

USD futures ae pulling back after a sizeable move on Friday.  It may be pulling back to Intermediate-term support at 90.33 before moving higher.  Should it break higher, there is a crowded short position that may be taken out this week.

 

 

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June 11, 2021

7:30 pm

TNX may have made its Master Cycle low today at day 255 in the Cycle.  The Elliott Wave structure also appears complete.  While there may be a small probability of a further low on Monday,  the highest probability points to a strong, complacency busting reversal.  As mentioned previously, the target for this rally may be 19.71, which would more than compensate for the 3.5 point (current) negative divergence between the CPI and TNX.

ZeroHedge comments, “Even though US CPI smashed expectations again, Deustche Bank’s chief credit strategist Jim Reid correctly points out that “the data isn’t going to change anyone’s mind of whether inflation is transitory or not.”

Still, as an aside for those who still care about fundamentals, he notes that the current gap between 10yr US yields (c.1.5%) and US CPI (5.0%) is a whopping 3.5%, the highest since 1980. In fact, the gap has only been more negative for 10 months in the last 70 years, all of which were in 1974, 1975 or 1980.

Another way of visualizing the unprecedented divergence between core inflation and 10Y yields is the following scattergram from Longview economics:”

ZeroHedge further comments, “One day before the “most important CPI print in history”, we showed the latest JPM Treasury Client survey and pointed out that “there were virtually no traders left to short Treasurys, with all bears already on board” as net short interest had hit an all time high. As a result, even a red hot CPI had been fully priced in by now, and the result would be sharply lower yields as we got another massive short squeeze, this time in rates.

Well, with 10Y yields tumbling to March lows and breakevens in freefall over the past 48 hours, that’s precisely what happened, and since not even yesterday’s scorching inflation print managed to spark some bearish rate sentiment, the market was promptly overrun with speculation that the reflation trade is now largely finished as “inflation has peaked”, an argument which was further bolstered by today’s drop in UMich 1Yr and 5-10Yr inflation expectations.

Commenting on this shift in market sentiment, Nomura’s Charlie McElligott writes that the liquidation of “Reflation” and “Hawkish Fed” trades clearly accelerated into crescendo yesterday, “as despite another really strong US Core CPI print yesterday, the “transitory” nature of a large part of the gains (“Used Vehicles” being 1/3 of the seasonally-adjusted increase, and as a function of supply-chain and semiconductor shortage issues), as well as still-stagnant Wages (AHE YoY cratering with MoM utterly sideways) and most critically, an incredibly disappointing Labor market, all lends further credibility to the Fed’s “slow-play” stance and forces a positioning-cleanse of insanely crowded “Short UST” positioning—which critically, hasn’t been returning for months now.

 

 

7:30 am

Good Morning!

I have an appointment soon, so I will do what I can this morning.

NDX futures have risen to 13997.62 at this point.  Since today is a potential day of strength, I wouldn’t be surprised to see it make a new all-time high.  Note that this Cycle took 258 days from low-to-high.

 

SPX futures have come very close to another new all-time high this morning.  Today’s Cyclical strength may propel it to that new high, as well.

ZeroHedge reports, “S&P futures – which overnight rolled from the ESM (June) to the ESU (Sept) contract – extended gains on Friday further into record territory as inflation fears receded into the background calming concerns over a possible long-term spike in rising prices, with investors now turning focus to next week’s Federal Reserve meeting for more cues on monetary policy. Treasuries were steady, trading at 1.44% – just above the lowest level since March – amid growing (if wrong, according to BofA and DB) confidence inflation will prove transitory, leaving scope for continued central-bank support. S&P 500 E-minis were up 7.25 points, or 0.17 at 06:36 a.m. ET. Dow E-minis were up 77 points, or 0.22%, while Nasdaq 100 E-minis were up 30.25 points, or 0.22%.

After seeing fresh all-time highs on Thursday, US equity futures have largely been traversing sideways, in wake of Thursday’s dovish ECB confab, and surging US inflation, which has not given too much concern to equity or bond investors ahead of next week’s FOMC, since the Fed is likely to look through what it sees as ‘transitory’ price pressures; some analysts disagree, arguing that there is building evidence of more sticky prices, but whether or not this inflation proves to be transitory will only really be resolved in Q3/Q4, so for now, markets are taking the Fed at its word. BofA reported that US equities have seen the first weekly outflows since March, with more outflows out of growth styles than value styles; by sector, inflows were seen in financials, materials, real estate, energy and health care, while outflows were seen in utilities, communications, consumer sectors, and tech.”

 

VIX futures record another ow of 15.15 this morning, still within the parameters of a retracement rather than a new low.

 

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June 10, 2021

9:45 am

Back in April I had posted a target for the SPX at 4250.00.  Then I forgot about it as The May 7 high rolled by.  Well, it was resurrected this morning.

ZeroHedge proclaims, “Traders bid up US equity futures ahead of the bell after a hotter than expected inflation print this morning…

The soaring CPI sent yields higher too…

Billionaire fund manager Stan Druckenmiller clarified the farce…”The market is not speaking right now on May’s CPI data and will not until the Fed stops cancelling market signals and at that point we will know.

 

 

7:35 am

Good Morning!

NDX futures are in decline.  Yesterday’s failure to make a new high gave us a clue that all is not well in the tech market.  Futures rose to 13839.50 at midnight, then have steadily declined since then.  As mentioned yesterday, the Cycles Model suggests a 12.9-day collapse from yesterday’s high.

 

After making a retracement high at 4237.02 yesterday, SPX futures languished, but did not decline beneath Short-term support at 4209.89 in the overnight session thus far.  A break of that level puts us on high alert of a gamma crash below 4200.00.  The Cycles Model gives us confirmation of that beneath mid-Cycle support at 4182.64.   The 50-day Moving Average and Broadening Wedge trendline are both near 4150, which triggers a minimum decline to 3344.00.  But that would only Primary Wave [3] of Cycle Wave I.  Primary Wave {5] must venture beneath the 2020 low at 2191.00.

ZeroHedge reports, “Welcome to Super Thursday when in a double whammy of market-moving events we will first find out how the ECB intends to adjust monetary policy as Europe brings the pandemic under control (we expect no material changes), and we will also get to see whether the startling jump in April’s U.S. inflation numbers persisted or even accelerated in May, perhaps rising by the most on record. Needless to say, markets could move substantially on any surprises and yet, listless futures are trading as if nothing notable will take place and with both the ECB announcement and a sharply higher CPI already priced in, they may be right.

In a session that was anything but exciting, S&P futures traded in yet another narrow range ahead of the ECB and CPI data, which is expected to show that the consumer price index increased 0.5% last month after surging 0.8% in April, the largest gain since June 2009, as speedy vaccinations helped re-open the economy. Oil edged higher while the dollar was unchanged. S&P 500 E-minis were up 2.5  points, or 0.07% at 07:15 a.m. ET. Dow E-minis were up 63 points, or 0.18%, while Nasdaq 100 E-minis were down 32 points, or 0.22%.”

 

 

VIX futures remain suppressed, but may bounce at the open as options settlement is completed for yesterday’s options expiration.  The 5-Wave decline and lower low tells us that Tuesday’s low was the end of not only th e Master Cycle but also the declining trend outline by the bullish Wedge.

 

TNX is back above the 100-day Moving Average at 14.91 after testing it yesterday on day 253 of the Master Cycle.  There is a probability of another probe lower before the master Cycle is complete.    The strength of that probe may depend on the CPI report given later today.

ZeroHedge observes, “Yields on 10-year Treasuries dipped below 1.50% today for the first time since early March amid a furious short squeeze discussed earlier

… and as post-pandemic inflation concerns appear to be waning as quickly as they flared up.

This is a point we first brought up last month when observing the collapse in China’s credit impulse, arguably the most important variable for the entire global reflationary narrative (see “China’s Credit Impulse Just Turned Negative, Unleashing Global Deflationary Shockwave“)…

 

USD futures rose to 90.28 in the overnight session, still beneath Intermediate-term resistance at 90.38.  however, note the breakout last week, giving fair warning of a higher USD.  The Cycles Model alerts us to growing strength through the end of the week.

ZeroHedge reports, “With the world’s eyes having moved on from China’s rip-roaring PPI (and post-data decision to unleash price controls), this morning’s CPI print has been heralded as the arbiter of “is it transitory or not” with some (BofA) even suggesting we are nearing a period of “transitory hyperinflation.” The answer for now is – inflation’s still accelerating as headline CPI soared 5.0% YoY (hotter than the +4.7% expected). That is the highest level of inflatuion since Aug 2008.

Source: Bloomberg

But it is core CPI that is the huge outlier, soaring 3.8% YoY – the hottest level of inflation since 1992…”

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