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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January 14, 2022

11:55 am

BKX has reversed back beneath the trendline after Yesterday’s Master Cycle high.  This constitutes a sell signal which may be confirmed once it declines beneath the Cycle Top support at 144.01.   The Citigroup’s earnings miss marks the top of this Cycle and ushers in reduced liquidity to the markets.

ZeroHedge remarks, “According to Doug Ramsey of the Leuthold Group, 334 companies trading on the New York Stock Exchange recently hit a 52-week low, more than double the amount that marked new one-year highs. That’s happened only three other times in history — all of them occurring in December 1999.

How did we get back to the precipice of the year 2000, where tech stocks plunged 80% and the S&P 500 lost 50% of its value over the ensuing two years? Well, start off with the fact that the amount of new money created by our central bank in the past 14 years is $8 trillion. That, by the way, is an increase in base money supply only and does not include all of the new money created by our debt-based monetary system. So, from 1913 to 2008, the Fed created $800 billion. And, it took from 2008 until today—just 14 years–for it to have created $8.8 trillion in base money supply. Is there really any wonder why inflation has now become a salient issue, especially for the middle and lower classes, and why the stock market is now set up for a meltdown similar to the NASDAQ collapse of two decades ago?”

 

7:45 am

Good Morning!

NDX futures have continued their decline overnight, slipping beneath the Ending Diagonal trendline and the 2-hour Cycle bottom at 15455.00.  Max Pain for today’s expiring options is at 15660.00.  It is deep in negative gamma territory and may lose control beneath 15500.00, near yesterday’s close.  At that point the decline may become self-reinforcing.  The NDX Hi-Lo Index closed at -318.00, showing investors heading for the exits.

ZeroHedge remarks, “NASDAQ – back to very oversold, but…

NDX closed right in the big support “congestion” area. We closed below the 100 day moving average, but the longer term trend is still around these levels/slightly lower. 200 day is some 3% lower. RSI is oversold, but as we all know, oversold can stay oversold for longer time periods, especially when RSI “establishes” low levels (note RSI in February and September 2021). Big oscillations and a non trend remains the theme, but watch this closely should we close slightly lower…”

Source: Refinitiv

 

SPX futures have fallen beneath the 50-day Moving Average and the Ending Diagonal trendline at 4650.00 this morning.  It is on a confirmed sell signal with the potential of reaching 4000.00 by the end of the month.  It may go deeper.  The Ending diagonal target is its origin at the March 23, 2020 low at 2191.86 and may be complete by the end of February.

 

The NYSE Hi-Lo Index closed at 34, just above neutral territory at 30.00.  A sell signal is confirmed beneath the 50-day Moving Average at 7.36.

ZeroHedge reports, “fter trading flat for much of the overnight session, S&P futures slumped to session lows shortly after JPM reported earnings that disappointed the market (see our full write up here) and were last trading down 30 points or 0.64%, with Dow futures down 0.3% and Nasdaq futures taking on even more water as the “sell tech” trade was back with a bang. Treasury yields rose 3bps to 1.74% and the dollar reversed an overnight loss. The VIX jumped above 20 and was last seen around 21.

The Nasdaq 100 fell to the lowest in almost three months yesterday as tech came under pressure after Fed Governor Lael Brainard said officials could boost rates as early as March. It looks like the selling will continue today.”

 

VIX futures made a new high this morning at 21.82.  It is on a confirmed buy (SPX sell) signal.  An unofficial calculation shows the VIX may rise above 100.00 this month.  There may be two more weeks of rally in this Wave 3.

 

TNX may have launched its next surge higher as a triple dose of trending strength may have taken hold today.  That period of strength may last until the end of the month.    However, the top of this Cycle may continue to the end of February.

 

 

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January 13, 2022

11:21 am

NDX has made its reversal after the bounce fell short of the 61.8% retracement at 16056.00 and the 50-day Moving Average at 16087.68.  The opportunity to short the NDX is now.  SPX will follow.

 

10:05 am

BKX may be the answer to the conundrum of the sinking US Dollar.  It appears that money is still flowing into the financial system, evidenced by the rise in bank stocks, the first entities to benefit from money flows.  Today is day 267 of the the current Master Cycle.  It is not remarkably late yet, but is having a negative influence on Treasuries and the USD.

 

7:30 am

Good Morning!

SPX futures are holding steady near the options Max Pain zone at 4720.00.  Options turn negative at 4700.00, while gamma goes negative at 4675.00.   It is quite alarming to see how much the options market dominates the SPX.   Monday morning’s low was due to Friday’s bearish puts being settled, but SPX quickly recovered to minimize the options pain (to the dealers) by the close of the day.  Max Pain is the point where options speculators in both puts and calls get paid the least.  Dealers may still be licking their wounds to the wallet that the last decline produced.  The NYSE Hi-Lo closed at 64.00 yesterday.

The Cycles Model suggests a turn lower into the last week of January.  The probable decline may target the Cycle Bottom at 4063.47, or possibly lower.  Point 6 may be reserved for the end of February.

ZeroHedge reports, “US futures were little changed on Thursday one day after the highest CPI print since 1982 and just minutes before another red hot PPI print is expected (9.8%, up from 9.6%), as investors tried to gauge the timing and pace of monetary tightening. S&P 500, Dow and Nasdaq 100 futures were up 0.1% as investors waited for the next trading signal. 10Y yields were flat around 1.74%, and the dollar edged lower as a growing tide of investors bet the world’s reserve currency has reached a peak with rate hikes largely priced-in to the market with Fed tightening likely to lead to an economic slowdown.”

 

VIX futures rose this morning after an overnight low of 17.85.  Yesterday it made an 81.7% retracement, far more than the normal 67% retracement to the mid-Cycle support at 18.62.  It may be that the bounce has excited speculators betting on a further decline in the VIX since at the 18.00 strike there are 214,715 put contracts against 9,497 open interest call contracts for next Wednesday’s options expiration.    Max Pain for these speculators is 23.00.

 

NDX futures are rising modestly after the NDX closed positive gamma yesterday.  Tomorrow’s option expirations are positive above 15770.00.  A decline beneath the trendline at 15600.00 (Max Pain) would reinvigorate the bears.  It is interesting how trendlines and Moving Averages influence the investing crowd.  I think it is unintentional.

 

TNX paused near its likely Trading Cycle low made yesterday, due to pre-auction short covering.  The Cycles Model indicates that trending strength may come back with a vengeance over the next week.

ZeroHedge remarks, “Ahead of today’s 10Y auction, some rates pundits speculated that the auction would be another blockbuster affair like yesterday’s 3Y if for no other reason than the special, -0.1%  rate 10Y notes earned in the repo market suggesting the short overhang is once again extensive and there would be a short covering during the actual auction.

And while that may have been the case before today’s session, the sharp drop in yields across the curve as inflation fears faded after today’s CPI print, meant that it would be virtually impossible to get a non-tailing auction and sure enough, moments ago the Treasury completed the sale of $36BN in the 9-year 10-month reopening of cusip CDJ7, which priced at 1.723%, tailing the When Issued 1.720% by 0.3bps, making this the third consecutive tailing 10Y auction following the end of 6 consecutive stop throughs. The yield was just over 20bps higher than the 1.518% from December 2021 and also the highest since Jan 2020.”

 

USD futures are lingering near their overnight low at 94.65.  Granted, the USD may pull back as far at the mid-Cycle support at 93.19.  However, it has stretched the Master Cycle to 288 days, a month beyond the mean.  It could mean that investors have been frightened by the high CPI and PPI.  Or it could be a major institution is acting to keep confidence up.  We’ll know more soon.

ZeroHedge remarks, “Sometimes, financial-market discourse may sound as if Formula One commentators had suddenly switched over to a marathon, where getting overexcited about the first lap may say nothing about what the eventual result might be.

In the first few days of the year, as Treasuries slumped, analysts were wondering whether to tear up their calls for their year-end 10-year yield forecasts. Now, it’s the turn of the dollar — hard as it may to believe, we are just into the second working week of the new year.

In truth, fundamental judgments on none of the assets are passed every single day. Sometimes, there is a lot of noise, but no real signal, and it happens especially around the start of the year as flows move across seamless financial borders with greater velocity. Indeed, it does feel that way: real-rate differentials have hardly moved one way or the other since the start of the year, meaning capital flows may be the reason why we are seeing what we are.”

 

 

 

 

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January 12, 2020

8:05 am

Good Morning!

NDX futures hit an overnight high of 15908.80, just above the Fibonacci 50% retracement level at 15886.35.  While I had thought that the 22-month trendline might be the stopper for this rally, and the retracement appeared complete, the powers-that-be had their own plans to raise the NDX to the Max Pain zone at 15850.00.  However, today’s options gamma turns positive at 15875.00 and especially so at 15900.00.  The Cycles are primed for a turn this morning.  That would give the NDX 8.6 days of decline and less than two days of a bounce.  The Cycles Model calls for a probable decline through the week of January 24, a possible 10.45 to 12.9 days of further decline.

The NDX Hi-Lo closed at -127.00 yesterday, still negative despite the impressive rally.

ZeroHedge observes, “Prices should continue to be unstable.

That’s the message from many in the market as while talking-heads want to proclaim yesterday as a fundamentally-driven buying spree confirming how ‘cheap’ hyper-growth has become, SpotGamma points out that is was actually a “short cover rally” fueled by delta (puts closed/rolled) and vanna (implied volatility crush).

Additionally, SpotGamma’s models continue to suggest high volatility until the 4700 strike is recovered – and it is not until 4800 that we would see significant dealer based support.”

 

SPX futures rose to an overnight high of 4739.00, just beyond the 61.8% retracement value at 4728.42.  Today’s options expiration Max Pain zone is near 4700.00. While positive above that, gamma remains neutral to 4800.00.  Another Cyclical pivot may be reached this morning that may turn equities back down.  The NYSE Hi-Lo Index closed at 39.00 yesterday, above the 50-day Moving Average at 12.40.

ZeroHedge reports, “U.S. index futures were little changed, if slightly in the green on Wednesday as investors settled into a wait-and-see mode ahead of today’s “brutal” CPI report which is expected to show the highest CPI print in nearly 40 years, a time when the fed funds rate was 11% compared to 0% now…

… and gauge the pace of Federal Reserve tightening. Consensus expects December CPI to show inflation climbing to 7.0%, a result which could see front- end fully price in a March rate hike (currently priced at 85%). Helping the overnight mood in Asia, was a moderation in China’s inflation pressures, with CPI dipping to 10.3% y/y in December, giving the central bank scope to cut interest rates to cushion the economy’s downturn just as most major nations look to tighten policy. At 730am ET, S&P futures were up 0.2% of 7.50, and Nasdaq futures rose 22 points or 0.14%, recovering toward Asia’s best levels; Dow futures were up about 0.1%. The dollar was slightly lower, extending on its recent sharp drop, while Treasury yields were steady.”

 

VIX futures rose to 18.69 in the overnight session, still beneath the 50-day Moving Average at 19.75.  VIX has made a 73% retracement and may be poised for a lift-off.

TickerTape observes, “Markets crash. And when they do, it can be fast. So, it’s a good idea to study the Cboe Volatility Index—or more affectionately, the VIX—to help you guess when that next market sell-off might happen.

Often, the VIX is inversely correlated with the S&P 500 Index (SPX). When the SPX goes up, the VIX typically goes down. But there’s more to the VIX than this relationship. In addition to it being the market’s “fear gauge”—investors tend to be more fearful when market volatility (vol) is high, and less so when vol is low—the VIX measures the market’s expectation of future volatility implied by SPX options prices.”

 

TNX has pulled back beneath the Cycle Top and may test the Lip of the Cup with Handle at 16.93 this morning.  However, it may be running out of time, as the CPI has already been announced.  Be prepared for a blast-of ot Trending strength that may last up to two weeks.

ZeroHedge reports, “Consensus was convinced – with barely any outliers – that this morning’s consumer price index would print with an astonishing 7.0% YoY (and notably 7 of the last 9 releases have come in above consensus) and they nailed it with the 7% print at its highest since June 1982 (when ET was launched in the US)…

Source: Bloomberg

That is the 19th straight monthly rise in headline CPI and Core CPI also surged to its highest since Feb 1991 (printing hotter than expected at +5.5% YoY)…”

ZeroHedge observes, “What do you get when you tae half a portion of excess GDP growth this year over trend expansion, together with half a portion of excess inflation over its long-term trend and combine them with the neutral rate of the economy?

You get a Fed funds rate of 4.15%, that’s what. At least, that’s according to the recipe that John Taylor at Stanford University came up with before the turn of the century. Taylor himself agrees. The Fed is “way behind” the curve, and depending on the assumptions made, the federal funds rate should be anywhere from 3% to 6%, not the near-0% now targeted by the central bank, he remarked at this year’s annual meeting of the American Economic Association.”

 

USD futures made an new overnight low of 95.23 but may be poised for a bounce higher.  Trending strength comes back early next week and may last through the first week of February.

 

 

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January 11, 2022

7:30 am

NDX futures continued to rise after closing but peaked at 15745.90 at 5:30 pm as options were settled.  The Max Pain zone for Wednesday is 15650.00 while gamma turns positive at 15700.00.  However, at its peak retracement, NDX only retraced 40.8% of its decline.  The NDX is pivoting on 5-day Cycles (34.4 hours) and may reach its second Cyclical pivot this morning in the cash market.

 

The NDX Hi-Lo Index shows the internal weakness as the negative close merely shows the bounce was due to short covering in stocks that are already deeply in the red. This is not a sign of recovery, since new 52-week lows were being made.

 

SPX futures bounced to a retracement high of 4697.10, jut shy of the 50% Fibonacci retracement value at 4699.35 after closing at the 38.2% Fib value at 4671.28 on Monday.  It was also able to neutralize the lion’s share of Monday’s negative gamma starting at 4700.00.  It peaked 5 days later than the NDX, but now shares the second 5-day (34.4 hour) Cycle due to end this morning.  The Cycles Model calls for a Master Cycle pivot (low) on or around January 28.

ZeroHedge reports, “After yesterday’s miraculous tech recovery which saw gigacaps drop as much as 4% before recovering all losses and closing green, Nasdaq futures led gains among U.S. stock-index futures, hinting at further relief for technology stocks as Treasury yields retreated in early trading but have since steadied around 1.75%, unchanged from Monday. Nasdaq futures rose as much as 0.7%, while S&P 500 and Dow Jones contracts were also higher by about 0.4% ahead of Powell’s Senate confirmation hearing for second term as Fed chair which begins at 10am and where the Fed chair is expected to put on a dovish mask and walk back some of the recent hawkish commentary.

Dip-buyers rescued the Nasdaq from a fifth session of declines on Monday after Marko Kolanovic urged JPM clients to buy the dip, writing that yields aren’t too high and the Fed’s won’t derail the economy’s rebound. “We view the recent equity volatility as an adjustment to the Fed’s incrementally more hawkish stance, rather than a sign that the Fed is about to bring the recovery and the equity rally abruptly to an end,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note. “We now expect three Fed rate hikes this year, starting as soon as March.”

 

The NYS Hi-Lo Index fell while the SPX bounced, showing that short covering was the greater (maybe the only) impetus to the bounce.

 

TNX futures pulled back to 17.37 early this morning, challenging the Cycle Top support at 17.55.  It may pull back as far as the Lip of the Cup with Handle at 16.93, but a triple dose of strength is due for the remainder of the week and may last about two weeks.  Be prepared for some fireworks to come out of the Fed meeting tomorrow.  In the meantime, pundits are downplaying the rate hikes.

ZeroHedge opines, ” The Fed FOMC minutes came out last week, signaling tighter monetary policy. Peter Schiff talked about the minutes in his podcast, arguing that the Fed can’t do what it says it’s going to do. If it does, it will crash the markets and the economy. And it won’t lower inflation.

The Fed minutes were widely viewed as even more hawkish than the messaging coming out of the December meeting. Peter said the minutes even surprised him a bit. But he reminded us that when he’s talking about a “hawkish” Fed, he’s not really talking about hawks.

They’re extinct. They may as well be the dodo bird at the Federal Reserve. Everybody is a dove. We’re just talking about degrees of dovishness. And so, the Fed was less dovish than the markets had expected.”

 

 

 

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January 10, 2022

4:00 pm

Here’s a “what if” to consider.  What if Wave [3] of the VIX has the same dimensions as Wave [1]?  If so, we could use the same multiplier for the entire structure (5 Waves).  Currently Wave 1 of (C) of [1] is 8.28 points, while Wave 1 of (C) of [3] is 20.59 points, a multiple of 2.5 times.  Wave 3 of (C) of [1] is 37.73 points in length.  Using the 2.5 multiple, we get 94.33 points.  Add to the Wave 2 low (January 4) and the target for Wave 3 of (C) of [3] is 110.67.  Should we see the same time frame as Wave [1], we may see the top of Wave 3 by the end of January. and the top of Wave [5] by the end of February.  I may be giving the final calculation for Wave 5 at the end of the month.

 

2:17 pm

SPX bounced above the trendline and the 100-dayMoving Average at 4565.00  to attempt to close the gap beginning at 4655.00.  However, gamma is negative all the way to 4700.00 with put options dominating to 4715.00.  The bounce appears to stall under 4650.00 thus far.  Should that be the case, the SPX would have a running correction Wave 2.

11:02 am

BKX may have begun its Master Cycle reversal this morning on day 264.  It may produce a sell signal beneath the Cycle Top at 142.89.  Earnings season starts off on Friday with Citigroup, JP Morgan Chase, Wells Fargo and Blackrock all giving their earnings announcements.  The Cycles Model suggests growing trend strength over the next two weeks, so should the reversal take hold, the chances of a panic decline arises.

ZeroHedge observes, “After a relatively quiet start to the year on the economic event front, if not in markets where last week’s FOMC Minutes sparked the worst bond rout since 2020 triggering the worst first week for the Nasdaq since the dot com bubble burst…

… we have a “simply a massive week ahead for markets” according to Nomura’s Charlie McElligott, with Powell testimony and bunches of Fed speakers, along with US economic releases headlined by the market’s most important datapoint in the CPI release Wednesday, in addition to PPI, Retail Sales and Consumer Sentiment over the course of the week, plus two Duration-heavy auctions ($36B of 10Y and $22B 30Y, on top of tomorrow’s $52B 3Y) and finally, US corporate earnings season kickoff (highlighted by JPM, C and WFC this upcoming Friday)

 

10:33 am

SPX has crossed its 22-month trendline and begun to bounce beneath round number support at 4600.00.  The Cycles Model suggests that the bounce may be stopped at the trendline at 4620.00 so we may see the decline resume this afternoon, should the trendline hold.  The SPX may be at risk for a “running correction,” where the bounce is minimal or nonexistent.  A trendline of this dimension may prevent a bounce from rising above it.   In addition, the negative gamma appears to be growing, especially as the SPX may be closing at a new low for today’s options expiration.

ZeroHedge remarks, ““Minsky Moments” almost certainly await, warns Nomura’s Charlie McElligott in his latest note as he reflects on a massive week ahead for markets.

With Powell testimony and bunches of Fed speakers, along with US economic releases headlined by the market’s most important datapoint in the CPI release Wednesday, in addition to PPI, Retail Sales and Consumer Sentiment over the course of the week, plus two Duration-heavy auctions ($36B of 10Y and $22B 30Y, on top of tomorrow’s $52B 3Y),… and finally, US corporate earnings season kickoff (highlighted by JPM, C and WFC this upcoming Friday), it is no wonder that investors are degrossing still…

 

8:20 am

Good Morning!

NDX futures have fallen deeply beneath the 22-month trendline at 15550.00.  Options gamma remains negative and may be setting up a feedback loop.  The Decline has taken 8.6 days thus far and the hourly Cycles suggest the decline may accelerate beyond this point.  A possible inflection point (bounce) may be the daily mid-Cycle support at 15021.00 or the 200-day Moving Average at 14972.00.

ZeroHedge remarks, “Last Thursday Jim Cramer described the performance of the ARK Innovation ETF (ARKK) run by Cathie Wood as “attrocious”. This caught my attention – Cramer, whether you love him or not, doesn’t often criticize other asset managers.

It turns out that the demise of ARKK highlights what happens too frequently in finance. To wit, because inflows to ARKK followed strong performance, as is usually the case, it turns out that the cumulative P&L on ARKK is negative. It peaked last February at just under $12BN and has been in steep decline ever since. At the beginning of this year it crossed into negative territory. The average dollar invested in ARKK has lost money.

ZeroHedge further observes, “Could that bag that Cathie Wood is holding have been passed to her directly from the very same company insiders she is publicly supporting? It sure looks that way.

That’s because executives of companies held by Wood’s ARKK Innovation Fund are selling shares at a “swift clip”, according to a new report from the Financial Times.

The report notes that insiders have sold a stunning $13.5 billion in stock while purchasing just a paltry $11 million over the last six months. The sales are “far higher than in any previous period,” the report notes.

When you ex out the $10.7 billion recently sold by Elon Musk, the figure still stands at $2.8 billion versus $11 million in purchases. These are still “levels well above historic norms, having averaged nearer $500m per six-month period between 2015 and 2020,” FT notes.

 

The NDX Hi-Lo Index reflects the outflow problem with a lack of dip-buying after Wednesday’s massacre.

 

SPX futures are making new lows beneath the 50-day Moving Average at 4670.00.  The Cycles Model shows a possible bouncing point sometime early this afternoon.  The obvious place for a bounce is the 22-month trendline at 4615.00.  This may set up a positive close today.  However, the Max Pain zone for today’s options expiration is at 4725.00, near the 50% retracement value.  Anything short of that may cause the decline to resume.

ZeroHedge reports, “he new week has picked up where last week left off: with futures selling off and global markets lower as yields continued their relentless treck higher, hitting fresh two year highs (amid concerns of a faster Fed balance sheet drawdown coupled with a massive IG issuance slate forcing managers to put on rate locks in what remains an illiquid market).

US index futures traded down to session lows as US traders sat at their desks after rising modestly earlier in the session, and were down 27 points or 0.6% at 730am…

… while Treasury yields stabilized after reversing an earlier spike rising as high as 1.8064% before dropping to 1.7656% following a global bond selloff last week as investors awaited key inflation data later in the week. Tech stocks again led the decline with Nasdaq futs down 0.63%, while  Dow futures were down 0.12% or 44 points. The dollar rose, bitcoin dropped and crude oil steadied around $79 a barrel.

 

VIX futures made a new high at 21.20 after a consolidation on Thursday and Friday.  The Cycles Model shows increasing strength through the month of January.  The next few days may be dicey.  VIX has made a 52% retracement of a Minute Wave [i] thus far.  We may know whether that is sufficient in the next day or so.

 

TNX is forging higher as trending strength “triples down” this week.  Of course, this is totally unexpected by most pundits.  The Cycles Model suggests the trend may continue through the end of February, with January offering the strongest gains.

ZeroHedge remarks, “US 10 year – time for the second “golden” cross?

US 10 year is trading at 1.8%, highest levels in a year. A few days before Christmas we traded at 1.37%…so this has been a rather extreme move. 1.8% is a short term resistance level to watch (but there is nothing major to the upside until 2% should we close above the 1.8% level). Note the 100 day crossing the 200 day here. Momentum is strong, but this is getting ahead of itself in the short term at least.

 

USD futures are bouncing off the 50-day Moving Average at 95.63 and has reached the top of Friday’s trading range.  The Cycles Model calls for a steady climb this week with trending strength gaining in the latter half of the month.

 

 

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January 7, 2022

3:15 pm

SPX is trading flat at or beneath 4700.00 despite efforts to boost equities.  It’s time to short this market.  I cannot see it recovering on Monday after such a negative options expiration.  Be prepared for increased volatility.

The NDX is deep into short gamma territory.  This may have an influence on the blue chips, as well.

 

11:15 am

The SPX has crossed beneath the 50-day Moving Average at 4669.39 and may be heading for the 22-month trendline/100-day Moving Average at 4628.05.  The decline is now impulsive to the downside, although there may be a bounce once it hits support.

 

 

10:55 am

I have been watching the NDX with a mixture of amazement and disbelief.  The decline may now be impulsive (trend changing) and may have more decline ahead.  The negative gamma appears to be simply overwhelming and may build on itself.  The NDX is on a sell signal, but confirmation lies beneath the trendline.  Until then the risk of a pullback is very high.  This may not be an easy position to hang on to but the message is clear.  The Cycle may now be heading down for the duration of January.  I realized the Cycles Model may have been correct after all, especially as it pertains to the NDX.  Should the decline continue, the next target appears to be near 15000.00.  The daily Cycle Bottom appears near 13000.00.

The NDX Hi-Lo rose at the open to -2.00 in an effort to revive the bounce.  It has since subsided to -77.00.

 

10:36 am

TNX continues to rise above the Lip of a Cup with Handle formation.  What is not understood by many is that (1) the Fed is no longer in charge of rates and (2) rates may rise far more than anticipated or even imagined.

ZeroHedge remarks, “A hotter than expected wage growth print and tumbling unemployment rate have been greeted by selling in bonds and stocks as no obvious ‘dovish’ excuse can be gleaned from the data.

Academy Securities’ Peter Tchir’s instant reaction clarifies much and the headline is simple – this is not great for markets…”

 

7:30 am

Good Morning!

NDX futures are bouncing, but not yet able to exceed yesterday’s high at 15900.60.  Today it must overcome the 50-day Moving Average at 16101.25.  To put this into context, NDX option gamma is extremely bearish.  The Max Pain zone is at 16160.00 and gamma turns bullish at 16200.00.  QQQ (closing price $382.10) must rise to its Max Pain zone at 392.00.  Options gamma turns bullish at 400.00.

The Cycles Model suggests a probable Cycle top, if not a new all-time high, near January 15.  Since that is a weekend, it may be either January 14 or the 17th, should the Cycle be on time.  It is noteworthy that the heaviest options will be on January 21.

ZeroHedge comments, “NASDAQ – to dare or not to dare?

NASDAQ has actually done nothing since early September. The index has been stuck in a perfect range since mid Oct. The only thing that has risen is tech volatility, VXN. Price action today is not overly impressive post the carnage yesterday, but note VXN is up as we trade close to the 100 day, the longer term trend line and the lower part of the range. All break out attempts (up as well as down) have been reversed since October. Is this time different?”

 

The NDX Hi-Lo Index closed at -522.00, a very dicey position.  But the Hi-Lo has recovered from plunges this low in the past month.  There may be more choppiness ahead.

 

SPX futures are lingering near 4700.00, not as dire as the NDX.  The rotation to quality stocks has helped the blue chips.  However, the mega-tech stocks still weigh heavily in the SPX.  If we are to follow the NDX Master Cycle, we may yet see a new all-time high in the next week.  In today’s options expiration, gamma is very bearish at 4700.00, so a stumble lower may start a panic.  However, the Max Pain zone is at 4745.00.  Gamma turns bullish at 4775.00.

ZeroHedge reports, “US index futures climbed on Friday, paring this week’s losses fractionally as investors braced for jobs data that should provide clues about the pace of Fed tightening and which is expected to come in strong (whisper number at 502k, above 447k estimate, up from 210K last month; Wednesday’s ADP print was 807k, well above 410k estimate, our full preview is here) but not too strong – remember we now live in a “good news is bad news” world – or else the market will freak out that the Fed will hike even faster than is currently expected. Nasdaq futures also showed signs of recovery after a three-day selloff even as cryptocurrencies crashed again during the Asian session. As of 730am, emini S&P futures were up 4 points or 0.1%, Nasdaq futures were 0.24% higher, or 37 points and Dow futures were unchanged.Treasuries were steady, with the two-year yield heading for the biggest weekly spike since October 2019. Crude oil headed for the longest streak of weekly gains since October on tightening supplies.”

 

TNX just surged above the Cycle Top at 17.42 on the news of the Payrolls miss.  This may jolt equities lower.

ZeroHedge reports, “With everyone bulled up on the December jobs print which was expected to more than double the disappointing November print of 210K to 447K with a whisper of more than 500K, moments ago the BLS reported that in December the US job market deteriorated again, as only 199K jobs were added, a huge miss to expectations, and the lowest number since December 2020.”

 

 

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January 6, 2022

10:25 am

NDX appears to have bounced off its 22-month trendline and may be heading higher.  The new target, should it run to the top again, is 16700.00 where Wave C equals Wave A.  However, it will have some serious headwinds at the 50-day Moving Average at 16087.00.  In tomorrow’s NDX options expiration, 16300.00 appears to be the Max Pain zone, while gamma turns positive at 16400.00.  The dealers have their work cut out for them.

 

10:03 am

SPX may have bounced from its mid-Cycle support at 4682.00, although it is too early to tell as it may test the 50-day at 4667.00.  The current decline has kept the form of a Wave B, so the bounce is still in play.  For some reason this chart shows the 100-day (green line) and not the 50-day Moving Average.

 

9:43 am

BKX made a new high this morning as it challenges the Cycle Top resistance at 142.34.  The Cycle Trading Bands are narrowing, anticipating a probable reversal off the Cycle Top and the start of a powerful new trend.  It could be that, since Wave [5] appears truncated, that this may be another attempt at Wave [5].  If so, the top may appear closer to 145.00.

 

7:30 am

Good Morning!

NDX futures reached an overnight now of 15633.50, bouncing off the 22-month trendline discussed yesterday.  We may consider that to be strong support which may lead to a Wave C bounce to the vicinity of  the Wave A high (flat correction) or to 16732.00, where Wave C equals Wave A.  NDX is in seriously negative gamma territory and should do this quickly, as the next options expiration is due tomorrow.  QQQ (384.29) must rise a hefty 2.5 to 3% to achieve its Max Pain zone at 394.00 at options expiration tomorrow.

RealInvestmentAdvice observes, “The first part of our 2022 outlook looks through the front windshield and contrasts 2021s tailwinds with 2022s growing headwinds. While no one knows what 2022 holds in store for investors, our concern is that it should not foster the same optimism as 2021. The economic and financial environments are shifting rapidly making the 2022 outlook much more difficult than this past year.

Part 2 of the 2022 outlook, coming out next week, will cover our thoughts on the stock and bond markets.

“The more extended the advance, and the higher valuations become, the more stable and promising the investment can appear to be, when judged through the rearview mirror.” John Hussman

 

The VXN closed above its 50-day Moving Average at 23.30 and may reach its Cycle Top before a correction to retest the 50-day.  It is on a buy signal (short NDX), but shorting the NDX should be done on the pullback.    The NDX Hi-Low closed at -282 yesterday, giving it a sell signal.

 

SPX futures bottomed out at 4677.10 in the overnight session and has stabilized near 4700.00.  Should Wave C follow through, it may ultimately close above the Wave A high, as far as 4950.00 Where Wave C equals Wave A, a common relationship.  However. 4800.00 may provide heavy resistance, as 4775.00 is the Max Pain zone in Friday’s options.  Remember, options providers have the incentive to pay the least at expiration time.  At the moment, the dealers must be very uncomfortable, as gamma is negative below 4775.00 and there are 8,000 more put contracts than calls at 4700.00.

ZeroHedge reports, “US equity futures were little changed after earlier swings as traders digested hawkish Fed minutes that sparked a global stock rout on Wednesday. As discussed yesterday, minutes from the Fed’s December meeting showed a growing preference for a faster path of rate hikes and a shrinking of the bank’s balance sheet (one which would lead to yet another market crash and even more stimulus). However, while rising rates is terrible news for tech and high duration names, it’s good news for the value sector, and investors bet while the Fed’s faster-than-expected policy tightening (which will lead to faster than expected easing) may crimp highly valued technology stocks it will offer opportunities in other equity sectors, and sure enough with Nasdaq futures bombing again, energy names like Exxon are at 2 year highs. Treasury yields extended a spike, with the 10Y rising to 1.75%, the dollar was unchanged and bitcoin’s plunge continued even though the selling in stocks has subsided. At 730am, Emini S&P futures were down 3 points or -0.06%, Dow futures were up 82 points or 0.2% and Nasdaq futures were down 76 points or 0.5% but off worst levels.”

 

VIX futures reached a new high at 20.79 in the overnight session, but have come down, remaining thus far above the 50-day Moving Average at 19.55.  The probe higher may be finished for now, but the buy signal has been made and VIX investors may be looking for a better entry point.

 

TNX has challenged its Cycle Top at 17.42 this morning.  TNX futures rose to 17.53 before opening beneath Cycle top resistance.  This is significant, since the Cycle Top is 2 standard deviations from the mean 258-day average at 14.71.  Investors at analysts look upon the 17.00 level as a major cange in outlook, which it is.  However, they still view the Fed as being “in charge” of rates.  However, I have done a study which reveals that the Fed has always been behind the Fed Funds rate Cycle by 1-3 months since 1949, when that data became available in 1949.

ZeroHedge remarks, “Considering that today’s minutes covered a FOMC meeting that took place some three weeks ago, with numerous Fed speakers having ample opportunity to set the stage for what was to come (talk about those famous Fed “communication” skills), it is rather shocking how powerful and violent today’s stock tantrum was.

But what exactly spooked traders so badly?

Well, as JPM Michael Feroli writes in his FOMC post-mortem, the minutes portray “a Committee on the march toward removing policy accommodation” which is not a surprise to anyone except perhaps the biggest cubic zirconium hands out in Seoul. Regarding the expected path of policy rates the minutes note that meeting participants generally see rate hikes “sooner or at a faster pace” than previously expected. Of course, this too had already been hinted at by the dots released after the meeting.”

 

Gold futures are down beneath all supports this morning, creating a powerful sell signal.  It made its Master Cycle high on Monday, day 257.  Yesterday’s uptick was strong, but unable to make a new high.  The new trend may see a breakdown beneath the Broadening Wedge and Head & Shoulders formation.  the New Master Cycle may not pivot higher until mid-February.

 

 

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January 5, 2022

2:50 pm

TNX has broken above its straight line resistance at 16.93 and appears to be challenging Cycle Top resistance at 17.39.  It has been on a buy signal (UST sell signal) since it crossed above the 50-day Moving Average.  The bond bust may be moving faster than anticipated.

ZeroHedge observes, ” The FOMC Minutes are considerably more hawkish than expected in terms of both the timing of the liftoff of rates and the pace of normalization of the balance sheet.

*  *  *

Since December 15th’s FOMC statement, bonds have been battered, the dollar is down modestly while stocks and gold are up strongly….

Source: Bloomberg

The short-end of the yield curve has risen dramatically, pricing in the new hawkish dot-plot offered by The Fed (for 2022) with a 73% chance of Fed hikes by March 2022 now ((from 40% pre-FOMC)…

 

2:42 pm

NDX has declined beneath its 50-day Moving Average and is heading for its Cycle Bottom at 15657.15.  The Scenario I mentioned this morning appears to be coming about.  I am hesitant to call for a sell signal since the potential Wave (2) is incomplete.  In addition, the potential Master Cycle is more than a week away.  The Cycle Bottom is near the Ending Diagonal trendline originating from March 2020, so I will err on the careful side. and wait for further developments.

 

7:45 am

Good Morning!

NDX futures are performing poorly as they bounce overnight at Short-term support at 16176.00.  Wave B may develop further, declining down to the Cycle Bottom support at 15664.21 before a last pile-on of BTFDers to rise to the Cycle Top resistance at 16748.42…and still not make a new high.  The NDX Hi-Lo Index closed at 2.00.

Today’s QQQ (396.47) options are bearish beneath 400.00 with a downward pull should Short-term support break.  Friday’s options expiration remains bearish beneath  399.00.

ZeroHedge reports, “After futures rose to a new all time high during the Tuesday overnight session, the mood has been decided more muted after yesterday’s sharp rates-driven tech selloff, and on Wednesday U.S. futures were mixed and Nasdaq contracts slumped as investors once again contemplated the effect of expected rate hikes on tech stocks with lofty valuations while waiting for the release of Federal Reserve minutes at 2pm today. At 730am, Nasdaq 100 futures traded 0.3% lower amid caution over the impact of higher yields on equity valuations, S&P 500 Index futures were down 0.1%, while Europe’s Stoxx 600 gauge traded near a record high. The dollar weakened, as did bitcoin, while Brent crude rose back over $80.

“The sharp rise in U.S. yields this week has sparked a move from growth to value,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. “Wall Street went looking for the winners in an inflationary environment and as a result, loaded up on the Dow Jones at the expense of the Nasdaq.”

 

SPX futures remained flat in the overnight session.  While it made a nominal new high, the SPX may still decline further in Wave B.  Depending on the depth of the decline, if any, the preliminary target of 5000.00 may come off the table.  Traditional pensions, defined contribution plans and profit sharing plans all must make their annual contribution by January 15, or file an extension.  This may be the last hurrah for money flows into equities for some time.

ZeroHedge remarks, “The consensus narrative for stocks this year seems to be clear: Watch inflation and central banks’ reaction to it amid slowing global economic growth. But that means a lot of moving parts and when the seasonal strength in January ebbs, the path to further gains this year might not be so easy.”

 

VIX futures rose in the overnight session, still rangebound beneath mid-Cycle resistance at 18.56.  Above that level may be considered an aggressive buy, while above the 50-day may confirm that signal.  Note that the VIX has back-tested the Ending Diagonal trendline at its Master Cycle low yesterday (day 265).

 

TNX has also consolidated in place as the next Trading Cycle low may be due this weekend.  The uptrend is not being challenged by this minor Cycle.  However, the breakout may be delayed until next week as trending strength returns.

 

USD futures pulled back to 96.00 as it consolidates after two days of gains.  The uptrend ay remain intact through the second week of February.  A likely target for this upsurge appears to be the 61.8% retracement of the 2020 decline at 98.30.

 

Crude oil futures rose to 77.82 in the overnight session, topping out the potential last day of strength in this bounce.  The Cycles Model calls for a decline into the last day of January as it completes the correction.

ZeroHedge observes, “Oil prices rallied today with WTI erasing all of the post-Omicron losses after OPEC+ agreed to revive more halted production as the outlook for global oil markets improved, with demand largely withstanding the new coronavirus variant.

Global fuel consumption continues to recover from 2020’s collapse. There’s rising traffic and factory activity across key Asian consuming countries and dwindling crude inventories in the U.S., buoying oil prices to nearly $80 a barrel in London.”

 

 

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January 4, 2022

3:45 pm

Today is day 258 of the Banking Index, our liquidity proxy.  Liquidity has the most impact on the NDX, since earnings are secondary, if nonexistent in most tech companies.  A reversal may soon be upon the banks and on interest sensitive companies where earnings are non-existent and rely on low interest financing.

ZeroHedge notes, “For a while it appeared that stocks, and especially giga-techs, were willing to ignore the plungefest in Treasuries and were riding the wave of new capital (some $125 billion according to Goldman) allocated to stocks of all stripes to start the new year. However, it wasn’t meant to last, and with yields suffering their biggest 2-day surge since the chaos in March 2020…

… high-duration names, which just happen to be the market’s all-important generals, are finally sliding which in a market with as little breadth as this one…”

 

10:07 am

With all the talk about new all-time highs, a lone discrepancy stands out.  The NDX is not making them.  NDX usually goes along with the SPX Cycle but at certain key intervals it strays apart.  In this case, I had noticed that the November 22 high in the NDX had “pushed” the SPX Cycle forward as you will notice below that the top of Wave B, where a Cycle Top usually occurs, happened two weeks earlier.  It appears that we may see the same phenomenon in January, since the NDX Master Cycle is due January 14, while the SPX Master Cycle is due January 28.  Yesterday I had discussed the possibility of an “event” pulling the top of the SPX (and its Master Cycle high) into the second week of January.  This, among other possibilities, may be a factor in doing so.

Now for the second question.  Will the NDX make a new all-time high?  With Apple breaking 3 trillion, you would think that is a good possibility.  Structurally, NDX does need to make a new high, since a Wave (2) must be a zig-zag formation, but will it exceed that of November 22?  It may not take long to find out.

 

8:30 am

Good Morning!

SPX futures are now over 4800.00 and rising.   The month of January is anticipated to have heavy inflows, as pension plans are due to make their annual contribution by January 15.  Once the biggest flows are in, we may see rising volatility and a sustained weakness by the end of the month, based on the Cycles Model.

As for the Options Chain, tomorrow’s options expiration is positive above 4775.00, pushing SPX higher.  However, Friday’s options are negative up to 4800.00.  That means the SPX must stay above 4800.00 for the duration of the week to keep its upward momentum.

ZeroHedge reports, “US stock futures, European bourses and Asian markets all rose, extending the blistering start to 2022 (just as Goldman predicted in its $125 billion January inflow case), with more strategists cementing their bullish projections as investors shrugged off worries Omicron could choke the global economic recovery as data on U.S. manufacturing and job openings due today will further show the world’s largest economy is resilient against the spread of omicron. Nasdaq 100 futures rose 0.4% and contracts on the S&P 500 climbed 0.3% to a new all time high above 4,800 after the underlying gauge closed at a record on Monday. European stocks also gained. Waning demand for haven assets pushed the yen to a five-year low, while oil fluctuated ahead of an OPEC+ meeting. The dollar and U.S. treasury yields extended their surge – with the 10Y last yielding 1.6630% – after Monday’s worst start to a year since 2009.’

 

VIX futures made a low of 16.34, testing Thursday’s bottom.  While the SPX has no Master Cycle Pivot, the VIX is in day 265 of its Master Cycle, so a new low may be made today.  However, it is due for a rebound.

ZeroHedge observes, “VIX – getting there

VIX has crashed since the early December panic. VIX is approaching the “new” natural floor level at these levels. Expecting much lower VIX from here is probably a very late trade. Ask yourself: how much downside vs upside is there in VIX from here and then assign some probabilities. Regular readers of TME are familiar with our overall view on volatility and protection: “buy it when you can, not when you must”.

 

TNX continues its climb, testing the breakout zone at 16.93.  The test may not produce a breakout this week, but strength returns “bigly” in the second week of January.  Once above the resistance zone, TNX is due to continue trending higher through the end of February.

 

 

 

 

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January 3, 2022 – Happy New Year!

8:15 am

Good Morning!

SPX futures are approaching 4800.00 again after hitting 4808.93 on Thursday.

During the Christmas Break I had a chance to refine the Model and ultimate outcome.  It appears that the SPX formed a Triangle that allowed it to progress sideways for the months of November and December.  I had interpreted the lack of Master Cycle terminals to mean “no new highs.”  Mea Culpa.  However, a Triangle formation brings back clarity to the Model.  It precedes the final move, which may be a zig-zag that reaches as high as 5000.00.  The current Master Cycle ends on the last week of January.  This may be interpreted as the final high, unless an unexpected event triggers the reversal sooner.  The reversal window opens next week.

ZeroHedge reports, “If 2021 ended with a whimper, then 2022 is starting off with a bang, as futures on all major U.S. equity indexes rise on the first trading day of the year amid light volumes with markets including the U.K., Japan China, Australia and New Zealand closed for holidays. Europe’s Stoxx 600 rose 0.6%. In Hong Kong, property shares dropped and China Evergrande Group halted trading without an explanation. The dollar rose, as did bond yields and bitcoin, while oil erased earlier gains.  At 745am, emini S&P futures traded 29 points, or 0.61% higher, and rising as high as 4,790, just inches away from all time highs of 4,799.75; Dow futs were 172 points or 0.48% higher and the Nasdaq was also in the green by 29 points or 0.6%.”

 

VIX futures rose to 17.66 over the weekend.  We may see the VIX rising, even as the SPX makes new all-time highs.

ZeroHedge observes, “Believe it or not – the VIX guy just called us again

We didn’t expect the VIX guy to call us only a month after his latest call. Recall what we wrote on Nov 30 (here): “We have been waiting for the panic call from our VIX guy. Earlier today he called us and we haven’t heard him in such a panic mode in a long time. His latest logic is based around the vaccine news from Moderna, the recent VIX spike “can’t you see the stress bro?” and that people had a great year and will sell etc. His main idea was to buy VIX here. Needless to say we are starting to sell volatility here. One way to play it is via put spreads in VIX. After all, volatility is mean reverting and our VIX guy has continued holding the perfect 100% inverse track record. Will he nail it again?”

 

TNX launched higher from the 50-day Moving Average at 15.25, confirming its buy signal.  This new probe ma last up to 7 weeks with strength growing, especially during the next two weeks.  The next target may be the March 2021 high at 17.65.

 

USD futures are higher this morning after having completed a Master Cycle low on Friday which completes a flat correction and allows it to advance to new highs.  The new Master Cycle is set to continue its trend to the second week of February.

 

Crude oil appears to have been deflected at the 50-day Moving Average at 76.48.  This may propel WTI to decline toward its Broadening Wedge target by the end of January, its next Master Cycle pivot.

 

 

 

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