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.

 

Posted in Published | 13 Comments

July 18, 2024

7:45 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

NDX futures bounced modestly (beneath 1919973.00) after approaching its Ending Diagonal trendline and Intermediate support at 19643.62.  A further decline beneath that level confirms the sell signal.  The mantra may change from “buy the dip” to “sell the bounce.”  Last Thursday’s all-time high remains the top of the Spring rally.  Now we have the hot days of Summer ahead of us.  Available cash is near an all-time low in mutual funds, indicating buyers are out of ammo.

Today’s options chain shows NDX firmly in short gamma beneath 19850.00.  This is a dangerous place to be, as it could snowball into an avalanche of selling.

ZeroHedge remarks, “What is happening…?

Here are a couple of short/medium term catalysts to explain the weakness (outside the most important one – the MoMo carnage – dealt with in previous email).

1. Rotation rampage……Several days of Big Tech underperformance, as investors expanded their exposures, adding more pro-cyclical exposure and lean into small-cap stocks, instead of concentrating positions in growth and momentum names

2. One weak earnings datapoint …..ASML’s weaker than expected 3Q results

3. Show me the AI money…..Increasing focus on AI, tech earnings, and whether there is too much optimism already priced into the stocks

4. Trading a lowered bar ahead of next week……Consensus expects all five of the mega-cap AI-related tech stocks will report a slowdown in sales growth and four will also have a contraction in net margins”

 

SPX futures have bounced to challenge the upper Ending Diagonal trendline near 5600.00.  It may be o a Cyclical aggressive sell signal.  The Sell signal may be confirmed beneath the lower (red) trendline and Intermediate support at 6459.59.

Today’s options chain shows Max Pain at 5600.00.  Long gamma may begin at 5620.00 while short gamma prevails beneath 5560.00.

ZeroHdge reports, “Futures are higher, rebounding from Wednesday’s tech-fueled rout. At 7:40am, S&P futures are up 0.1% and off session highs, while Nasdaq futures rise 0.4% after concerns over tight US restrictions on chip sales to China drove its worst day since 2022; Semi stocks see some relief after Taiwan chip giant TSMC’s earnings beat expectations: NVDA +2.7%, AMD +2.1%, AVGO +1.3%. Mag7 names are higher, too, with VRT +1.7% pointing to potential gains in second derivative AI plays. Major The Stoxx 600 index added 0.3% as most European markets trade higher ahead of the ECB at 8.15am ET, where the expectation is for rates to be held steady ahead of a potential Sept cut. China-exposed stocks are leading alongside macro recovery while AI/Semis remain under pressure despite positive TSMC earnings. Bond yields are higher 2-3bps with the belly underperforming; European bond yields are higher as many curves bear flatten. After tumbling to a 2-month low thanks to a surge in the yen driven by a reversal in the carry trade, the dollar was slightly higher as President Joe Biden faced intensified calls to bow out of the 2024 race. Commodity weakness continues with pockets of strength in precious metals and natgas (WTI is flat). Today’s macro data is focused on jobless claims and 3x Fed speakers.”

 

VIX futures are consolidating beneath yesterday’s high and above mid-Cycle support at 13.97.  It is now in the upper half of its 8.6-month trading range. The Cycles Model suggests the VIX may continue to rally through late August.  It affords a cheap hedge against a calamity i the market.

The July 24 options chain shows calls outnumbering puts at all levels above 13.00.  However, there does not seem to be much conviction in the options market.

 

USD futures may have reversed near the halfway point of its Trading Cycle, indicating a potential rally may ensue through mid-August.  Cash may be king for th enext month as both stocks and bonds go into a tailspin.

 

TNX rose from yesterday’s Master Cycle low at 41.44 to begin a new trek higher.  Serious overhead resistance lies at 53.16.  Should that be broken, the next resistance is at 68.23.  This is a very serious juncture in the Cycles.

 

Gold futures consolidated beneath yesterday’s potential Master Cycle high at 2488.40 on day 264 of the aging Cycle.  The triple top shows how liquidity has been waning since April.

ZeroHedge observes, “At the beginning of the year, I not only laid out 24 stocks that I would be watching for the year based on what I thought the macro environment would do, but I also detailed gold and miners as what I would buy if I had to narrow things down to one trade only.”

 

Posted in Published | Comments Off on July 18, 2024

July 17, 2024

7:45 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures have hit a new low at 20062.60 this morning.  It has declined through Cycle Top support at 20462.56 and is approaching a two-month trendline at 20000.00.  A Cyclical sell signal is in place and may be confirmed beneath the trendline.  Why the sudden change in trend?  The song of the soft landing has put investors asleep.  They have been suddenly awakened by rhe reality of earnings.

The options chain shows NDX deep into short gamma which intensifies beneath 20150.00.

RealInvestmentAdvice remarks, “On December 5, 1996, Chairman of the Fed Alan Greenspan offered that stock prices may be too high, thus risking a correction that could result in an economic fallout. He wondered out loud if the market had reached a state of “irrational exuberance.”

Over the past few months, we have seen the same term, irrational exuberance, used to describe the current state of the stock market. To gain perspective on the future, let’s compare the market environment that prompted Greenspan’s comments to today. ”

 

SPX futures have declined to 5605.20 thus far, possibly bouncing at round number support at 5600.00.  However, Intermediate and trendline support lies at 5461.25.  A sell signal may be confirmed beneath that level.  Today  is day 264 in the aging Master Cycle.

Today’s options chain shows short gamma starting beneath 5640.00.  Long gamma starts at 5650.00.  The battle between the longs and shorts is on.

ZeroHedge reports, “US equity futures slide with tech dragging down S&P and Nasdaq futures as both Semis and Mag7 are being sold pre-mkt with ASML -6% on a Bloomberg report the Biden administration is considering using the most severe restrictions available on companies like Tokyo Electron and European chip giant ASML (which tumbled to the lowest since early June), if companies continue to give China access to advanced semiconductor technology. As of 7:45am ET, S&P futures are down 1% and Nasdaq 100 futs tumble 1.4% with tech giants such as AAPL, NVDA, TSLA, AMD, MU, AVGO, MSFT, AMAT all down 1.4% – 4%. Meanwhile, the great rotation continues for another day with Russell futs positive. The yield curve is twisting flatter as 10-year Treasury yields rose while the dollar weakened and the yen jumps, sending the USDJPY lower as much as 200 pips to just above 156. Commodities are lower with Energy/Metals in the red though Ags are strong and WTI is flat. Today’s macro data focus is on Housing data, Industrial Production, and the Fed’s Beige Book. There are two Fed speakers and the 20Y bond auction which JPM rates strategist believe will require a concession.”

 

 

VIX futures rose to a morning high at 14.07 and remain elevated.  This is a buy signal confirmation, as the VIX isalready above the 50-day Moving Average.  The mid-Cycle resistance which is being challenged this morning, elevates the VIX into positive ground.  Look for further confirmation above the May 30 high at 14.88.  The Cycles Model calls for a rising VIX through mid-August.

 

USD futures declined to 103.36 this morning, surpassing the June low at 103.48.  It appears that the Cycles Model may allow the USD to decline to its rising trendline and Cycle Bottom at 101.67 bu mid-August.  A weakening USD may be an indication of a serious liquidity problem.  In addition, the Japanese Yen has been rising since its reversal from its July 3 low.  The Euro put in its low on June 26. Foreign investors ma be repatriating their investments.

 

TNX may have made its Master Cycle low yesterday. on day 266 of the aging Master Cycle.  It also touched its rising trendline, suggesting a further rally to new highs.    Rising yields may have a direct effect on the outcome of the election.  Rate cuts are still a commonplace discussion, but the Cycles Model infers just the opposite.

ZeroHedge remarks, “Housing Start s and Building Permits rose more than expected in June (+3.0% MoM and +3.4% MoM respectively) and May’s disappointments were revised modestly higher too (-4.6% MoM and -2.8% MoM respectively)…”

The modest rebound in permits – forward-looking – appears to have been triggered by a renaissance in Fed rate-cut hopes…”

 

BKX may have finally made its Master Cycle high by testing its Cycle Top resistance at 114.46 on Day 265.  There is a slight possibility of an even higher high today, but keep in mind that the Cycle is aging.  It has thrown over its trading channel near 112.50.  A decline beneath that trendline may produce an aggressive sell signal.  Other critical support lies at 104.10.  As in other indices, the larger institutions have added some exuberance to this index.

ZeroHedge observes, “Trump Trump Trump

“Trump trades” have of course been the key focus in the market over the recent past. Most of it on bonds & the dollar. Here are three “other” Trump-trade observations.

1 – M&A bankers love Trump

Expectations for a more business-friendly regulatory regime are the boon private markets have been waiting for. As a proxy for future M&A activity, shares of investment banks Evercore (+7.7%) and Lazard (+9.3%) have soared WTD.”

 

 

 

Posted in Published | Comments Off on July 17, 2024

July 16, 2024

7:50 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures consolidated beneath their new all-time high at 20672.10 made on Thursday, the 258th day of the Master Cycle.  It was announced by a Key Reversal on that day, which hasn’t been surpassed.  The Cycle Top support lies at 20431.00 and has been broken through, creating an aggressive Cyclical sell signal.  Institutional fund managers remain net long while hedge funds and individual investors are becoming increasingly short.

Today’s options chain shows Maximum Investor Pain at 20430.00.  Long gamma may arise at 20450.00 while short gamma may begin at 20420.00.

 

SPX futures are consolidating beneath yesterday’s all-time high at 5666.94, on day 262 of the Master Cycle.  The INDU also made it’s all-time high yesterday at 40351.10.  Both indices are in the reversal zone.  The Cycles Model calls for a decline into mid-August that may take many by surprise.  The probable target for the ensuing decline maybe near 5100.00.  The Dow may be due for another all-time high in September while the SPX and NDX may not go higher.  You may recall that the previous all-time high was made on November 22, 2021 in the NDX while the Dow and SPX made their previous highs on January 3, 2022.  A similar situation may develop here, as well.  The upper trendline of the Ending Diagonal (red) may be found near 5600.00 while the lower trendline of the Ending Diagonal may be found near 5550.00 for a possible sell signal.

Today’s options chain shows Max Pain at 5630.00.  Long gamma may exist above 5650.00 while short gamma may begin at 5600.00.

ZeroHedge reports, “US equity futures are modestly higher, rebounding from session lows, and led by Russell futures as the rotation looks poised to continue as bond yields are lower with the curve bull flattening. As of 7:45am, S&P futures are 0.1% higher with Nasdaq futures rising 0.2%. Premarket, Mag7 is mixed with TSLA +1.7% the standout with Semis flattish. European stocks were red across the board, as China also traded lower after Trump’s selection of JD Vance – who said China represents the biggest threat to the US – as his VP, triggered further trade and geopolitical concerns in the region. FTSE -20bp/DAX -35bps/CAC -70bps/Shanghai +8bps/Hang Seng -1.6%/Nikkei +20bps/Kospi +18bps. Treasuries rose, pushing yields to their lowest since March, as expectations for a September rate cut rose: 10-year rates fell to as low as 4.17% while 2Y yields was at 4.41%. At the same time, the US Dollar is seeing some support, but the story is the BOJ and potential JPY intervention, though JPY is weaker. Commodities are weaker across all 3 complex with precious metals, natgas, and softs providing some support. Today’s macro data focus is on Retail Sales where the headline number likely is negative based upon lower gasoline prices but the Control Group is likely higher as the consumer spent on everything else.”

 

 

VIX futures rose to 13.47 this morning and remains in positive territory.  Institutions remain net short the VIX, limiting its potential to rally.  The Cycles Model suggests the VIX ay rise through mid-August and possibly to the end of ?August.   VIX shorts currently remain the most overbought/oversold asset, next to AI.  There is a potential for a violent turn higher that may leave the shorts scrambling to cover.

 

TNX futures made a new low, while the cash market did not.  Since the charts are using the cash market, Thursday’s low remains the Cycle low.  A buy signal may be obtained above the mid-Cycle resistance at 43.24. The Cycles Model suggests that yields may rally into the third week of August.

ZeroHedge remarks, “If you don’t think the Fed has become an abject handmaid of the Wall Street gamblers, take a gander at the chart below. Owing to the slight down-tick in this week’s monthly CPI report, the outcry for rate cuts is reaching a deafening roar down in the trading pits.”

ZeroHedge further remarks, “After Powell, fully expectedly, refused to drop any hints today at the timing of The Fed’s next action, he did mention that the last three inflation reading had “added to confidence.”

Speculation on the when not the if is building.

The FOMC has an undeniable (if never acknowledged) incentive to avoid initiating cuts in the last two months of a presidential election campaign. This doesn’t mean the committee couldn’t cut in September, but it does mean that July would be preferable,” concludes Goldman Sachs chief economist Jan Hatzius in a brief note this morning.”

 

 

 

Posted in Published | Comments Off on July 16, 2024

July 15, 2024

7:45 am    2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

The Industrials made a new all-time high on Friday, modifying the Cycles landscape to allow a new all-time high in September.  The Cycles Model suggests a steep decline into mid-August.  The intended target may be as low as the mid-Cycle support at 34731.25.  Should the INDU stay above that support, a new all-time high may be made in September, approaching 45000.00.

Master Cycles may end either at a low or a high.  The ensuing Master Cycle may then take the opposite track.   In this case Friday’s Master Cycle high allows the August Master Cycle to end at a low.  You may recall that I have called the Friday Master Cycle an inversion, since it has created a triple top in the INDU.  While it is now due for a correction, this may not be an outright crash.  While the weekend futures rose to 40278.00, the INDU is now pulling back from that high.  Friday was day 259 in the Master Cycle.

ZeroHedge remarks, “Breadth and liquidity go hand in hand. In this report, we revisit Thursday, what led up to it, and what it might mean going forward. However, first we are compelled to share this really interesting fact about Thursday. According to @bespokeinvest, there was only one other day since 1979 where the Russell 2000 rose 3%+ while the S&P 500 was down, and that was in October 2008.”

 

SPX futures remained beneath Friday’s all-time high, reaching 5642.90 while Friday’s high was 5655.56.  While the Wave structure appears complete, the key may be the 1987 trendline, just above 5050.00.  Should SPX remain above that level in the ensuing decline, the probability of a higher high in September remains.  Otherwise, declining liquidity may be only strong enough to propel the Industrials higher at the expense of the other indices.  Prepare for a correction starting this week.

ZeroHedge reports, “US equity futures are stronger with the Russell/small caps again outperforming as the market rotation was supercharged over the weekend after Trump’s assassination attempt, sending both yields and the dollar higher, and is pushing a broadening that is extending July’s gains. Futures on the S&P 500 rose 0.4% at 6:35ET am in New York, while Nasdaq 100 contracts traded 0.5% higher. Pre-mkt, Mag7 and Semis are stronger with TSLA +4.9%, AAPL +2.1% standing out. Bank earnings continue this morning. The yield curve is twisting steeper and the USD rises, as soaring odds of Trump winning the US election spurred a climb in Treasury yields, led by the long end, and revived risk appetite as US equity futures climbed, outperforming European peers. In commodities there is general weakness but some strength in base with crude leading the Energy complex. As the market shifts its focus toward earnings to search for fundamental support for the nascent broadening, the macro keys this week are Retail Sales, Housing Starts, and at least ten Fed speakers including Jerome Powell today.”

 

 

VIX futures rose to 14.05 over the weekend and remain elevated this morning.  While VIX closed beneath the 50-day Moving Average at 12.82 on Friday, it is now elevated to a buy signal this morning.  A rise above the mid-Cycle resistance at 14.06 may suggest a definite change of trend.

 

TNX futures rose to 42.57 over the weekend, suggesting the Master Cycle low on Thursday is confirmed and the cash market may go higher.  The Cycles Model infers rising rates into mid-August.  Thursday was day 261 in the Master Cycle, an appropriate date for a turn.

ZeroHedge observes, “June’s year-over-year Consumer Price Index is still running 3 percent, which is now considered more-or-less on target. Five years ago, that would have been seen as intolerably high. The month-over-month decline of 0.1 percent, the best in a year, was driven by gas and used cars, which are reported as down 10 percent year over year (but still up 30 percent over four years).”

 

BKX may have made its high on Thursday, July 11, which was day 260 of the Master Cycle.  The new Master cycle may extend to late August with the target being the neckline of a massive Head & Shoulders formation at 72.50.  This does not bode well for small cap and AI stocks, which are interest sensitive.  The reversal may be confirmed with a decline beneath the 50-day Moving Average at 103.63.

 

 

Posted in Published | Comments Off on July 15, 2024

July 5, 2024

 9:00 am 2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

ZeroHedge reports,   “It appears that Biden’s apparatchiks refuse to give up on the myth of a “strong labor market” just yet even as they admit to anyone who reads between the lines just how ugly things are getting.

Moments ago the BLS reported that in June the US added 206K jobs, above the 190K expected.

 

 

SPX futures remain flat after the Bureau of Labor Statistics Employment Situation Survey.  Today is day 252 of the current Master Cycle.  The Master Cycle is nearing its end and a critical pivot may occur at any time.  The Cycles Model also suggests a day of strength, which may be revealed in either or both directions.   Today is likely to be a low volume day which may magnify any moves, as well.

ZeroHedge reports, “S equity futures are unchanged for two days in a row – having gone nowhere during the July 4th holiday – erasing an earlier attempt to break out to all time highs. At 8:00am ET, S&P futures were flat while Nasdaq futures rose 0.1% as global stocks traded at all-time highs before crucial US jobs data that’s expected to show some moderation in hiring. The US dollar dropped for fourth day to its lowest level in three weeks while the pound notched its longest winning streak in four years as Labour swept to power in the UK’s general election. Bond yields are modestly lower ahead of NFP. Commodities are mixed: oil and base metals are lower; precious metals are higher. Today, the key focus today will be NFP release and any further updates on the US election (our full NFP preview is here). Consensus sees 190k jobs being added, with Goldman calling for a street low 140K; unemployment is expected to hold at 4.0% while average hourly earnings are expected to rise 0.3%, down from last month’s 0.4%.”

 

 

VIX futures have risen to 12.52 from its Master Cycle low at 11.84  on Wednesday, day 253 in the VIX Master Cycle.  The 50-day Moving Average lies at 13.15, above which is a buy signal.  Most analysts may not recognize the buy signal until it exceeds the 200-day Moving Average at 14.19.

Next week’s options chain shows only moderate activity.  However, the July 17 options chain is chock full of speculation.  Max Pain is at 14.00.  Short gamma exists between 12.50 and 13.50.  Long gamma is heavily populated from 15.00 up to 65.00.  As SPX begins its decline, hedging may expand even higher.

 

TNX futures have declined to 42.73 while the cash market has made a low of 42.84 this morning.  Today is day 255 of the current Master Cycle.  This allows a couple more market days to achieve its target which may be near 41.00.  Next Tuesday is a day of strength and an ideal day for a reversal, as well.

Note:  I will be on a family vacation next week, so this blog may take a back seat during that time.  I plan on being back at the blog on Monday, July 15.

 

 

 

 

 

 

 

Posted in Published | Comments Off on July 5, 2024

July 3, 2024

9:42 am

BKX is edging higher this morning as it completes its current Master Cycle.  Today is day 252, leaving only 3 more market days of possible new highs.  The financial system is showing signs of stress.

ZeroHedge remarks, “The banking industry has benefited from the Federal Reserve’s measures to control inflation.

Over the past two years, the U.S. central bank paid out more than $400 billion to banks and money market funds in interest payments and other transactions meant to curb lending to fight inflation, based on data published by the Fed as of July 1.

After a rate hike spree in 2022 and 2023, the central bank now pays 5.4 percent annual interest on “reserves” – any money a bank leaves parked at the Fed overnight.

The banks, on the other hand, haven’t necessarily passed on the windfall to its customers, as deposit rates remain very low compared to the rates banks receive from the Fed.”

 

8:30 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

SPX futures reached an overnight high at 5514.40, signifying a high probability that the Current Master Cycle may end at a high.  Resistance lies at 5543.00, which may provide a suitable target.  Overnight money flows are fleeing from Europe and Japan while domestic retail investors provide daytime inflows.  Dealers are net long, while hedge funds continue to sell.  There is no exuberance.  The sentiment is that there is no alternative.  One must not be short while the market continues to rise.  Today is day 250 in the Master Cycle. The Cycles Model suggests a reversal is due in the next week or so.  Earnings reports start next week with high expectations.

Today’s options chain shows Max Pain at 5500.00.  Long gamma may start at 5525.00 while short gamma may begin at 5495.00.  Options are tightly wound and may react violently to any stimulus.

ZeroHedge reports, “US futures traded at new record highs amid rising optimism a Fed rate cut is coming, perhaps as soon as the end of the month, and ignored sticky high yields which traded near the highest level in a month. As of 8:00am ET, and ahead of a data barrage later in the day which includes ADP, Trade and claims data, as well as the latest PMI, ISM, Factory orders and Durable goods reports, S&P and Nasdaq futures were flat, erasing a modest gain earlier in the session, and ahead of a shortened-session that will end at 1 p.m. because of the July 4 holiday. On Tuesday, the S&P 500 closed above 5,500 for the first time notching its 32nd record this year. Tech and small-caps are outperforming as the market received a bullish boost from Powell but now the question is whether the macro data (and earnings) can deliver with ISM Services today and NFP on Friday. European markets took heart from Wall Street’s latest all-time highs and efforts to block a right-wing majority in French elections. Bond yields are flat to +1bps as the curve is flattening; USD is lower and commodities are higher led by metals where silver is the standout. Today’s macro data focus is on ISM Services, ADP/Jobless Claims, Factory Orders, and Fed Minutes (released after the Equity close).”

 

 

VIX futures are consolidating near yesterday’s low.  Today is day 252 (of an average 258 days) in the current Master Cycle.  A major reversal may be imminent.  The market is increasingly vulnerable to higher volatility.

The July 10 options chain shows a very small contingent of puts at 12.50.  Long gamma may begin at 17.00.  Next week’s op-ex appears to be a nothing burger.

 

TNX has pulled back beneath its 50-day Moving Average at 44.40 after its breakout to a Master Cycle high on Monday.  The mid-Cycle support lies directly beneath it at 43.40.  Investors are speculating on an imminent rate cut in July, assuming a low jobs number on Friday.

 

 

 

 

 

Posted in Published | Comments Off on July 3, 2024

July 2, 2024

10:04 am

The Ag Index (raw goods) has broken beneath the neckline of a Head & Shoulders formation spanning 5 years.  GKX has already declined beneath the 61.8% Fibonacci level aa t387.76.  But the H&S formation is being challenged, suggesting a larger decline to come.  This is the worst of both worlds, since prices at the farm are declining while rising at the checkout counter (stagflation?).  This may be due to bottlenecks in transportation and processing that have an inflationary effect on prices and may cause shortages.  Home gardening is catching on, but many don’t have the wherewithal to make a dent in their grocery bills.

ZeroHedge observes, “If you are really struggling with the high cost of living, I want you to know that you aren’t alone.  In recent months, I have been hearing from so many people that feel like they are drowning financially.  Have you experienced a palpable sense of panic when you compare your rising bills to the level of income that you are currently bringing in?  So many people out there are stressed out of their minds because it has become such a struggle to pay the bills each month.  As I discussed a few days ago, a typical U.S. household must now spend $1,069 more a month just to buy the exact same goods and services that it did three years ago.  Over the course of an entire year, that is almost an extra $13,000 dollars.  Month after month, prices just keep going higher, but those that are running things continue to insist that everything is just fine.”

 

9:32 am

BKX may be reversing from a Master Cycle high made yesterday after testing the lower trendline of the Ending Diagonal formation.  Yesterday was day 250 in the Master Cycle.  While time still allows a little “play,” the price may be right.  Earnings may start next week with very low expectations for regional banks.

 

8:00 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures have declined to 19672.40, remaining above yesterday’s intra-day low at 19577.54.  Should the NDX decline beneath that level, it introduces the probability of a further decline to short-term support at 19358.00.  Otherwise, the options dealers may be able to maintain a tight grip on equities, although bullish sentiment is waning.  Earnings estimates for the past three quarters were set low, but earnings came in lower.  Now the talk is of an earnings recovery, which may lead to a severe disappointment.  This far this market is marked by extremes, leading us to the conclusion that a reversion to the mean is looming.

Today’s options chain shows Maximum Investor Pain at 19800.00.  Long gamma may start above 19900.00.  Short gamma is creeping up to 19750.00.

 

SPX futures have declined to a morning low of 5444.60, then bounced from short-term support at 5447.20.  This action may allow SPX to go lower, possibly to Intermediate  and trendline support at 5362.00 .   That action may be countered by the options dealers who are long the SPX and would be inclined to keep it higher for the holiday.  Earnings reports don’t begin until July 8 and the majority of reports may be due after July 15.  The NYSE Hi-Lo Index closed beneath its 50-day Moving Average at 14.55 yesterday and is spending more time in the single digit range..

Today’s options chain shows Max Pain at 5475.00.  Long gamma may start at 5500.00 while short gamma may begin at 5450.00.

ZeroHedge reports, “US equity futures are sliding, reversing all of Monday’s gains and then some, with tech and small-caps stocks underperforming even though bond yields are lower by 2bps ahead of the latest JOLTS data that will give clues on the outlook for US interest rates while French stocks give up all of the post-vote gains as the relief rally reversed. As of 8:00am ET, S&P futures are down 0.5% and Nasdaq futures lose 0.6%. Treasury yields held most of Monday’s rise, which was fueled by speculation that a Donald Trump presidency would lead to greater US fiscal deficits and higher inflation. The US Dollar is stronger for a second day and commodities continue to find a bid, led by oil and energy. Today’s macro focus will be on JOLTS and Powell (9.30a) as the world adjusts to the new political outlook, one where Trump replaces Biden in November, and which appears to be the near-term driver of bond yields and commodity prices; the hurricane in the Atlantic is also supporting energy prices. These moves may be exacerbated by the low volume associated with the holiday week. ”

 

 

VIX futures bounced to a morning high at 12.88.  A buy signal may be achieved above the 50-day Moving Average at 13.38.  There is a growing likelihood of the VIX  putting in a Master Cycle low this week or early next.  It may take the earnings season to break the VIX out of its slumber.  Implied correlations in equities are near an all-time low.  What that means is that stocks are performing out of sync with one another, giving the impression of calm on the surface.  Should correlations begin to align, a spike in volatility may result.  Substantially lower earnings may be the catalyst.

Tomorrow’s options chain shows Max Pain at 13.50.  There is a large nest of puts at 13.00.  Long gamma may begin at 20.00 in the event of a surprise.

 

TNX has pulled back beneath the 50-day Moving Average at 44.46 this morning.  Today is day 253 in the Master Cycle, leaving an approximate week to complete the Cycle.  There is an overhead trendline at 45.50 which may define the upper limits of this move.

ZeroHedge remarks, “Higher for longer

US 10 year bounced perfectly on the big trend line, and is now reaching the short term negative trend line. This last move higher has taken most by surprise. Note we are above all major moving averages as of today…”

 

 

USD futures are pulling back beneath this morning’s Master Cycle high.  The Cycles Model suggests a decline in USD to mid-August.  The target may be the Cycle Bottom at 101.60.

 

 

 

Posted in Published | Comments Off on July 2, 2024

July 1, 2024

9:40 am

BKX made a marginal new high this morning, but may be nearing its retracement limit.  The Cycles Model suggests a reversal may be imminent (this week).  It may be possible that news of small bank failures may be postponed until after the 4th of July holiday.  Should that occur, the subsequent decline may last approximately 2 months.

ZeroHedge reports, “Money market funds saw modest inflows last week (up around $5BN) as bank deposits (NSA) saw $25.7BN outflows…

Source: Bloomberg

However, on a seasonally-adjusted basis, total bank deposits rose by $38BN last week to their highest since SVB’s collapse…

 

8:15 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures traded between 19658.00 and 19780.00 over the weekend, well beneath its Friday high at 20017.71.  In fact NDX made a Key Reversal on Friday, signifying a potential change in trend.  Should that be so, the Cycles Model offers us about 2 weeks of potential decline.  It doesn’t seem like a lot of time, but the possible loss of confidence after the presidential debates and diminished purchasing power may have a dramatic influence on individual investors and the outcome of this potential decline.  It is being reported that the June net selling of tech stocks by hedge funds has led to a reversal in the last  holdout of the Magnificent 7, NVDA.

Today’s options chain shows Maximum Investor Pain at 19775.00.  Long gamma may start above 19800.00 while short gamma resided beneath 19750.00.

 

SPX futures have consolidated between 5460.00 and 5480.00 after a Key Reversal from an all-time high at 5523.64 on Friday.  The Cycles Model suggests the bounce may be transitory.  Institutional and hedge fund purchases have diminished, leaving the beleagured retail investors pulling the load.

Today’s options chain reveals Max Pain at 5470.00.  Long gamma may start at 5500.00 while short gamma begins near 5550.00.

ZeroHedge reports, “US equity futures are higher boosted by a relief rally in French stocks and European bonds, where the result of the French parliamentary election (no outright majority for Le Pen) was not as bad as some had feared. As of 8:00am ET, S&P futures are up 0.3, trading near session highs,while Nasdaq futures gained 0.2% with Nvidia dropping as much as 2.8%, but off the lows. Major European markets are higher led by France and Italy after Le Pen’s National Rally led the first round of snap polls but failed to secure an absolute majority as some polls had suggested; CAC +1.4%. On macro data, Germany regional CPI suggests some cooling. We will receive the national German CPI at 8am ET. In Asia, PBOC signals possible government bond sales to cool market rally which pushed Chinese bond yields to record lows. Meanwhile bond yields in the US are 1-2bp higher, the 10Y TSY trading at 4.41%, following higher EU yields; the USD is lower. Commodities are higher led by oil and base metals. Today, the macro focus will be June ISM-Mfg where consensus expects a modest increase to 49.1 vs. 48.7 prior.”

 

 

VIX futures rose to 13.16, lifting out of the slump from last week.  It also has about two weeks to the  potential Master Cycle terminus.  The Wave structure may allow a spirited rally out of the low.

Wednesday’s options chain shows possible Max Pain at 13.50.  Short gamma lies at 13.00 while long gamma does not begin until VIX is above 20.  However, there is no follow-through.  Basically dealers are long SPX gamma and are not expecting a rise in volatility this holiday-shortened week.

 

TNX is on the move, having risen to 44.59 thus far.  Today’s breakout above the mid-Cycle resistance has placed TNX on a confirmed buy signal.  The breakout may only last a week prior to a pullback.  TNX has challenged the 50-day Moving Average.  Once above it, TNX may rise to the Cycle Top resistance at 48.70.

 

 

 

 

Posted in Published | Comments Off on July 1, 2024

June 28, 2024

10:40 am

SPX is rising to new all-time highs.  NDX is also at a new ATH.  The DJIA has not exceeded its May 20 high.  Most of the money flow for this market is coming from overseas.  There are two fractal calculations for maximum resistance near 5550.0.  However, the Cycles Model tells us that a turn may be made at any time over the next 8-9 market days.

RealInvestmentAdvice observes, “Financial advisors get a bad rap. Some deserve it; most don’t. The problem for the entire investment advisory and portfolio management community stems from the “career risk” they inevitably face. That “career risk” has been exacerbated over the last decade as massive monetary interventions and zero interest rates created outsized returns. A point we discussed last week in “A Permanent Shift Higher In Valuations.”

“The chart below shows the average annual inflation-adjusted total returns (dividends included) since 1928. I used the total return data from Aswath Damodaran, a Stern School of Business professor at New York University. The chart shows that from 1928 to 2021, the market returned 8.48% after inflation. However, notice that after the financial crisis in 2008, returns jumped by an average of four percentage points for the various periods.””

 

8:15 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

SPX futures rose this morning to 5506.30.  It may be noted that on June 20, the futures rose to 5513.10, so this is not a new ATH in the futures.  Should the June 20 cash high at 5505.53 not be exceeded, we may see an 8-9-market – day decline to the Cycle bottom at 4172.77.   The alternate view is a new ATH may be made in the same time period, should the rally persist.    The DJIA and NDX futures are not making new highs, so there is no confirmation that the SPX may make new highs.  This is a confusing market as liquidity rotates to find a new home.  An open beneath 5490.00 suggests the decline may resume.

Today’s options chain shows Max Pain at 5475.00.  SPX may be in long gamma, above 5480.00.  Short gamma may begin at 5460.00.

ZeroHedge reports, “Futures are higher led by small caps with tech stocks also mostly higher, as markets start pricing in a Trump presidency following what even Bloomberg admitted was a “disastrous” debate performance by Biden which is making Democrats panic. As of 7:45am ET, S&P and Nasdaq 100 futures rose 0.4%, suggesting this week’s rally on Wall Street is set to continue, with both indexes on course for a third quarter of gains amid expectations that signs of more bad economic growth will give the Fed more room to ease policy this year. That said, not even a looming core PCE which will likely show continued easing in prices (May PCE est 0.0% MoM, down from 0.3%, 2.6% YoY, down from 2.7%) is having an impact on bond yields which are notably higher this morning as is the USD as markets take a long, hard look at what inflation will look like under Trump’s tariff-ridden regime (spoiler alert: higher). Commodities are mixed: oil and precious metals are higher; base metals are lower. Today’s macro focus will be the May PCE release to access the Goldilocks narrative. Survey expects a 0.1% MoM print vs. 0.2% prior; on YoY basis, survey sees the number dropping to 2.6% survey vs. 2.8% prior).”

 

 

VIX futures made a new corrective low at 11.87 this morning.  The Cycles Model shows the VIX is within 2 weeks of the end of the current Master Cycle.  A new low beneath the May 23 low at 11.52 may pinpoint the end of the Master Cycle.  The alternate view is a possible volatility outburst that may upend the current “calm” environment.

The July 3 options chain shows Max Pain ar 12.50.  Long gamma may begin at 13.00, but does not have a loot of conviction.

 

TNX futures have fallen to new low at 42.61 thus far and may continue toward the trendline or lower.  The Cycles Model calls for a possible week of further decline.  This may boost equites to a new all-time high.  Liquidity for Treasuries (UST) may be arriving from European and Japanese investors who are fleeing a meltdown in their currencies.  A sell-oof in US equities may exacerbate the flow.

ZeroHedge observes, “Following two very solid coupon auctions, when the US sold 2Y and 5Y paper earlier this week, moments ago the Treasury completed the week’s final coupon sale when it sold $44BN in 7Y paper in yet another very strong auction.

The high yield of 4.276% was almost 40bps below May’s 4.650% and also stopped through the When Issued 4.279% by 0.3bps. This was the 4th stop through for the tenor in the last 5 auctions.”

 

USD futures declined to 105.42 this morning as it may complete its correction to the June low.  Both the Euro and the Yen have made their Master Cycle lows on Wednesday.  The reversal of money flows back into those currencies may bring USD futures down temporarily while the other major currencies recover.

 

 

Posted in Published | Comments Off on June 28, 2024

June 27, 2024

10:09 am

The Ag Index suddenly took a dive beneath its prior low and may have triggered a Head & Shoulders formation.  Normally H&S structures occur above or beneath a Wave (1).  This pattern is beneath a Wave (3), which is a bit unusual.  However, the pattern is valid.  The normal Wave structure allows for a decline to 225.00, so the H&S may allow for an extension.  Something may be going on that is quite unexpected.

Food wars?  ZeroHedge observes, “Sunny Verghese, CEO of Olam Agri, a Singapore-based agricultural trading firm, spoke at the Redburn Atlantic and Rothschild consumer conference last week, warned the audience that the world is heading towards a period of “food wars” as geopolitical wildfires spread across the globe.

“We have fought many wars over oil. We will fight bigger wars over food and water,” Verghese said, quoted by the Financial Times, adding that food protectionism has forced some governments to boost domestic food supplies, exacerbating food inflation.

Meanwhile, consumers hesitate at the grocery stores.  ZeroHedge remarks, “General Mills shares plunged nearly 8% at the start of the US cash session, marking its steepest intra-day drop since May 2022. The decline followed the packaged-food company’s report of fourth-quarter sales that missed average analyst estimates, coupled with a full-year sales forecast that also fell short. This disappointing outlook signals more evidence of a consumer pullback amid elevated food prices and builds on our weak consumer theme. ”

 

7:50 am  2 Chronicles 7:14

“If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”

Good Morning!

NDX futures declined this morning to 19618.30.  NDX is on an aggressive sell beneath its Cycle Top and may be due for a further decline today.  Short-term support is at 19572.00.  Intermediate support and the 2-month trendline is at 19949.30, where a confirmed sell signal may be made.  The 50-day Moving Average is  at 18493.58.  NDX has the “feel” of going higher, but insiders and hedge funds are distributing a record amount of shares shares to retail investors.

Today’s options chain shows Maximum Investor Pain at 19760.00.  Long gamma may begin at 19770.00 while short gamma may start at 19750.00.  The lines are being clearly drawn.

 

SPX futures declined to 5451.60 this morning, testing short gamma at 5450.00.  A decline beneath that level is an encouragement for an aggressive sell.  Short-term support lies at 5420.64 while Intermediate support and the trendline lie at 5343.67, where a confirmed sell signal may be made.

Today’s opotions chain shows Max pain at 5475.00.  Long gamma may start at 5500.00, while short gamma may begin at 5455.00.

ZeroHedge reports, “US index futures are down but well off session lows as Treasury yields stay at a two week high high this morning ahead of a flurry of economic data over the next two days which will help set the path for Fed policy. At 8:00am ET, S&P futures were down 0.1% as ugly earnings from Walgreens confirmed the consumer weakness is spreading, while Nasdaq futures dropped 0.2% after Micron’s disappointing sales forecast weighed on tech giants. Semis are mostly lower post MU’s earning as hedge funds continue to dump TMT/semi names to retail investors: NVDA -1.1%, AMD -47bp, QCOM -40bp. MU is down -5.4% pre-market, partially recovered from the initial 7% loss. Bond yields are flat while the USD is modestly lower. Commodities are mostly higher led by oil complex, ags and precious metals. Today, the key macro catalysts are Jobless Claims, Durable/Cap Goods Orders and the first presidential debate tonight, while tomorrow we get the closely watched core PCE figures. The figures come after Fed Governor Michelle Bowman yesterday tempered market expectations for interest rate cuts. We also receive WBA and NKE earnings.”

 

 

VIX futures consolidate as the market winds up for  a release of volatility next week.  A Minsky Moment may be coming, as call chasing equities by investors may do a turnabout.  The Cycles Model suggests a very intense 2-3 week reversal just ahead.

The July 3 op-ex shows a very calm volatilities scenario.  There is no short gamma, but long gamma is also scarce.  The July 17 monthly options expiration comes alive at levels not seen in a while.

 

TNX futures raced up to 43.47, testing the mid-Cycle resistance at 43.53., then backed away.  The Cycles Model suggests a further decline to the trendline over the next week before moving higher.  The volatility in bonds is striking, mirroring the European chaos as money flees to the US.

ZeroHedge reports, “After yesterday’s solid 2Y auction stopped through with the best Bid to Cover in one year, moments ago the Treasury sold $70BN in 5Y paper in another very strong auction.

The high yield of 4.331% stopped through the When Issued 4.335% by 0.4bps, the third consecutive stop through in a row, and also the lowest high yield since the 4.235% in march.

The bid to cover rose to 2.35 from last month’s 2.30, but it was still well below the six-auction average of 2.39 and was the second lowest this year.”

 

USD futures may have put in a Master Cycle high yesterday and shows signa of reversing lower, down to 105.40 today.  The Cycles Model suggests a decline toward 103.00 before resuming its uptrend.

 

 

Posted in Published | Comments Off on June 27, 2024