3:48 pm
SPX has met both time and price elements for this micro-Cycle. Prepare for a rapid decline.
9:54 am
BKX, our liquidity proxy, may have made its Master Cycle high on Monday, day 263, at 115.20. For the third consecutive time since its July high it has made lower highs at each peak. It now faces a possible 6-week decline.
ZeroHedge comments, “94-year-old Warren Buffett’s Berkshire Hathaway has been on a multi-month dump-a-thon of Bank of America shares. The reason for the abrupt selling, which began in mid-July, has yet to be officially disclosed but should be viewed as an ominous sign that the ‘Oracle of Omaha’ foresees economic trouble ahead.
The latest Bloomberg data shows that Berkshire’s total proceeds from selling BofA shares have now topped a whopping $10bln.”
8:15 am 2 Chronicles 7:14
“If my people, which are called by my name, shall humble themselves, and pray, and seek 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!
After a more-than-week-long hiatus, the Shanghai Composite opened with a bang, then puked the better part of its gains. However, it remains above its weekly Cycle Top at 3390.25. This process may have created a top on day 264 of its Master Cycle. The Cycles Model suggests a brief, but savage decline back to the origin of this short squeeze over the next two weeks. Once the liquidity injection is over, there is likely to be only sellers. Based on this chart, an aggressive sell signal lies beneath 3390.00 while the sell signal on the daily chart lies beneath3197.00.
ZeroHedge remarks, “There is some good news and some bad news for China bulls this morning (local time).
First the good news: since mainland China (aka A-shares) were closed for the past week, mainland Indexes such as the Shanghai Shenzhen CSI 300 are up – just barely – because after opening up almost 11% to catch up with the frenzied rally in offshore markets and ETFs, the index has erased almost all gains since it closed for trading on Sept 30.”
SPX futures rose to 5722.10 overnight, but eased back somewhat. Short-term support lies at 5710.00 where an aggressive sell signal may be found. The Cycles Model suggests that the support beneath SPX is getting very shaky. However, stimulus leaking from China may boost the SPX temporarily. Resistance lies near 5750.00. Should it decline beneath 5700.00, we may see a panic decline lasting the rest of the week. The sell signal may last up to 6 weeks.
Today’s options chain shows Max Pain at 5710.00. Long gamma may begin above 5730.00 while short gamma may start at 5700.00.
ZeroHedge reports, “US equity futures are higher, even as Europe and Asia stumble after a horror show in Hong Kong as China’s record rally hit a brick wall. As of 8:00am ET, S&P futures are 0.4% higher, recovering about half of Monday’s drop which was the worst day since early September, while Nasdaq futures rise 0.5% led by the Mag 7 (NVDA +1.4%, MSFT +0.8% and GOOG +0.6%). Both indexes slid Monday after traders faded bets on rate rate cuts, pushing 10Y bond yields above 4.0% for the first time in 2 months. Taking a step back, US stocks remain unchanged since the Fed’s jumbo rate cut.”
VIX futures have pulled back from yesterday’s new high, but remained above the Cycle Top support at 21.78. Trending strength appears later this week and may extend to the end of October. VIX is stressed and needs to catch up to market conditions. Or possibly, the market needs to react appropriately to the stress building up in the VIX.
Tomorrow’s options chain shows Max Pain at 22.00. Short gamma inhabits the zone from 15.00 to 20.00. Long gamma starts at 23 and may go as far as 45.00. However, the consensus is on the short side. In conditions such as these, it does not pay to follow the consensus.
TNX continues its rising pattern with a new morning high at 40.51. Trending strength is building into the weekend and may persist through next week. Should the mid-Cycle resistance be overcome, the ultimate target may be the Cycle Top at 47.25.
ZeroHedge observes, “Last month, we – and many others – were stunned when after several months of progressively declining revolving credit growth, in July credit card debt unexpectedly soared by the most since January, sending total consumer credit growth surging by just under $27 billion, the single biggest monthly increase since 2022. We called it a “Last Hurrah” moment (literally “In “Last Hurrah”, Credit Card Debt Unexpectedly Soars Despite Record High APRs As Savings Rate Hits Record Low“) and said that “with consumers ever more strapped for actual cash and equity, as the personal savings rate in the US collapses from over 5% to 2.9% – the lowest since the Lehman bankruptcy – in just one year, as all the excess savings from covid are long gone there is only so much more credit card maxing out that can take place before reality finally sets in.“”
Japanese Yen futures continue their advance to 67.84 thus far. Should the rally persist, it may last to the end of November. The window for exiting the Yen carry trade is almost over, despite calls for jumping back in. Prospects for the carry trade don’t look good should the Yen rise over the 50-day Moving Average at 68.69.
Crude oil futures rose to a high of 78.46 after the close, then plummeted to a low of 74.52 before a bounce, creating a possible Master Cycle high.. In doing so, it may have created an aggressive sell signal beneath the mid-Cycle support at 77.58. Confirmation may lie beneath the 50-day Moving Average at 72.85. A lot may transpire until then.