The Long View

It’s times like these, when the markets are near all-time highs, that Wall Street loves to trot out the idea that “You Can’t Time the Market.”  In addition, we have seen that bull markets may run for seriously long periods of time while bear markets are rather short in comparison.  But you won’t see articles or books touting “Buy for the long haul.”  at market bottoms.  Sentiment “goes with the flow.”  That is why it takes so much time and study to master the market.  This chart is not attempting to predict anything.  However, if you believe Mark Twain, “History doesn’t repeat, but it rhymes.”  Then you may understand that everything runs in Cycles.

 

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February 22, 2024

11:55 am

SPX made a new all-time high this morning, yet NDX has not yet attained a new high.  All of this excitement over one company…We’re looking over the edge, but being pulled back at the last moment.  The NDX is especially vulnerable, as Nvidia and Meta accounted for 70% of this year’s gains.  Today is day 251 in the current Master Cycle, leaving a week to finish off this probe higher.  Positioning is stretched, but no one seems to care.

ZeroHedge reports, “US equity futures blasted higher, and were set to push US the S&P500 to a new all time high when markets open for trading, matching record highs hit earlier in the session for both Japanese stocks…

… and European bourses…

… boosted by blowout earnings by Nvidia which surged in early trading after delivering another eye-popping sales forecast  – it really was the $2BN delta between NVDA’s $24BN revenue forecast for the current quarter and the $21.9BN consensus estimate – that added fresh momentum to a stock rally that already made it the world’s most valuable chipmaker and fanned gains in tech stocks – and really all stocks – around the world. ”

 

VIX pulled back beneath the mid-Cycle support at 14.78, but maintaining an upward bias.  VIX has two more weeks to go in its current Master Cycle.  A lot may happen in two weeks.

 

TNX is probing higher, being largely ignored while speculators gorge on their Nvidia gains.  More strength fo the rally in yields is in store for the next two weeks.

 

 

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February 21, 2024

2:25 pm

SPX has now fallen beneath the Cycle Top, the Diagonal trendline and short-term support at 4961.00, giving a sell signal.

 

 

815 am I am leaving on a tour until the end of March.  I may only have limited time, if any, to write this blog until April.

Good Morning!

NDX futures declined to 17427.00 this morning and are hovering near their lows.  NDX is on a sell signal with several supports left beneath it.  The first is Intermediate support at 17251.87, which confirms the sell.  The 50-day Moving Average is at 16995.70 where most analysts would agree that the move is bearish.  The Cycles Model suggests the decline may last until the end of February, with a possible 4-day extension into the first week of March.  Volatility may pick up over the weekend with the largest moves starting next week.  All eyes are on Nvidia this morning.

Today’s options chain shows Maximum Investor Pain at 17600.00.  Long gamma picks up at 17650.00 while short gamma begins with a bang at 17580.00.  Any negative news may put short gamma into play.

 

SPX futures morning low was 4959.80, hovering above yesterday’s low at 4955.00 where the CycleTop support and 4-month trendline lay.  Beneath 4955.00 is a sell signal for SPX.  The Cycles Model implies that the Master Cycle low may come at the end of February.  However, outside forces may extend the low into the first week of March.

Today’s op-ex shows Max Pain at 4985.00.  Long gamma may begin at 5000.00, but short gamma starts at 4975.00.

ZeroHedge reports, “US futures extended their slide, bucking a strong Asian session with European stocks mixed, ahead of what Goldman trader Scott Rubner called the most important stock on planet earth”  that would be Nvidia for anyone who has been living in a cave the past year – reports after the close facing sky-high expectations, and where another Goldman trader, Peter Callahan, said that the tactical debate is whether this print will be a local top or a ‘break-out’ moment for the stock and for the AI trade (from where he sits, this “feels like consensus is learning more towards the former“). And with options implying the stock may move about 11% in either direction, i.e., a whopping $200BN in market cap may be gained or lost for a company that recently surpassed GOOGL and AMZN in market cap, it’s not surprising why the market is on edge. With that preamble out of the way, S&P 500 futures dropped 0.2% as of 7:40am and Nasdaq contracts lost about 0.5%, suggesting Wall Street may be in for a third day of declines. Bond yields are lower, the 10Y dropping 2bps, with steepening across most of the curve; the USD is flat and commodities are weaker. The macro data focus is on Fed Minutes this afternoon; while possible to see a dovish surprise regarding QT this most likely comes at the March 20 Fed meeting where we may see a reduction in the pace of QT.”

 

 

VIX futures shot up to 16.12, above yesterday’s high. The Cycles Model shows rising trending strength going into the weekend.  The Master Cycle high in VIX may be anticipated in the first week of March.  This may very well be a slingshot move beyond market expectations.

Today’s op-ex shows Max Pain near 15.00.  Short gamma runs from 13.00 to 15.00.  Long gamma starts with a bang at 16.00 and runs hot to 40.00.

 

TNX eased down to 42.60 (futures to 42.51) this morning.  The Cycles Model suggest trending strength may prevail through the end of the week.

ZeroHedge pithily remarks, “…

The Market Ear Picture

Source: Jefferies

The worst average equity performance occurs when the 10Y-3M yield spread is negative and rising – as it is now. What is going on here? Either the bond market expects a recession or the bond market expects more inflation. Neither one seems to be what equities are suggesting.”

 

The Shanghai Composite Index rose to a high of 2994.61 today, on its way to the mid-Cycle resistance at 3081.81.  The current Master Cycle has two more weeks left to termination.  Whether it exceeds its target is still to be determined.

Zerohedge observes, “After the relentless jawboning in recent days, many were expecting some further easing today from the PBOC, and Beijing did not disappoint when China cut the 5-year loan prime rate (LPR) – which influences mortgage rate pricing – and is also known as China’s Libor (or rather SOFR since Libor no longer exists) by 25bp to to 3.95% on Tuesday, while holding the 1-year rate at 3.45%. The LPR cut is the largest since China revamped its loan pricing mechanism in 2019. China last trimmed the 5y LPR by 10bp in June 2023.”

 

 

 

 

 

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February 20, 2024

10:55 am

NDX is on as ell signal, having crossed both the daily Cycle Top and Diagonal trendline at 17604.57.  Confirmation comes at the 2-hour mid-Cycle support at 17259.96 and the 50-day Moving Average near 16983.85.  The NDX may be prone to surprises through the next 2-3 weeks.

ZeroHedge comments, “The Conference Board’s Leading Economic Indicators (LEI) continued its decline in January, dropping 0.4% MoM (notably worse than the -0.1% MoM expectations), and December’s 0.1% declin e was revised down to a 0.2% decline.

  • The biggest positive contributor to the leading index was stock prices (again) at +0.10
  • The biggest negative contributor was average workweek at -0.18″

 

8:00 am – I am preparing for a journey until the end of March.  Blogging may be spotty, at best, from this point forward.

Good Morning!

NDX futures have fallen to 17555.50 this morning.  It has challenged the Cycle Top Support at 17587.00, where an aggressive sell signal resides.  A confirmed sell signal lies at the trendline at 17250.00.  The Cycles Model suggests the decline may last to February 29, with a possible four day extension after that.  Be aware that I may not be able to comment on it as it happens.  Thjis is the most concentrated market in history.

Today’s options chain shows Maximum Investor Pain at 17650.00.  Long gamma begins at 17700.00.  Short gamma starts at 17600.  Speculators are selling calls and buying puts.

ZeroHedge remarks, “Slight Déjà vu 

The current market scenario is closely mirroring the call option buying frenzy witnessed during the pandemic, with a significant increase in net call volume for mega-cap and tech stocks. Market volatility has risen, particularly in the tech sector, with the VXN index steadily climbing and single stock call option crowding reaching its most extreme levels in three years.”

 

SPX futures declined to a morning low at 4980.1.  Critical support is at 4949.14, where the Cycle Top support atn diagonal trendline lie.  Beneath that lies the first sell signal.  The next sell signal is at the 1987 trendline and Intermediate support at 4866.37, beneath that is a confirmed sell signal.  SPX has lingered near the top since its first break at February 12.  The decline may pick up speed from here with a minimum target at the 50-day Moving Average at 4803.71.

Today’s options chain shows Maxx Pain at 5010.00.  Long gamma may begin at 5025.00 while short gamma reigns beneath 5000.00.

ZeroHedge reports, “After a flat Monday when US cash market were closed for President’s Day, equity futures are pointing to a lower open on Tuesday as the latest earnings reports and corporate news failed to shake concerns about higher-for-longer interest rates and the faltering Chinese economy, while markets braced for the main event: tomorrow’s NVDA earnings after the close. As of 8:00am contracts on the S&P 500 fall 0.3% but rebounded from session lows and were trading just above 5,000; Nasdaq 100 futures lost 0.5%. European stocks were mixed while Asian stocks pulled back from their highest level since April 2022 amid a lack of positive momentum, with a reduction in China’s mortgage reference rate failing to lift sentiment. 10Y yields dropped 1 basis point from Friday’s close (cash Treasuries were closed on Monday), while gold rose, the dollar dipped and bitcoin traded back over $52,000 erasing overnight losses. The only notable macro event today is the Leading Index (exp.-0.3, last -0.1).

 

 

VIX futures rose to an overnight high of 15.41, above the mid-Cycle support/resistance at 14.85 and on a confirmed buy.  The Cycles Model implies that the current Master Cycle may not be over until March 6, with a possible extension to March 8.  The Model suggests some very large swings in VIX throughout that period.

Tomorrow’s options chain shows Max Pain at 14.50.  Short gamma resided from 12.50 to 14.00.  Long gamma begins at 16.00 and remains strong to 42.50.

 

The Shanghai Composite Index rose above its 50-day Moving Average and upper trading channel trendline at 2899.32 to a high of 2927.31, making a bullish breakout.  However, it is overbought and may correct to the week of March 11 before a consolidation or resuming it rally.  It must rise above the mid-Cycle resistance at 3093.70 to break its declining trend.  A decline to its Cycle Bottom at 2813.43 may be constructive in making its target.

ZeroHedge observes, “With onshore traded Chinese stocks closed last week for the Lunar New Year holiday, expectations were high that Monday’s reopen would push domestic markets sharply higher if only to catch up with offshore proxies in Hong Kong and in the US, where the Nasdaq China Golden Dragon ETF has ramped sharply higher in recent days.”

 

 

TNX may be pulling back from its new high to test support at the mid-Cycle at 41.88.  Whether it does or not, the Model suggests TNX may go to 44.00 before a larger correction.

ZeroHedge remarks, “Fred Smith, the founder of executive chairman of shipping giant FedEx, is the latest business leader to sound the alarm that if America’s ballooning public debt is left unchecked, it will threaten to spiral into a catastrophic crisis.

Mr. Smith was asked during an interview on Fox News for his opinion on projections from the Congressional Budget Office (CBO) that U.S. federal debt held by the public will go from 99 percent of gross domestic product (GDP) in 2024 to a record 116 percent in 2034, before pushing above 170 percent by midcentury.

He replied by saying that warnings about the level of government spending adding to America’s public debt are both serious and growing and, “hopefully, I’m adding to the chorus and saying this is unsustainable.”

 

 

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February 16, 2024

10:24 am

The overnight melt-up in the SPX has started to melt down, instead.  Speculators are selling their calls and buying puts in a frenzy to stay ahead of the reversal.  The options market may reinforce the decline beneath 5000.00 as short gamma becomes very populated beneath that level.  What’s even more interesting is that 90% of the options market falls off at the end of the day.  It was speculators overwhelmingly buying calls that fueled the melt-up.

ZeroHedge gives an example, “After its 250% rally over the past 21 trading days, Super Micro (SMCI) is… umm… red!

It’s been up 18 of those 21 days with the biggest daily decline being 0.6%, so this is notable. SMCI is back below $900 (from $1080 highs)

And it’s 0-DTE options traders that are suddenly reversing. They started by aggressively selling calls and are now piling into puts…”

 

8:15 am

Good Morning!

Welcome to delirium Friday!

NDX futures rose to an overnight high of 17961.00 as the am options settlement looms.  The significance of this is that, if this bounce is a Wave two, it may not exceed the all-time high, leaving empty space beneath it at the end of the day.  The 50-day Moving Average at 16930.42 may be its first stop on the way down.

Today’s options chain shows Maximum Investor Pain at 17825.00. Long gamma resided above it with heavy emphasis from 17900.00 to 18000.00.  Short gamma resided beneath 17800.00.

ZeroHedge remarks, “Junk takes over leadership

Low quality led the way yesterday with Commercial Real Estate (+3.75%) and Regional Banks (+3.40%) while Megacap Tech (-0.5%) and Obesity Drugs (-1%) lagged meaningfully. Buying junk and selling Thematic Winners of course only happens in the 8th or 9th inning of a bull run. If only there were more signs of peakish frenzy….

Is the whole market about to go Meme…?

SMCI is +86% in February (11 sessions). The stock finished the day with an RSI of just under 97, the highest level since Gamestop in early 2021, and look how well that turned out. SMCI is currently on a 9 day winning streak.”

 

 

SPX futures have risen to 5043.20 in the overnight market, not exceeding the all-time intraday high at 5048.39.  Some look at the closing high last Friday at 5026.61, but I do not, since the market is continuous.  In addition, the futures are pulling back and the cash market may open in the red this morning. Emotions are running high and the most looked-for information on Google has been “call options.”  Time to sell.

Speaking of options, today’s morning op-ex shows Max Pain at 5025.00.  Long gamma resides above this with heavy emphasis at 5050.00 and above.  Short gamma may begin at 5020.00, but short speculation becomes very crowded beneath 5000.00.

The PM options are similar, but with massive puts & calls at 5000.00.  There may be high dudgeon in the options market today.

ZeroHedge reports, “fter stocks successfully recovered from a mid-week rout following the much hotter than expected CPI print, resulting in a burst of BTFD and flurry of 0DTE buying, on the last day of the week, S&P 500 futures were up 0.2% – amid bigger gains in European stocks …

… and were on pace to dodge a weekly red candle in the process setting up a record 15th weekly gain of the past 16, as the market no longer drop. Ever. Meanwhile, the euphoria was even more ridiculous over in tech world where Nasdaq futures accelerated their silly meltup, rising 0.5%, propelled by Applied Materials rising ~13% in premarket trading while the current generation’s Gamestop, Supermicro, was up another 6% premarket, sending its RSI to a record 98.”

 

 

VIX futures rose to a morning high at 14.48, as it edges back toward (above) the mid-Cycle support/;resistance at 14.87.  It remains on a buy signal above the 50-day Moving Average with further confirmations possible above the mid-Cycle and at a probable breakout above 17.54.  Most investors are slow to realize the nuances of the VIX.

Next Wednesday’s op-ex shows Max Pain at 14.00 with short gamma primarily at 13.00-1350.00.  Long gamma dominates at 16.00 and runs to 42.50.

ZeroHedge observes, “VIX seasonality

We are just at the point in time in the calendar when VIX tends to spike.

Source: Equity Clock

 

Just in time

Second half of February is bad for stocks.”

 

 

TNX futures rose to a morning high of 43.33 before easing back beneath 43.00.  The Cycles Model suggests it may resume the rally to even greater highs next week.

ZeroHedge remarks, “The yield curve has proven a poor (or very early) recession indicator in this cycle. This year, though, it will be far more useful in describing the evolution of liquidity and of funding markets, both critical to highlighting when the stock rally might be about to flounder.

Specifically a bear steepening – longer-term yields rising more than shorter-term ones – will indicate that liquidity and money velocity are in jeopardy from rising government interest payments, and that funding markets are approaching the point where reserves could shift from abundant to scarce abruptly.

Both will imperil risk assets.”

 

USD futures made a modest new low overnight, but appears to be reversing as it may resume the rally.  The Cycles Model suggests trending strength may be on the rise this weekend and into next week.

 

 

 

 

 

 

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February 15, 2024

8:00 am

Good Morning!

NDX futures rose to 17862.50 in the overnight session, a 68% retracement.  Today is a make-or-break day, as the direction of the market from here may dictate the tone of the outlook for the year.  The Cycle Top support is at 17530.00, beneath which we find an aggressive sell signal.

Today’s options Chain shows Maximum Investor Pain at 17690.00  Long gamma begins at 17700.00 and is heavily weighed while short gamma begins at 17600.00.  Investors are chasing the bull through the options market.

ZeroHedge remarks, “3rd spot secured

The day after surpassing the market value of Amazon, the chip giant has now overtaken Alphabet as well.

Source: Bloomberg

NVDA coming for the number 1 spot

1. NVDA would need to hit ~$1,150 to surpass Apple in market cap.

2. It would need to hit ~$1230 to surpass MSFT and take over as the largest stock in the world.

3. NVDA is currently 60% above its 200-day moving average. If it would reach the same level of overbought that TSLA reached in end 2020/early 2021 of 120% above it would be the largest company in the world.”

 

SPX futures have risen to 5014.40, a 73% retracement, but has not been able to fill the gap left on Tuesday at 5021.84.  Sentiment is riding high as “blue sky” beckons retail investors after 15 weeks of (nearly) unbroken rally.  Has it gone too far?  Those who know the history of the market claim the stock market is skating on very thin ice.  The Cycle Top support and Diagonal trendline lie at 4932.80, beneath which we find an aggressive sell signal.  The Sell signal is confirmed beneath Intermediate support and the 1987 trendline at 4932.80.

Today’s op-ex shows Max Pain at 4980.00-4985.00.  Long gamma kicks in above 5000.00.  Short gamma reigns beneath 4975.00.

ZeroHedge reports, “Tuesday’s post-hot CPI dump now seems like a distant bad dream as US equity futures continued their rebound, following a tech fueled rally on Wednesday that drove the S&P 500 back above 5,000. As of 8:05am, S&P 500 futures were up 0.1%, also approaching pre-CPI levels; Nasdaq futures were as usual even stronger, rising 0.2% Europe’s Stoxx 600 index surged to the highest in more than a month.  WTI crude oil futures are down 0.8% on heels of 1.6% drop Wednesday, following a bearish report by the IEA which predicts lower demand growth than supply growth in 2024. Today’s macro focus is on Retail Sales and Jobless data amid the barrage of data which includes import/export price indexes, Empire State manufacturing and Philadelphia Fed business outlook surveys, January industrial production, December business inventories, February NAHB housing market index and December TIC flows. A weaker print in retail sales – which our preview suggested is coming – and claims may continue the rally in bonds, potentially pushing the Equity rotation that began last week (paused with CPI) farther. There are also three Fed speakers today.”

 

 

VIX futures did not exceed yesterday’s low, but consolidated beneath the  mid-Cycle resistance at 14.89.

Next Wednesday’s op-ex show that virtually all of the short gamma has rolled of in yesterday’s expiration.  Long gamma starts at 14.00 and remains strong to 40.00.

ZeroHedge comments, “VIX seasonality

We are just at the point in time in the calendar when VIX tends to spike.

Source: Equity Clock

Just in time

Second half of February is bad for stocks.”

 

TNX has pulled back to test support at the mid-Cycle line at 41.82.  It may seek the 200-day Moving Average at 41.32 or possibly the trendline at 41.00 to complete  the correction in the next day or two.  The Cycles Model suggests a resurgence of trending strength may arrive early next week.  TNX is on a buy signal and this pullback offers a “buy the dip” opportunity.

 

USD futures have declined to a low of 104.22 as it corrects the most resent probe higher.  The correction may only last to the weekend, as trending strength comes back to the USD next week.

 

 

 

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February 14, 2024

10:50 am

BKX has bounced off its new low to retest the 50-day Moving Average at 93.70 this morning.  However, it may not last, since this may be in preparation for a waterfall event lasting to the end of February and possibly beyond.  The bounce in Treasuries starting in November was meant to re-liquify the markets, but the damage to banks is simply too severe.  As interest rates rise again, bank reserves may become desperately hollow.  Up to six months cash-in-hand is an oft-recommended practice in these times.

 

9:40 am

Good Morning!  I received my ashes this morning.

SPX opened very near its 50% retracement value at 4984.00 and promptly started its decline.  Although there is some relief at the open, it is a time to sell/sell short, as the decline may have already begun.  There may not be more bounces to sell after this.  A possible target for this decline may appear near 4800.00 or the 50-day Moving Average at 4786.00.

Today’s options chain shows Maximum Investor Pain at 4980.00.  Long gamma may begin at 4985.00 while short gamma starts at 4975.00.

ZeroHedge reports, “After the worst rout for US stocks since March 2023, which followed hotter than expected CPI prints across the board andsparked fears the Federal Reserve may not cut interest rates as soon as expected, US equity futures and Treasuries rebounded with S&P 500 futures adding 0.6% and rising to 5,000 after the worst inflation-day drop for the index since September 2022, while Nasdaq futures rose 0.6% as JPM writes that “markets will see if yesterday was a blip and today’s relief rally is sustainable or if it is a deadcat bounce.”  10Y Treasury yields retraced some of the previous day’s surge, but held above 4.3% as traders trimmed bets for an early Fed rate cut. In a mirror image response, UK’s FTSE 100 jumped by almost 1% after the latest UK CPI print came in lower than expected; European bourses began the session on a mixed footing and trade was generally tentative, before eventually the Stoxx moved into the green. Oil prices are little changed, with WTI trading near $78. Spot gold falls 0.1%. Bitcoin gains over 3% and is back above $50,000. There are not notable data releases today; Thursday’s Retail Sales and Friday’s PPI have implications for the inflation outlook and yield curve. Today kicks off another day of Fedspeak with both Barr and Goolsbee.

 

 

VIX opened at 15.38, but slid to a low of 14.42 before regaining its equilibrium.  Today is monthly options expiration with a battle to keep VIX at the least payout to options investors.  It is on a buy signal and today’s pullback gives an opportunity to sell shorts and buy longs while the differences get settled.

Today’s (monthly) op-ex shows Max Investor Pain at 14.50, where VIX is not hovering.  Short gamma may begin at 14.00 while long gamma may start at 15.00.  0DTE speculators will be quick to latch on to whichever way VIX goes.

ZeroHedge remarks, “VIX mania

VIX is putting in the biggest up candle in “forever”.

Source: Refinitiv

VIX panic kicking in

VIX has not closed here since the melt up started in late October 2023. You do not compare volatility to trending assets over time, but the shorter term chart shows a clear picture. VIX panic is here.”

 

 

TNX opened above 43.00 and remains hovering near there.  TNX may probe toward 44.00 before going into a corrective phase.  Once the correction is over, there may be a panic rally even higher, as the Cycles Model suggest trending strength may visit TNX next week.

ZeroHedge remarks, “Have markets been fooled by the base effect? Have they been basing too much? One would almost think so, as the decline in the y/y rate in US CPI core inflation since the summer of 2023  seems to have largely informed market participants (alongside some weaker economic data perhaps), whereas the seasonally adjusted annual rate of monthly changes in core inflation has actually been trending up. The latter, albeit more erratic, is not subject to echoes from the past.”

 

USD futures peaked at 104.85, then pulled back in a probable consolidation.  The rally may not be finished, with three weeks left in the Master Cycle.

 

Gold futures have broken beneath the prior low, reaching 1997.00 thus far.  Today is day 258 of the Master Cycle, suggesting up to two or three weeks of correction/consolidation before resuming a downward plunge.  Analysts are still calling for gold at $5,000.00.

 

Crude oil futures rose to an overnight high at 78.78, but then reversed beneath the mid-Cycle support at 77.80 to create a sell signal.  The Cycles Model suggests that crude may drop in price until May before a bottom may be found.  Don’t ignore the Head & Shoulders neckline at 63.00.

ZeroHedge remarks, “Oil prices extended gains overnight after API reported big product draws (which offset a large crude build) and on geopolitical concerns rising once more after Israel launched an extensive wave of attacks in Lebanon, Israel Defense Forces spokesperson Daniel Hagari said on social media Wednesday.

Additionally, OPEC’s top official said Tuesday that global oil demand is set to expand strongly, while a monthly outlook from the group revealed limited compliance with the members’ latest round of supply cuts.

“Oil has weathered the financial storm decisively, but copious upside potential might be too much of an ask,” said Tamas Varga, an analyst at brokerage PVM”

 

 

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February 13, 2024

1:30 pm

SPX is hovering above its Ending Diagonal trendline at 4950.00.  It has already declined to 4945.00, indicating a deeper decline to come.  The Daily Cycle top is at 4925.00.  So, an aggressive sell signal may be had between 4925.00 and 4950.00.  Confirmation of the Sell signal comes at the 1987 trendline and Intermediate support at 4846.00.  Loss of that support may trigger a waterfall event.  Analysts are still calling for an even higher blow-off top.

ZeroHedge remarks, “With equities surging higher, the signs of rampant bullishness are percolating. Year-to-date, broad based equity indexes, like the S&P500, are +5.8%, while leading sectors like the SMH (Van Eck Semi ETF) have surged an eye-watering +17.8%.

But, how do you know when the bullishness has gone from a “strong trend” to “exuberance”?”

 

12:21 am

BKX dropped into a confirmed sell signal beneath the 50-day Moving Average at 93.53.  The trap door is now open for business.  The next critical support is at the Cycle Bottom at 70.25.  The current decline may last until the end of February before a bounce.  The decline is likely to be a multiple of the March decline of approximately 34 points.

 

8:20 am

Good Morning!

NDX futures are down to 17734.10 this morning.  Critical support is at the Cycle Top at 17470.72.  Beneath that is an aggressive sell signal.  Further support is at the trendline and Intermediate support at 17128.38, beneath which lies a confirmed sell signal.  Investors are concerned that CPI may come in hotter than expected.

Today’s options chain shows Maximum Investor Pain at 17890.00.  Long gamma is above 17900 while short gamma lies beneath 17875.00.

 

SPX futures are testing round number support at 5000.00.  One may take aggressive steps beneath it.  Further support lies at the Cycle Top and Diagonal Trendline at 4917.47 for an aggressive sell signal.  Confirmation of the sell signal lies at Intermediate support and the 1987 trendline, currently at 4840.05.

Today’s op-ex shows Max Pain at 5030.00. Long gamma begins at 5030.00 while short gamma may begin beneath 5025.00.

ZeroHedge reports, “US equity futures and European bourses slumped before the release of closely watched CPI data that could set the stage for the timing of the Federal Reserve move to interest-rate cuts. Contracts on the Nasdaq 100 slid 0.6% while those on the S&P 500 fell 0.4%, extending Monday’s decline in the main US stock gauge from a high of near 5,050. Nvidia dropped 1% in premarket trading with all Mag 7 stocks down. Bond yields are down 3bps, the dollar fell and bitcoin traded around $50,000, the highest in over two years. Commodities are higher pre-mkt led by both Energy and Metals. CPI is the key macro focus for today but we also receive Small Business Optimism; full CPI preview and scenario analysis is below.”

 

 

VIX futures have risen to 14.14 thus far.  It is on a Cyclical buy signal, which most analysts won’t recognize until it breaks above 15.40.  VIX has been schlepping along the bottom of its historic trading range for two months and may be ready for a violent reaction.

Tomorrow’s op-ex shows Max Pain at 14.50.  Short gamma inhabits the domain between 12.50 and 14.50.  Long gamma begins at 15.00 and may extend as high as 55.00.

ZeroHedge observes, “VIX

Vols catching bids lately. VIX has closed higher once since Jan 18. SPX is up 220 points since then…”

 

 

TNX leaped above mid-Cycle resistance this morning as the CPI numbers gave yields a boost.  Recent buyers of T-bonds and notes have reason to be worried, since the expectation of a tailwind in bonds has just been trashed.  The Cycles Model suggests yields may continue to increase through mid-April.

ZeroHedge remarks, “Expectations were for a big drop in the YoY consumer price index (from +3.4% to +2.9%) but instead it surprised to the upside (just as we warned) with a +3.1% YoY print for headline CPI (spoiling the sub-3% partiers). Consumer prices rose 0.3% MoM (more than the 0.2% exp) but the headline did decline from +3.4% to +3.1% YoY…”

 

 

 

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February 12, 2024

10:04 am

BKX is taking a shot at Intermediate resistance at 95.16, up from the 50-day Moving Average at 93.33.  However, it is not likely to make it, as it is fighting against a potential downdraft much larger than the decline of last March.

ZeroHedge observes, “Even before the last week’s chaos surrounding New York Community Bancorp, US bank deposits (non-seasonally-adjusted) had been collapsing. But this week – amid the chaos – deposits exploded $147BN higher (NSA)…”

 

7:45 am

Note to readers:  I am leaving for an extended trip early next week that may last through the end of March.  I may decide at which levelto continue thepracticalinvestor.com after I return.

Good Morning!

NDX futures have been consolidating beneath Friday’s high over the weekend session.  It is at round number resistance at 18000.00.  Should it exceed resistance, it may venture near 18037.00, where the next resistance lies.  On the downside, The Cycle Top support lies at 17437.00.  Beneath it we may find an aggressive sell signal. The Diagonal trendline and Intermediate support are at 17095.28, where the sell signal may be confirmed.  The Cycles Model suggests a possible 3 week decline that could bring NDX down to the 1987 trendline.  Everyone seems to be all-in.

Today’s options chain shows Maximum Investor Pain at 17900.00  Long gamma lies above it.  Short gamma begins at 17890.00.

ZeroHedge remarks, “Terrific tech

NASDAQ continues making the consolidations, followed by a break up. For now the trend remains very much in place, but there is a negative RSI divergence to consider. Watch the short term trend line inside the channel that connects the last three highs. A failure to push above it could be signalling fading momentum.”

 

SPX futures are also consolidating beneath Friday’s high.  It is in throw-over mode and may be structurally complete, or nearly so.  SPX is in mid-Cycle and may have about 3 weeks of decline ahead.  Should it go into decline, it may seek the Cycle Bottom at 4073.40 as its preliminary target.

Today’s options chain shows Max Pain at 5025.00-5030.00.  Long gamma starts above 5030.00 while short gamma begins at 5025.00.

ZeroHedge reports, “After a record-matching 14 weeks of gains in the past 15 pushed the S&P to a new all-time high above 5000 last week on unbridled optimism about eventual Fed rate cuts and easing inflation pushed, S&P futures traded flat and near the top of Friday’s range, as traders paused their relentless buying after  That said, the rally in Big Tech that lifted the S&P 500 above 5,000 for the first time on Friday looked set to extend, as Amazon.com. Nvidia Corp. and Tesla ticked higher in premarket trading. Moves beyond those standouts were muted, in S&P 500 and Nasdaq 100 futures trading as well as for US Treasuries and the dollar. Bitcoin traded around $48,000 after almost reaching $49,000 during the weekend on accelerating inflows into various bitcoin ETFs.”

 

 

VIX futures advanced to 13.50 this morning, lifting off from the Master Cycle low on Friday, day 261.  The Cycles show a massive effort to keep VIX down as treasuries rallied and stocks soared.  The change may be dramatic.  VIX may now be on a buy signal (above the 50-day Moving Average at 13.09).  Time to take appropriate action may be running out.

 

TNX is hovering just above mid-Cycle support/resistance at 41.72.  The Cycles Model may be in a correction phase that could last about a week.  Should that occur, it may correct down to the 50-day Moving Average at 40.65.  However, any surprises may be to the upside.  “the US fiscal policy is on an unsustainable path,” according to Powell.

 

 

 

 

 

 

 

 

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February 9, 2024

8::20 am

Good Morning!

NDX futures have come off their overnight high at 17857.80 this morning as the markets await the CPI report to determine how soon rated cuts may begin.  Should the outlook dictates that rate cuts are postponed again, there may be a shift in sentiment.  Critical support lies at 17403.48, where an aggressive sell signal may be had.

Today’s options chain shows Maximum Investor Pain near 17700.00.  Long gamma emerges at 17750.00 while short gamma may begin at 17670.00.

ZeroHedge observes, “As we previewed yesterday, today’s most anticipated economic event was the annual revision to the BLS’s seasonal adjustment factors used to calculated the seasonally adjusted headline and core CPI data, and while traditionally this is a non-event for the market, with all attention on the trend in CPI (not to mention Fed governor Waller building up expectations when he said on Jan 16 that “one piece of data I will be watching closely is the scheduled revisions to CPI inflation due next month. Recall that a year ago, when it looked like inflation was coming down quickly, the annual update to the seasonal factors erased those gains”) and also due to the substantial upward revisions last year which had a major impact on Fed market pricing, there was a lot of attention being paid to today’s data.”

 

SPX futures reached a morning high of 5023.80, before backing down, awaiting the CPI report. The reaction to the report indicates that SPX may open beneath 5000.00.  Critical support lies at 4899.73, along with an aggressive sell signal.

Today’s options chain shows Max pain at 4940.00.  Long gamma may begin at 4950.00 while short gamma starts at 4925.00.

ZeroHedge reports, “US futures ticked higher again on Friday morning ahead of the release of CPI revision data (previewed here), assuring that the S&P 500 cash index will rise above the historic 5,000 level when it breaks for trading. S&P 500 futures traded 0.2% higher as 7:50am in New York, while contracts for the Nasdaq 100 Index gained 0.3% as Big Tech stocks made more advances in premarket trading. While Asian stocks fell, weighed by Hong Kong, as China was closed for holidays, European stocks gained paced by the Estoxx 50, where energy sector leads as WTI crude oil futures hold most of Thursday’s 3.2% advance. Meanwhile 10Y interest rates rose again, hitting 4.18%, leaving their yield up about 17 basis points in the past five days, as the US dollar and oil traded flat. Today, we get receive CPI revisions (updated seasonal factors and weights) where few expect any major changes but according to JPM, expect “headline inflation rates for recent months to be lowered somewhat on net.” The next key data point will be the regular US inflation print due Tuesday.”

 

 

VIX futures are marginally higher as the market digests the CPI data.  A buy signal awaits the VIX above the 50-day Moving Average at 13.09.

The February 14 options chain shows Max Pain at 14.50.  Short gamma stretches from 12.00 to 14.50 while long gamma begins at 15.00 and ay stretch to 65.00.

ZeroHedge remarks, “Who’s dead?

SPX vol is dead baby. 2%ile move in SPX intraday vol over the past decade.”

 

 

TNX may be consolidating after yesterdays strong lift where it challenged the mid-Cycle resistance at 41.69.    A close above that support may reinforce the uptrend, especially should it break out above the previous highs at 41.77 and 41.98.  The Cycles Model suggests that the positive trend may last through mid-April.

ZeroHedge reports, “After yesterday’s 10Y auction priced well ahead of expectations as a burst of buyers crushed any fears there may not be enough demand for the record-sized auction, moments ago the Treasury sold $25 billion ($2BN shy of the record auction size of $27BN hit during the peak of the covid crisis) in 30Y paper in what was a stellar auction.

The high yield of 4.360% was above last month’s 4.229% by just over 13bps but more importantly, the auction stopped through the 4.38% When Issued by 2bps, which was not only the third consecutive stop through (after five tails to close out 2023), but was also the biggest stop through since Jan 2023.”

 

 

 

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February 8, 2024

1:41 pm

BKX, our liquidity proxy, is hovering at the 50-day Moving Average at 92.97, waiting for the trigger to be pulled.  The resumption of the decline may be unstoppable.  The banking system as we know it may be totally changed in a mater of months.  Individuals can prepare by having cash on hand as the banking pressures rise.  The problems from last March were not solved,  They were simply postponed.

ZeroHedge remarks, “Don’t look now, but it seems that the regional banking crisis is beginning to reemerge after almost a year of hibernation.

Last February brought with it the failure of Silicon Valley Bank, First Regional and Signature Bank. At the time, the crisis was quickly spreading and the Fed was forced to step in with an emergency facility known as the Bank Term Funding Program (BTFP), which allowed banks to turn in underwater treasuries in return for cash equivalent to the par value of the treasuries at a very low interest rate. The BTFP is structured as a 1-year loan and Jerome Powell and company announced that they will not be extending the BTFP due to the fact that banks were taking the cash and dumping it into higher yielding facilities at the Fed to take advantage of an arbitrage opportunity that the BTFP opened up, which hindered the Fed’s balance sheet.”

 

8:00 am

Good Morning!

NDX futures have eased down from their new all-time high at 17784.17, to a morning low at 17719.50.  Critical support lies at 17374.13, where an aggressive sell signal may be made.  A confirmed sell signal lies beneath the Ending Diagonal trendline and Intermediate support at 17025.30.  The Cycles Model infers a decline in the making to the end of February or early March.  Meanwhile, sentiment is euphoric as stocks may be about tomake gains 14 out of 15 past weeks.

Today’s options chain shows Maximum Investor Pain at 17800.00.  Long gamma is sparse, but short gamma begins at 17790.00.

ZeroHedge remarks, “The equity world is wonderful right now, but sometimes even winners need to pause. We do believe equities will be lower over the next few weeks. Miss Market might even teach us a masterclass in humility. Here are the reasons why.”

 

SPX futures are consolidating beneath their new high made yesterday.  Today is day 34 (a Fibonacci unit) from the January low.  The bullish structure is all but complete.  Critical support lies at the Cycle Top at 4891.39.  Equities are out on a limb that may snap at any time.

Today’s op-ex shows Max Pain at 4965.00.  While long gamma may begin at 4975.00, short gamma resides beneath 4950.00.

ZeroHedge reports, “US equity futures dropped on Thursday after hitting a fresh all time high in the previous session, and bond yields rose as investors analyze a slew of earnings reports and also prepared for the sale of 30Y treassuries. As of 8:00am ET, S&P futures were down 0.2%, but even with the decline the S&P remains within striking distance of the 5,000 level and a small gain of just 5 points would take it there today. The MSCI World Index of developed-market stocks also rose to a record. The Stoxx 600 traded flat on the busiest day of the European earnings season. The dollar gains after the yen tumbled following dovish comments from BOJ Deputy governor Uchida who said the BOJ won’t aggressively hike rates even after ending negative rates (unclear who expected the BOJ to unleash a hiking spree). Commodities are the standout pre-mkt as the energy complex leads the group higher and strength across metals. It’s another busy day for earnings: the lineup in the US today includes Expedia, Philip Morris, ConocoPhillips, S&P Global and cereal maker Kellanova. On the macro side we get jobless claims and wholesale trade and inventories.”

 

 

VIX futures have risen from yesterday’s low at 12.81, which may have been a Master Cycle low at day 259.The two-month low readings in the VIX may offer a surprise in the opposite direction once the new Master Cycle has begun.

 

The Shanghai Composite Index rallied again today to Intermediate resistance at 2867.47.  It is now due for a pullback totest the low.  The correction may take up to a month.  However, it is unlikely that the Shanghai Index will make new lows at this time.

ZeroHedge notes, “China has appointed capital markets veteran Wu Qing to head the nation’s securities regulator just one day after the country’s sovereign wealth fund said it would ramp up buying shares in the open market amid a three-year rout that has wiped out a staggering $7 trillion in value off stock markets in Hong Kong and China.”

 

TNX rose to test mid-Cycle resistance at 41.65 this morning.  Tension is mounting over the auction of $25 billion of 30-year Bonds this afternoon and the offering of $185 billion in T-bills,  despite the blow-out 10-year Note auction yesterday.  The Cycles model suggests heightened volatility today, for good reason.  The Cycles Model suggests that yields may rise through late April.

ZeroHedge observes, “Today’s 10Y auction was set to make history: the February refunding auction would sell $42BN in debt maturing on Feb 15, 2034, the largest amount ever for a 10 Year auction…

… and after yesterday’s mediocre 3Y refunding, there were some concerns that the sheer size of today’s issuance could lead to severe market indigestion.”

 

 

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