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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May 7, 2021

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May 6, 2021

1:15 pm

Certain dealers and hedge funds are using their past experience to predict a possible short squeeze imminently.  NDX has been battling at mid-Cycle resistance at 13560.00 this morning and its Wave structure may not be complete.  Two possible outcomes are:  1.  NDX loses the battle and plunges beneath the 50-day, which opens the gates to a panic decline, or 2.  NDX rallies to Short-term resistance at 13854.81.  The Cycles Model suggests option 1.  As mentioned this morning, it marked yesterday’s high as a (mini) Cycle top.

ZeroHedge warns, “With the Nasdaq set for its biggest weekly drop since the end of February, when the infamous, catastrophic, “near-failed” 7Y auction sparked reflation fears and hammered tech stocks and duration in general…

… it will not come as a surprise that “someone” has been puking tech stocks, especially after we reported on Tuesday that in the past 4 weeks BofA’s hedge fund clients had sold a record amount of stocks.”

 

7:20 am

Good Morning!

NDX futures made an overnight high at 13570.00, but eased back beneath the mid-Cycle support/resistance at 13549.00.  The aggressive sell turns confirmed beneath the 50-day or with confirmation from the VIX and NDX Hi-Lo Index.  NDX is in negative gamma territory and the further down it goes, the more pressure is on dealers and hedge funds to unload their FAAMGs.  Once beneath the 50-day Moving Average at 13348.20, the trap door opens to the netherworld.  Point 6 of the Orthodox Broadening Top is at 6503.00, a 54% decline.  (Update) Yesterday’s close created the all-time high for the DJIA, which gives us a minimum of 8.6 days to May 18.   Most crashes took a minimum of 12,9 days, so we may be looking at Monday, May 24 as the Master Cycle low.

ZeroHedge comments, “Kids, you tried your best and failed miserably. The lesson is, never try..”

Forget fears of rising interest rates – the big threat is how the global economy will cope with supply chain bottlenecks and the coming commodities supercycle. These will create all kinds of friction. The West is particularly vulnerable to microchip supply instability – which could take years to resolve. 

There is an enormous difference between savouring a “Eureka” experience when one gains a realisation of how the universe works, and a “D’oh” moment when something so blindly obvious finally becomes clear – hitting one between the eyes like the swing of the proverbial sledgehammer.

 

SPX futures made an overnight high at 4174.62, but eased back slipped back beneath Short-term support at 4173.93.  It remains on an aggressive sell signal pending either a cross beneath mid-Cycle support at 4091.27 of confirmation from the VIX and NYSE Hi-Lo.  Yesterday’s high marks the first 4.3 days of the decline with 8.6 more days to go.  An alternate view shows a possible extension beyond options week, although it needs more confirmation.

ZeroHedge reports, “For the fourth morning in a row, futures are barely changed – a stark reversal to the previous euphoria that would see a big jump in risk sentiment in the overnight session – with Emini futures flat ahead of data that is expected to show a decline in weekly jobless claims, while shares of vaccine makers tumbled further after President Joe Biden’s plan to back intellectual property waivers on COVID-19 shots. The dollar weakened amid unchanged Treasury yields even as Japan and China returned from holiday.”

 

VIX futures slid from yesterday’s close, but stayed above the trendline at 18.20.  It has started to regain strength this morning, but still negative as I write.  The Cycles Model suggests a VIXplosion possibly starting no later than tomorrow with repercussions lasting another week thereafter.  The current Master Cycle ends on June 1.  It is uncertain whether it will be a high or low, which depends on how this rally develops through options week.

 

USD futures are consolidating beneath the 50-day Moving Average at 91.83.  The Cycles Model shows growing strength until options week.  There is a possibility of an extension through options week, which indicated a possible panic in the markets.

 

TNX made a low of 15.61 during the overnight session.  It triggers a buy signal above the 50-day Moving average at 15.91.  Confirmation comes above the Intermediate-term resistance at 16.31.  The minimum target appears to be 19.71, with the possibility of a further extension.  The current Master Cycle indicates a potential high on June 2.

 

The BKX, a proxy for liquidity, made a new all-time high yesterday on day 267 of he Master Cycle.  Structurally, BKX should not have gone above the March 2007 high at 121.16.  But this is a Cycle Wave b, which is an outlier.  BKX now has the ignominious challenge of declining beneath the March 9, 2009 low of 17.75.  The inevitable has simply been delayed.

ZeroHedge warns, “The Buffett Yardstick, or total market capitalization of the U.S. equity market relative to the overall size of the economy, now stands at a gaudy 270%.

For reference, at the peak of the Dotcom Mania, this measure only reached 188% so we are now over 40% more expensive than the most expensive stock market peak in history! Another way to think about this is to understand that, at today’s valuation, the stock market would need to fall 30% overnight in order to match the peak of what is widely considered the greatest bubble in modern history.

And not only is the current stock market bubble that much bigger than the previous record, it is also far broader. The median price-to-sales ratio of S&P 500 Index components is now almost 75% higher than it was at the peak of the Dotcom Mania just over 20 years ago. In other words, unlike that previous bubble which was confined to just a subset, the current bubble encompasses a much greater proportion of the overall stock market.”

 

 

 

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May 5, 2021

8:00 am

Good Morning!

NDX futures climbed to a morning high of 13627.00, above the mid-Cycle resistance at 13533.94, an approximate 34% retracement.  The futures page contains some inaccuracies that lead me to take that information with a grain of salt.  There is likely to be another push lower that may complete an impulsive (5-Wave) decline.

 

The NDX Hi-Lo closed at 26.00, not far from where it began yesterday.  Remember, due to the presence of the mega-tech stocks, there only needs to be a handful trading positively to keep the NDX elevated.  A confirmed sell signal won’t be registered until it falls beneath zero.

 

SPX futures may have hit a high at 4185.12, but have eased back down to Short-term support/resistance at 4173.92.  Again, the market feed is giving troublesome information.  Nevertheless, the Short-term line also denotes the 50% retracement level of the decline thus far.  Should the SPX resume its decline, it may proceed to mid-Cycle support at a minimum, at 4083.13.  The NDX decline may exert a greater downward pull on the blue chips, extending this decline even further.

ZeroHedge reports, “US index futures rebounded from Tuesday’s tech-led rout, with Nasdaq futures leading gains alongside shares in Europe as focus shifted away from inflation fears and turned to strong earnings and the global economic recovery. Nasdaq futs gained the most, rising 70.25pts or 0.52% to 13,606, S&P futures were up 14.25 points or 0.34%, and Dow futures were back over 34,000, up 57pts or 0.17% to 34,077. Oil and the dollar also climbed.”

 

VIX futures hovered between the trendline and the 50-day Moving Average in the overnight session.  Again, the data-feed appears problematic, so we should know more at the open.

 

TNX rose back above the 50-day Moving average at 15.94 which it tested yesterday.  The Cycles Model indicates that strength may come back to this uptrend in the next week.

ZeroHedge observes, “Two days after the US Treasury surprised rates watchers by unveiling that it would sell nearly 5x more Treasuries in the current quarter than previously expected ($465BN vs $95BN) and $1.3TN over the second half of the fiscal year, while reducing the amount of cash released from the TGA…

Source: Treasury Sources and Uses Table

… at 830am on Wednesday in its latest quarterly Refunding Announcement, the Treasury announced that it would keep its quarterly auction of long-term coupon debt unchanged, and at an all time high, of $126 billion (vs $84 billion a year ago) to refund approximately $47.7 billion of Treasury notes and bonds maturing on May 15, 2021.  This issuance will raise new cash of approximately $78.3 billion. ”

 

USD futures appear to be stalled beneath the 50-day Moving Average at 91.60.  The Cycles Model suggests strength rising into options expiration week.

ZeroHedge observes, “A little over a week ago, we reported on one of the biggest deflationary threats looming over the global economy: that is, China’s shrinking population, as deaths outpace births for the first time, a trend that demographers believe will only worsen as the impact of China’s one-child policy is felt on its population numbers.

And as Wall Street banks and America’s largest corporations complain about growing inflationary pressures in their sell-side research and earnings calls, the latest population update from the CDC has just confirmed that the deflationary trend of a falling birth rate continued last year in the US. In fact, one could argue this trend has been supercharged by the pandemic, thwarting theories about a lockdown “baby boom” as the number of births in the US fell by 4% in 2020, dropping to the lowest level since 1979.”

Put another way: thanks to the pandemic, US birth rates have fallen to their lowest level in a generation.

 

 

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May 4, 2021

1:56pm

NDX bounced just above its 50-day Moving Average and shows no intention of taking back its losses.  Based on the Chart Model, NDX is likely to retest the mid-Cycle resistance at 13531.05 before going lower.  A decline beneath the 50-day opens the possibility of testing the March low.  In addition, the volume of selling in the NDX may bleed over to the blue chips, as well.

ZeroHedge observes, “Two weeks ago, Bank of America warned that it had observed a sharp reversal to “increasingly euphoric sentiment” among its institutional, hedge fund and HNW clients, all of whom sold in the previous week even as stocks continued their grind higher. This happened around the time that Goldman’s Prime Brokerage had observed a startling streak as hedge funds sold stocks for 7 days out of 8, which prompted us to warn that a short squeeze was coming… we were right, because just a few days later the S&P was back at all time highs on – you guessed it – another whopping short squeeze.

Then, last week, when looking at its latest client flow data, BofA found that bearish sentiment accelerated and for the second week in a row the bank’s clients were net sellers (-$2.0B) of US equities with net sales in both single stocks and ETFs (only the third time this year clients sold ETFs), while retail clients were the “least dumb money”, and according to BofA were once again the only client group to buy stocks, albeit at the weakest level since mid Feb.

So after two consecutive weeks of sheer “smart money” revulsion did buyers finally emerge?

Well, according to the latest BofA Client Flow Trends report published overnight, not only did buyers not return – as the bank’s clients were net sellers (-$2.2B) of US equities for the third week in a row…”

 

10:12 am

SPX has declined beneath its “negative gamma” line at 4150.00.  This could lead to more declines as dealers and hedge funds shed their longs.  The decline is further reinforced beneath the Wave [iv] low at 4118.38.

ZeroHedge remarks, “Just like late February, when we had 2021’s first inflation scare-cum-Treasury tantrum, Tech is breaking down and look no further than Amazon for the evidence. In just the three days since reporting blowout Q1 earnings which sent its stock to a new all time high, AMZN stock is down over 9% and is on the verge of a correction. Other FAAMGs, most notably Apple which had a just as impressive quarter, are not faring any better.

However, unlike late February when tech was monkeyhammered largely due to sharply higher yields, this time there is the double whammy of dealers caught in a self-reinforcing negative gamma trap. As SpotGamma wrote overnight, “both SPY & QQQ remain in negative gamma territory which implies higher relative volatility.”

 

 

10:05 am

VIX has rallied above the 50-day Moving Average at 20.26.  It may retest the area and go back beneath it.  However, it has now broken out which gives us a buy signal (SPX sell).  Time to take appropriate action.

 

9:52 am

NDX is well on its way toward the mid-Cycle (2-hour) at 13526.70 and the 50-day Moving Average at 13352.96.  The signal changes from aggressive to confirmed beneath the mid-Cycle.

My daughter took her 4-month old baby girl to the doctor’s office for her evaluation.  She was given an MMR shot and the nurse started pushing hard to administer a series of vaccines, including the covid shot!  My daughter wisely refused, but she was shaken by this experience.  My daughter is an RN and knows her medicine.  How many others just “trust the science?”  Consider this website that monitors the VAERS site.  People are catching on that something is not quite as it seems. See for yourself.

 

7:37 am

NDX futures made a new low at 13652.62 thus far this morning.  It appears to be heading for mid-Cycle support at 13525.60 for a bounce.  Having made a new low beneath the April 22 low adds confirmation to the aggressive sell signal.  However, should it bounce, it may retest Short-term resistance at 13902.76 before resuming its decline.  The Cycles Model tells us a low may be expected during the week of May 17.

 

SPX futures declined to a low of 4162.12 thus far, adding confirmation to the aggressive sell signal.  The decline is still shallow, so a decline beneath the April 20 low at 4118.38 may also trigger the VIX over its 50-day Moving Average.

ZeroHedge reports, “For the second day, US equity futures traded in a narrow range, dipping during the muted Asian session where markets in Japan, China and Thailand remained closed on Tuesday, but then rebounding as Europe came online to trade mostly unchanged as investors continued to move out of megacap growth stocks amid fears of rising inflation and into companies that are expected to benefit more from the reopening of economies. At 715 a.m. ET, Dow e-minis were up 17 points, or 0.06%, S&P 500 e-minis were down 4.00 points, or 0.1%, and Nasdaq 100 e-minis were down 42 points, or 0.30%. The dollar jumped, while Treasuries dropped along with most European bonds. Ethereum extended its surge to set another record as larger rival Bitcoin slipped.

Nasdaq 100 Index traded down 0.4% a day after tech giants such as Tesla and Amazon.com dragged the underlying index lower on signs of quickening inflation. Tech shares were also the biggest laggards in the Stoxx Europe 600 Index, with semiconductor firm Infineon Technologies AG slumping as much as 5%. In contrast, cyclical shares such as miners and travel stocks helped power the European benchmark as a gauge of commodity prices hovered at the highest level since 2012.”

 

US 30 futures were positive until 7:15, when they plummeted.  There is no explanation yet, but a decline beneath 33800.00 may give a sell signal, leaving a truncated Wave [v].

ZeroHedge reports, “Three months ago, the Treasury surprised markets when in its quarterly borrowing forecast, it revealed that in the first calendar quarter of 2021, it wouldn’t need to borrow as much debt as it had recently because the Treasury’s cash balance (held in the Treasury General Account, or TGA, which is simply the Treasury’s cash balance held at the Fed) would plunge to just $800 billion, down a record $929BN from $1.729 trillion at Dec 31, 2020.

This forecast for a flood of liquidity emanating from the Treasury prompted us (and subsequently others) to predict that as a result of the “mind-boggling liquidity” of just under $1 trillion in cash set to be unleashed by the Biden admin, stocks would soar as the Treasury’s monetary injection would be far bigger than the $120BN in liquidity injected by the Fed every month.

And while stocks indeed surged to new all time highs, the Treasury’s cash flood plan stumbled as the latest, just released Treasury Marketable Borrowing Estimates have revealed.”

 

VIX futures reached a high of 19.79 this morning, threatening a potential breakout and nearing the 50-day Moving Average at 20.30.  This would bear watching today as the indices deteriorate.  The Hi-Lo Index is not in retreat, yet.  A close beneath 50.00 would suffice to confirm the sell signals.

 

 

USD futures rose to a high of 91.39 thus far, testing the 50-day Moving Average at 91.59.  USD appears to be poised to go as high as the Broadening Wedge trendline at 96.00 by options expiration.  The flow of liquidity into the USD may come from investors selling stocks and bonds, looking for a safe haven.

 

TNX is hovering above the 50-day Moving Average at 15.89 this morning.  It appears to have made a 70% retracement of its bounce out of the Master Cycle low, so little, if any, further decline is expected.  The Cycles Model suggests growing strength into mid-May.  Two potential targets offer themselves.  the first is the November 2019 high at 19.71.  Should it exceed that, the weekly Cycle Top at 25.78 is in reserve.

 

 

 

 

 

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May 3, 2021

7:30 am

Good Morning!

While the SPX and NDX appear weaker, SPX has  not declined beneath Short-term support to establish a bearish pattern.  The DJIA has been riding the up-sloping Short-term support while the upper probes have been declining to form a possible Triangle formation, which may be short-term bullish.  One of two possibilities exist.  The first is a breakdown, not just Short-term support/resistance at 33880.00, but also mid-Cycle support at 33419.66, which may establish the bear market.  The second is a probe higher to a new all-time high.  The minimum target is 34300.00.  The upper end of that range is near 35000.00.

US 30 futures have risen to a morning high of 33997.00, short of the Friday high of 34087.21.   The bullish probe higher may be established above that level.

ZeroHedge observes, ““We believe we are at the early stage of the biggest Cobra Effect in the history of economics. As the massive monetary and massive fiscal stimuli (over $15T globally) conjoin to save the economy from a deflationary depression, instead they risk hyperinflation – overweight commodities.”

Vaccination parties have broken out on many street corners as explosive human energy has come roaring out of the cage. To us, this is a preview of what is about to transpire around the planet and the “Cobra Effect” has entered the 4th inning. When governments tinker in capital markets there are always unintended consequences. Above all, we must keep in mind – what transpired in Q1 to Q4 2020 was NOT a mere tinkering.

We have just lived through a colossal public-private experiment where fiscal and monetary policy globally have been unleashed at unprecedented proportions. It is easy to sit back and think the 2021-2022 recovery will be much like the 2009-2010 vintage. This is a mistake.’

 

SPX futures have risen to 4198.62, still not climbing above round number resistance at 4200.00.  The Elliott Wave structure appears complete, potentially leaving the DJIA alone to make new highs.  The Cyclical period of strength ended last Thursday, leaving this week to sort out directionality without any help from the Cycles.  Should a breakdown beneath 4150.00 occur, we may see 2-3 weeks of serious decline.

ZeroHedge reports, “S&P and Nasdaq futures, and European bourses were volatile but ultimately rose on Monday to kick off a new month in a quiet session which saw several major markets closed, following a week of record earnings beat which however resulted in big stock drops with investors also keeping an eye on India covid cases and economic data to gauge the pace of recovery.

Trading was subdued with several including Japan, China and the U.K. closed for public holidays. S&P 500 futures added 0.6%, Dow e-minis were up 216 points, or 0.64%, and Nasdaq 100 e-minis were up 40.25 points, or 0.30%. Europe’s Stoxx 600 Index gained 0.4%. The yen weakened, while gold advanced.

With more than 60% of companies already having reported mostly stellar results so far, profits are now expected to have risen 46% in the first quarter, compared with forecasts of 24% growth at the start of April, which however has failed to propel stocks to new highs.”

 

VIX futures climbed to 19.12 before subsiding back to the trendline near 18.20.   A breakout above the 50-day Moving Average at 20.36 gives a buy signal.

 

NDX futures have risen to 13913.75, but have receded back beneath Short-term resistance at 13898.07.   NDX appears to be the weakest of the major stock indices.  Should this persist, we will monitor the NDX Hi-Lo Index (must close below zero) and the VIX/VXN to obtain confirmation.  The Shanghai Composite is closed for the holidays, so we may monitor it as the Chinese market re-opens later this week.

ZeroHedge comments, “Three weeks ago, just before th start of Q1 earnings season we said “Q1 Earnings Will Be Stellar, But Are Fully Priced-In” noting that “the past quarter is already fully priced in – and expected to be spectacular – which is why actual earnings may only disappoint.”

We were right.

As of this weekend, 303 S&P500 companies have reported first quarter results (75% of total market cap). 69% of companies reporting have beat street wide earnings estimates by >1SD (significantly higher than 46% historical avg) whereas only 6% have missed estimates by >1SD (significantly lower than historical avg of 14%). In short a spectacular earnings season not only in absolute terms, but also relative to expectations. Here is Goldman’s John Flood describing just how spectacular:

This earnings period we are seeing the highest percentage of companies beat street wide earnings ests (by >1SD) in the 20+ years that we have tracked this data. Very few companies are missing.”

 

TNX appears to be testing Intermediate-term support at 16.39 in a probable brief dip in the Trading Cycles.  This indicates at retest of the 50-day Moving Average at 15.83 before moving higher, falling into place with the 10-year auction announced for Wednesday.  The Cycles Model proposes a possible month-long rally to follow that breaks above the current high and targets the area near 19.71.

 

 

 

 

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April 30, 2021

3:00 pm

Here’s a binary question; Which comes next, the sellers or the buyers?  All the indexes are hovering near their daily lows, but are short-term oversold.   As we observed yesterday, the short squeeze ran out of fuel before it did any serious damage.  The market’s gumption (risk appetite) seems to have withered.  Is there something lurking beneath the surface that we are not aware?  Option Gamma turns negative beneath 4150.00.

ZeroHedge comments, “When the family office Archegos Capital abruptly imploded in late March, prompting $50 billion in block trades and $10 billion in losses at Credit Suisse, Nomura, UBS and Morgan Stanley, many bank analysts were taken by surprise. Last week, many of these analysts sounded frustrated listening to Credit Suisse’s earnings call in which senior management skirted round without giving any real detail about the disaster.

“Do you think it’s possible that this could produce a very fundamental reset in how your IRB credit risk models work?” wondered Stefan Stalmann of Autonomous Research. “I mean you have only CHF20 billion to CHF25 billion of counterparty credit risk-weighted assets on literally hundreds of billions of equity swaps and repos”.

 

7:15 am

Good Morning!

SPX futures tested yesterday’s low by declining to 4175.12 after retracing, but not exceeding, yesterday’s all-time high.    A pattern of lower highs and lower lows may be developing that may cascade into a steep decline.  Yesterday’s surge may have been the last of the trending strength to the upside.  The Cycles Model suggests we may see a Master Cycle low during options week, making the next three weeks extremely volatile.

ZeroHedge remarks, “”As good as it gets.”

U.S. index futures slumped on the final trading day of April, dragged lower alongside European and Asian markets, despite stellar economic data and blockbuster earnings as traders took a month-end breather amid a record high for the S&P 500 Index and some earnings disappointments. The dollar pared April losses, and the VIX jumped.

Russell 2000 futures tumbled 1.1% and Nasdaq 100 futures dropped 0.8% after China’s antitrust crackdown weighed on Asian technology shares. Twitter plunged 13% in premarket trading after forecasting second-quarter revenue below some expectations, while Amazon’s blockbuster earnings helped push the stock to all time highs, although gains were trimmed in the premarket.”

 

VIX futures rallied to an overnight high of 18.80, back above the trendline and a potential aggressive buy signal.  Trending strength appears next week and continues on the rise through options week.  This portends a potentially sharp rally in the next three weeks.

ZeroHedge observes, “Blow out earnings from tech giants, everything feeling great, the bull keeps pushing, but did you know NASDAQ has done nothing for basically 2-3 weeks…

It sure doesn’t “feel” NASDAQ has been stuck in a range at highs, but that is the reality.

We have seen a lot of “erratic” moves up here, relatively high vol, but no direction.

As we have pointed out over past days, despite everything feeling awesome and tech earnings doing great, NASDAQ “fear” has stayed bid.

VXN is up from recent lows and has stayed “up here” since that pop higher some 2 weeks ago.”

 

NDX futures also tested yesterday’s low, making a potentially new low at 13833.62.  My comment yesterday about the resistance at 14000.00 were more accurate on the NDX than the 4200.00 resistance on the SPX.  Short-term support is at 13881.50 and appears to be broken, giving NDX an aggressive sell signal.  I would like to see more follow-through to the downside to build confidence in my outlook, but yesterday’s weakness spoke volumes regarding the outlook for the NDX.

My comments regarding the influence that China is having on the tech industry may be justified.

ZeroHedge remarks, “Following reports that Beijing was looking to scapegoat regulators responsible for initially permitting the ill-fated Ant Group IPO, which was scuttled by the CCP leadership back in October after Alibaba founder and Ant Group Chairman Jack Ma criticized Chinese tech regulation, saying it was “stifling innovation”, at an obscure industry conference, it appears China’s anti-trust regulators are imposing new restrictions on the financial arms of other Chinese tech giants after hobbling Ant.

As Beijing reportedly prepares to slap Tencent with an antitrust fine commensurate with the $2.8 billion recently demanded from Alibaba, news that Chinese regulators had summoned 13 internet companies and ordered them to rectify their digital financial businesses dealt another blow to market sentiment. The wide-ranging restrictions could weigh on credit growth and hurt the prospects of public share offerings by fintech firms, analysts have warned.

 

The Shanghai Index challenged Intermediate-term support at 3442.58 before bouncing back above it.  Remember, the 50-day Moving Average is at 3474.88, leaving it on a sell signal while going sideways for the past two months.  A decline beneath the Intermediate-term support and especially mid-Cycle support at 3408.97 reconfirms the sell signal.

ZeroHedge reports, “For the 4th time in the last 5 months, China’s Services and Manufacturing PMIs missed expectations in April.

China’s official manufacturing purchasing managers index declined to 51.1 in April from 51.9 in March (and well below the 51.8 expectations), according to data released Friday by the National Bureau of Statistics.

The non-manufacturing gauge, which measures activity in the construction and services sectors, dropped to 54.9 (from 56.3 in March), compared to 56.1 projected by economists.”

ZeroHedge also observes, “Earlier this week, we highlighted an interesting article in the FT this according to which China’s population was set to decline for the first time since the 1950s when the national census data is released soon. However, in response to the report which prompted widespread speculation over implications of this demographic inflection point, the Chinese National Bureau of Statistics (NBS) best known for faking every possible piece of data, released a statement this morning saying that the population continued to grow in 2020 ahead of the official release. Watch for 2016-19 revisions though.

So although a decline was avoided, the NBS recently said that China’s demographics “has reached an important turning point”.

 

USD futures climbed to an overnight high of 90.88, adding credence to yesterday’s stretched (272 days) Master Cycle low.   USD is set to rally into options expiration week in May, bolstering the notion of an equity liquidation seeking a safe haven during that same period.

 

TNX appears to be back-testing Intermediate-term support at 16.39 after breaking above it.  The Cycles Model suggests increasing strength, especially during options week.

 

 

 

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April 29, 2021

1:20 pm

According to Nomura, a “Crash Up” is possible.  Investors are buying hedges and may be subjecting themselves to a potential short squeeze.  I disagree for two reasons.  First, look at the Industrials.  It made a high of  34032.83 against the April 16 high of 34256.80.  The largest investors invest in the DJIA for liquidity and size.  This does not compute with the new highs in the SPX and NDX, telling us that smart/institutional money may be leaving.  Second, the inability of the SPX to remain above 4200.00 and the NDX to stay above 14000.00 tells us that demand may be tapering off and ammo for a short squeeze may be in short supply.

Read the ZeroHedge analysis for yourself.  Even the best of analysis may be wrong, including my own!

 

12:04 pm

SPX has declined beneath the Ending Diagonal trendline just above 4185.00, giving an aggressive sell signal.  Confirmation comes beneath Short-term support at 4148.98 (4150.00).

The NDX has declined beneath its Short-term support at 13874.41.  It is also on an aggressive sell signal.

Interestingly, the DJIA did not make a new high, leaving April 16 as the high.  It also has declined beneath its Short-term support at 33841.30, giving an aggressive sell signal.

VIX is also above its trendline at 18.20.  This may also be considered an aggressive buy (SPX sell) signal.

The NYSE Hi-Lo Index has ramped up to a high of 597.00.  Considering the weakness in the SPX, it appears that the Hi-Lo may be influenced by retail investors buying small caps.

ZeroHedge reports, “‘Government knows best’ is clearly the message from the Biden administration as once again this morning, they unveil their latest target for the nanny state… gig workers.

In November, millions of Americans voting against state-imposed laws forcing gig workers to be employees (with the victory of Proposition 22 – by a convincing 58% to 42% margin).”

 

7:00 am

Good Morning!

NDX futures made an overnight high of 14047.00, not exceeding the April 16 high of 14051.50 thus far.  Whether the options market has failed to establish sufficient mass of calls above 14050.00 due to a lack of confidence or the Cycles simply have turned is not yet determined.  However, failure to move above the April 16 high may have the effect of turning sentiment despite the reassurances of the Fed.

ZeroHedge comments, “One week ago JPMorgan’s chief equity strategist, Dubravko Lakos-Bujas, joined the bearish sellside bandwagon aka the “Doom Chorus” we profiled previously and which included such bank as Morgan Stanley, Goldman and Deutsche Bank, when writing that after “aggressively pushing the upside case for equities” for the last 12 months, and arguing for a continued melt-up  with S&P 500 reaching 4,000 in 1Q and the majority of the upside to our year-end PT of 4,400 being realized during 1H”, he warned that “easy equity gains for the broad market are likely behind us” and as a result JPMorgan’s “bullish conviction is now lower.”

Remarkably, Lakos-Bujas’ bearish reversal followed just hours after his fellow JPM Croat and permabull, Marko Kolanovic, appeared on CNBC and said that “It’s time to buy the dip” (it wasn’t clear just what dip he was referring to).

So fast forward to today when after this afternoon’s extremely dovish FOMC statement in which there were no changes to policy, and Powell presser in which the Fed Chair pushed back on questions about rampant reflation (stagflation) as purely “transitory” despite casually mentioning that capital markets seem “frothy”…”

 

SPX futures made a new all-time high at 4207.62 after having bounced from the Ending Diagonal trendline yesterday.  Wave [v] is equal to Wave [v] at 4240.00, while the Cycle Top resistance is nearing 4260.00.  his appears to be the final probe to the top.

ZeroHedge reports, “S&P Futures roared to new record highs above 4,200 and Nasdaq futures jumped 1% on Thursday as Powell’s dovish assurances and blow-out earnings from Apple and Facebook powered a rally in tech stocks and cemented conviction the world’s largest economy is resurgent ahead of GDP numbers and jobless claims data which are expected to show further improvements.  At 7:30 a.m. ET, Dow e-minis were up 130 points, or 0.38%, S&P 500 e-minis were up 28.00 points, or 0.67%, and Nasdaq 100 e-minis were up 144  points, or 1.03%.”

 

VIX futures made a low of 16.78 in the overnight session, a 69% retracement of the surge out of the Master Cycle low.  The coiling action of the last week appears to be making a bullish pennant, with the potential of sending the VIX above the 50-day Moving Average.

 

USD futures made a new low at 90.42 on day 272 of a very stretched Cycle.

ZeroHedge reports, “It’s “not time yet to think about tapering”… was the simple confirmation of what everyone already knew and yet that sent the dollar lower, yields lower, stocks higher, gold higher, and crypto higher…

The Dollar made the biggest headlines, dumping to two-month lows…

 

 

The GSCI Ag Index pulled back from its Tuesday Master Cycle high (day 265).  However, the price of foodstuffs continue to rise.  In addition, the Elliott Wave structure may not be complete to the upside.  The standard correction above a Head & Shoulders neckline is to retest it before moving higher.  Ag prices have risen by 79% in the past year.  It may rise considerably more, given the global conditions.

ZeroHedge observes, “Yesterday we explained why with prices already soaring, global inflation was about to go into overdrive as the leading food price indicator that is the Bloomberg Agri spot index hit the highest level in six years.

In a nutshell, this is a problem since food is a large component of CPI baskets in Asia, and “this large inflationary impulse in the region that houses more than half the world’s population should result in higher wage costs in the factory base of the world. As CPI and PPI rise in Asia, it will feed through globally in the months ahead.”

 

TNX rose to a new high at 16.72 this morning.  The Cycles Model shows a building strength starting in May ands rising through the first week of June.

ZeroHedge observes, “In case you gave up on yields moving higher yesterday, take a look again. US 10 year at 1.65% and the 5 year at 0.89%.

This space trades like a cork in water, you push it down and it pops back up.

This could get “dynamic” to the upside should we close a little higher…Key levels for the 10 year are 1.70, then 1.75%, and for the 5 year 0.9% and then recent highs around 0.95%. ”

 

 

 

 

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April 28, 2021

2:30 pm

The usual 2:00 pm jolt from the FOMC announcement fell short of the morning high.  SPX tested the trendline by declining to 4181.79.  It has made a weak bounce.  Confirmation of a decline may be made at Short-term support , now at 4145.00, just beneath the lower call option level at 4150.00.  Nobody sees a decline coming.  See ZeroHedge analysis.  

 

10:15 am

SPX has made a new all-time high at 4197.04and appears to be testing round number resistance at 4200.00.  The possibility of a breakout is high, with possible targets at 4240.00-4260.00.  Just to give you the magnitude of this bubble, Primary Wave [5] is three times the size of Wave [1] at 4300.00.

Fear of missing out (FOMO) may be the primary driver of tis final probe higher.  However, watch out for a decline past 4175.00, which breaks the Ending Diagonal formation.

 

7:30 am

NDX missed the all time high yesterday by 2 ticks.  This morning NDX futures declined to 13907.25, nearing Short-term support at 13840.45.  The DJIA futures are also in decline, after failing to make a ne all-time high yesterday.  Both are left with tops on April 16, 12.9 months from the March 23, 2020 low.  The threat of a new all-time high still exists, but the weakness appears to be profound.  The promise of stock buybacks may not deliver the way investors expect.

ZeroHedge reports, “Judging by the just released Q1 blowout earnings from Google, the one thing that companies just can’t do without during the biggest government recession stimmy handout in history, is advertising.

Moments ago, Google parent Alphabet reported Q1 earnings (at the abc.xyz URL) that blew expectations out of the water powered by an increase in digital ad spending by businesses looking to expand during the pandemic reopening:”

 

SPX futures made a shallow low a 4175.88, testing the underlying trendline just beneath it.  The threat of a new all-time high remains, but may be cancelled by a decline beneath that trendline.  Short-term support is at 4137.37, which may confirm the reversal.

ZeroHedge reports, “For the third day in a row, US equity futures were broadly flat, with the emini trading virtually unchanged from where it was this time on Monday and Tuesday as traders hunkered down ahead of today’s main event: the FOMC announcement at 2pm where Fed Chair Jerome Powell is expected to reaffirm that easy monetary policy will remain in place for a prolonged period and dismiss any suggestions of tapering bond purchases.

S&P 500 e-mini stock futures rose 0.09%. or 5 points, while Dow Jones futures were down 31 points ot 0.09% and the Nasdaq was down 7.75 or -0.06% as investors digested a mixed bag of earnings from Tesla, 3M, Microsoft and Google overnight, with tech heavyweights Apple, Facebook and Amazon due to report in the next 48 hours.

“We expect the Fed’s tone on the economy to be more positive than at the March FOMC meeting, reflecting the ongoing pickup in the data, but we don’t expect any substantive new signal yet on tapering,” TD Securities analysts wrote. “While we do not expect much price action due to the Fed decision, Biden’s remarks could continue to suggest more incoming supply, bear steepening the (Treasury yield) curve.”

 

VIX futures remained muted, with an overnight low at 17.12.  The April 14 Master cycle low, although early, continues to point to the April 16 high in equities as the “official” top, despite the nominal new high in the SPX.  The Cycles Model shows increasing strength into the month of May, possibly as far as May 18.  Biden’s “tax and spend” plan may prove to be the final straw on the back of the bull market.

ZeroHedge reports, “President Biden will head to Capitol Hill Wednesday night for the first time since Inauguration Day (a casual visit by the president would risk spoiling the narrative that the Capitol remains a battle-scarred wreck since the Jan. 6 “uprising”) to unveil the second part of his “Build Back Better” plan, a $1.8 trillion proposal to expand the American “safety net” that will be financed by hefty tax increases on individuals and businesses, including a nearly 40% tax on short-term capital gains that spooked the market when it was first reported last week.

The scale of the plan, which has been named “the American Families Plan” and is intended to compliment Biden’s “American Jobs Plan” unveiled four weeks ago, has increased in scope since the first details of a preliminary version were leaked to the press earlier this month.”

 

TNX challenged Intermediate-term resistance at 16.36 this morning as it prepares to break above its prior high and the Cycle Top at 17.64.  The initial target appears to be the November 2019 high at 19.71, but it may not stop there.  The ensuing rally appears to be gathering strength through early June.  The next 10-year auction is on May 5.

ZeroHedge reports, “After two mediocre auctions on Monday, when both the 2Y and 5Y sales saw tepid market interest, some rates traders were worried that today’s 7Y auction would be ugly. Not February 2021 ugly, mind you, which we remind readers was the closest the US has had to a failed auction and sparked the furious dump across the curve which spilled over into stock, but still ugly.

Well, besides the smallest possible tail of 0.1bps, it actually was a pretty solid 7Y auction.

Yes, the high yield of 1.306% was the highest since January 2020, rising just above the 1.300% in March, and yes, it did tail the 1.305% When Issued (just barely), but the other indicators were relatively solid.”

 

USD futures made a new overnight high at 91.13, confirming Monday’s Master Cycle low.  While the USD Cycle is closely aligned with the 10-year rates Cycle, it may be given a boost by the liquidation of equities, as well.

ZeroHedge observes, “The Fed put a lot of effort after the March FOMC meeting into convincing bond investors that it was not thinking of changing its view of low inflation and low policy rates through 2023. There is increased optimism but not additional economic data since, so we think the Fed will try and keep the message as unchanged as possible. The lack of bond yield reaction to sharp data surprises has led investors to be cautious on the immediate upside to bond yields. Real yields are almost 20bps lower than at the March FOMC (Figure 1). There is no real appetite to fight the Fed now and the Fed has little incentive to rock this boat just yet.”

 

 

 

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April 27, 2021

10:22 am

The GSCI Ag Index made a new 8-year high this morning, on day 265 of its Master Cycle.  Should the Ag Index reverse from here, it may make a 50% retracement to the Head & Shoulders neckline over the next three weeks.  However, supply and demand constraints may take it higher, stretching the Master Cycle even more.

ZeroHedge reports, “Chicago corn futures are up 3% Monday as supply concerns drive prices to an 8-year high.

“Corn is in the driver’s seat as there are supply worries as well as strong demand,” a Singapore-based feed grains trader told Reuters. “Corn is pulling prices of wheat and soybeans higher.”

Besides corn, wheat tagged a seven-year high, while soybeans are at eight-year highs. The entire agri-complex is on fire.”

 

8:05 am

Good Morning!

SPX futures traded again in a narrow, but higher range in the overnight session. It is positioned to  rally as high as the Cycle Top resistance at 4240.00 in its final probe.

ZeroHedge reports, “For the second day in a row, U.S. equity futures are starting the day barely changed, up just 0.1% and at new all time highs, alongside Treasury yields as earnings reports added to positive sentiment regarding an economic recovery in the developed world despite some disappointment in the latest TSLA results. The S&P 500 and the Nasdaq closed at record levels on Monday, with the tech-heavy Nasdaq completing a full recovery from its 11% correction that began in February.

At 07:15 a.m. ET, Dow E-minis were up 12 points, or 0.04%, S&P 500 E-minis were up 4.5 points or 0.1% to 4,184, trimming earlier gains that pushed the Emini as high as 4,192.5, and Nasdaq 100 E-minis were up 20 points, or 0.14%.”

 

NDX futures rose as high as 14047.88 before easing down.  It has yet to make a new all-time high.  Should it reverse down before doing so, it would leave a glaring non-confirmation of the SPX high.

ZeroHedge reveals, “For the world’s bulge-bracket banks, the Archegos blowup is the gift that keeps on giving: Just when analysts thought that the busted family office’s prime brokers had disclosed all of their losses, UBS surprised them by revealing in its Q1 earnings report that it had booked a $774MM loss due to the fund’s implosion. Meanwhile, Japan’s Nomura revealed that its losses had climbed to $2.85 billion, though the losses straddled two fiscal years, with 245.7 billion yen (about $2.27 billion) booked in the year ending in March, and another 62 billion yen ($573.4MM) for the fiscal year that started in April. Like Morgan Stanley, UBS determined that its losses from Archegos weren’t significant enough to warrant an announcement ahead of a scheduled earnings release.

That $2.3 billion in red ink helped push Nomura to its worst quarterly loss since 2009.”

 

VIX futures are still hovering beneath the trendline at 18.20.  It appears to have completed a 64.8% retracement of its initial rally from the Master Cycle low.  It may now be primed to explode higher.

 

TNX continues its advance in a more volatile fashion.  The Cycles Model shows a very strong surge higher through the end of May.  The targeted value appears to be 19.71, although it may go higher.

ZeroHedge reports, “Following this morning’s disappointing 2Y Auction, moments ago the Treasury concluded the day’s second coupon sale, this time comprising of $61BN in 5Y paper, and amid expectations of a poor auction the final prints were actually not too bad.

The auction priced at a high yield of 0.849%, which was not only “on the screws” with the When Issued (i.e., on top of the 0.849% WI), but was 0.1bps below the 0.850% high yield from March.

Like in the 2Y auction 90 minutes ago, the Bid to Cover did drop, but not nearly as much sliding to 2.31 from 2.36, which was just below the 2.35 six auction average, but above the 2.24 hit in February.”

 

USD futures made an overnight high of 90.81 as it advances toward the 50-day Moving Average at 91.56.  Yesterday’s low occurred on day 269 of the Master Cycle, so there is no reason to anticipate a further decline.  It makes a buy signal above the 50-day.

 

 

 

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April 26, 2021

7:30 am

SPX made a new all-time high on Friday, just before the close.  SPX futures have been trading in a very narrow range between 4163.88 and 4175.88.  SPX has 17 days to its Master Cycle termination.  However, the Cycles Model shows no strength over the next three weeks.  The Cycle could just as easily end down as up.

ZeroHedge advises, “Now that even Wall Street’s perennial permabull, JPMorgan, has joined most other major banks including Goldman, Deutsche and Morgan Stanley in warning that the coming weeks and months could be treacherous for stocks (DB went so far as predicting a 10%+ correction in the next three months), and saying on Friday that “easy equity gains for the broad market are likely behind us” and as a result its “bullish conviction is now lower”, a caution which spooked retail and hedge fund investors alike, with Goldman Prime reported on Friday that its book “saw the largest net selling in 5 weeks (-2.1 SDs), driven by short sales and long sales (4 to 1) and equally by Single Names and Macro Products.”

Yet despite the selling stocks have continued to confound everyone, thanks to what we said would be yet another short squeeze, and rose back to all time highs amid mounting bearish sentiment.

And just to add to the confusion, a new catalyst has emerged which is almost assured to push the S&P decisively into record territory.

According to Goldman’s John Flood, the Buyback blackout period ended on Friday, with the strategist noting what we previously discussed, namely that buyback authorizations “are already up meaningfully vs prior year YTD values.” To wit, “2021 YTD authorizations are +75% vs 2020 YTD auths, +24% vs 2019 auths, and +26% vs 2018 auths (reminder, 2018 was a record buyback year).”

Of course, we already knew this as we reported last month that “Stock Buybacks Soar To All Time High”…

ZeroHedge reports, “S&P futures were flat, Nasdaq futures dipped ahead of FAAMG earnings while European stocks clawed their way higher on Monday and Asia rose as world markets began the week in a relatively upbeat – if quiet – mood following further signs last week that economies are recovering rapidly. There were no major moves, however, as investors refrained from taking on large positions ahead of this week’s Federal Reserve meeting, US GDP print and corporate earnings barrage.

At 7:30 a.m. ET, Dow e-minis were up 30 points, or 0.09%, S&P 500 e-minis were down 3.75points, or 0.08%, and Nasdaq 100 e-minis were down 48.75 points, or 0.37%.

 

NDX futures made a low of 13866.12 over the weekend session.  However, Short-term support lies at 13749.38.  No signal here, but it bears watching.

ZeroHedge explains, “The recent surge in hedge fund selling (as discussed last week in Goldman Prime: Hedge Funds Sell Stocks 7 Of The Last 8 Days; Short Squeeze Coming) appears to be accelerating, reinvigorated by last week’s dismal Netflix earnings and guidance, and as Bloomberg first pointed out has spilled over to the broader tech sector resulting in a broad liquidation before the sector’s heavyweights report this week.

The $161 billion QQQ ETF – a Nasdaq proxy darling of retail and institutional investors alike – has bled nearly $6 billion over the past five days in its worst stretch since the bursting of the dot-com bubble in 2000, according to data compiled by Bloomberg. It helped drag QQQ to its first weekly drop in over a month.

To be fair, with the exception of the ugly NFLX results, earnings season has hardly been disappointing for tech, with the few tech companies that have already reported surprising on earnings by 18% on average. And yet, as we warned, their stock prices have barely moved higher in the following 24 hours, as they were already priced to absolute perfection following the recent surge. It’s also why the pressure is on the rest of the FAAMG megacaps to deliver, including Amazon.com, Apple and Microsoft, which are all scheduled to report earnings next week.”

 

VIX futures rose to a weekend high at 18.17, testing the year-old Ending diagonal trendline at 18.20.  The buy signal is the 50-day Moving Average at 20.70.

 

USD futures decline to a low of 90.68 before bouncing above Friday’s close.  This has stretched the Master Cycle to 269 days.  The turn is confirmed above the 50-day Moving Average at 91.56.  The Cycles Model shows trending strength beginning this week and extending into options expiration.  Should the liquidation of equities begin in earnest, demand for the USD may jump.  The target for this move appears to be the Broadening Wedge trendline at 96.00.  Roasted shorts, anyone?

 

 

TNX gapped to 15.95 (15.99 in the futures) this morning, suggesting the Master Cycle may have ended on Friday, day 260.00.  Friday’s low was 15.31, as opposed to 15.29 on April 15.  This suggests there may be no hesitation to get the rally underway, gaining strength over the next three weeks.

 

 

 

 

 

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