For those who wish

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Lansing has its own support page on the website.  As I am not currently charging for my blog, I would appreciate your support of a project dear to my heart that I have committed my own support.  Thank you.

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December 6, 2022

10:15 am

SPX has broken through the rally trendline at 3990.00, further confirming the sell signal.  The next target is the 50-day Moving average near 3814.96 – 3818.00(daily chart).

ZeroHedge observes, “All of the US majors are in the red today led by the Nasdaq puking, hurt by Meta’s slide…

The Dow and the S&P 500 have joined the Russell 2000 in the red, erasing all of the massive gains from the post-Powell ‘dovish’ reaction in stocks…”

 

8:05 am

Good Morning!

I am highlighting the Dow Jones Industrials to show the magnitude of difficulty in analyzing the current Wave structure.  The DJIA has made an 80% retracement of the 10 1/2-month decline.  Wave (A) consists of an A-B-C bounce from the October 13 bottom.  This structure alone suggests a completed (A)-(B)-(C) correction.  However, Wave [2]s may completely retrace their counterpart Wave [1].  As a result, I am inclined to label this as shown in the chart.  The deciding factor may be the Wave (B) decline.  The NYSE Master Cycle may be due for completion on or around December 12.

 

The SPX has fallen short of its 50% retracement at 4155.00.  Having met its mid-Cycle resistance at 4024.09 and the descending trendline at 4100.00, I would normally consider this done as well.  However, there may be a week left in the current Master Cycle to complete  a possible Wave (B).  As it stands, it may not be enough to complete a decline to the Cycle Bottom at 3520.32.  There is a catch.  The VIX Master Cycle is due the week of the December op-ex on December 21.  That may lengthen and deepen the SPX/NYSE decline.  The chart shows the Master Cycle ending on day 249.  That is early and subject to change over the next 1-2 weeks.

ZeroHedge reports, “US futures trade in a narrow range on Tuesday following Monday’s rout, as investors weighed stronger-than-expected economic data and the potential that Federal Reserve rates will peak at a higher level. Contracts on the S&P 500 and the Nasdaq 100 were both up around 0.1% at 7:30am ET after trading on either side of the unchanged line earlier, signaling moderate gains for Wall Street after both underlying indexes closed lower on Tuesday, with hot US ISM services data fueling bets on a terminal Fed rate of close to 5% next year. The dollar weakened and Treasuries gained while bitcoin was unchanged.”

 

 

VIX futures have been flat in the overnight session.  They are at a low point that has been a buying opportunity three different times in the past year.  This should be no different.  Tie to expect the unexpected.

Tomorrow’s op-ex is lightly populated.  Max Pain is at 22.00.  Long gamma starts at 25.00 and goes to 40.00.  However the December 21 op-ex is loaded for bear.  Max Pain is at 23.00.  Long gamma starts at 26.00 with 157,000 call contracts and extends to 70.00 with 154,000 call contracts.  All told, there are nearly 1 million call contracts between the strikes at 25.00 and 70.00.  Can the VIX tail wag the NYSE dog?  We may find out.

 

TNX has pulled back from its new high made yesterday.  This appears to be a slight pullback to retest the low, but the old Master Cycle is done, after 276 days.  In fact, TNX may now be due for a surge of strength through the rest of the week.

 

USD futures have pulled back from the 200-day Moving Average.  The Current Master Cycle is not due to bottom for another week.  In that time we may see it test the bottom of the trading channel near 102.50.  From there USD may go higher to mid-January.

 

In case you may have missed it, BKX fell through the 50-day Moving Average at 102.43.  It is on a confirmed sell with the current Master Cycle running to the year-end.  After testing the 50-day ,it may resume the decline to the Cycle Bottom at 92.39.  This move is a warning that something is afoot.  Yesterday I discussed the commercial loans that are in arrears or that may default after the New Year.  The massive layoffs high personal debt levels also suggest credit card and mortgage defaults.  These may all be revealed after the year end.  Yesterday’s move tells us that serious money is being taken off the table at the banks. See the article below regarding the international banking scene.

ZeroHedge observes, “As the powers that be continue to scaremonger by slamming bitcoin and crypto every day, as if the asset class which is now well below $1 trillion is somehow systemic to the global economy and world markets, today the BIS briefly highlighted the real financial  bogeyman.

In its latest quarterly report, the Bank for International Settlements – also known as the central banks’ central bank – warned that pension funds and other ‘non-bank’ financial firms now have more than $80 trillion of “hidden, off-balance sheet” dollar debt in the form of FX swaps.”

 

 

 

 

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December 5, 2022

2:17 pm

SPX is testing Short-term support at 3990.95.  Crossing beneath it would be a further confirmation of the sell signal.  Mike Wilson was the first analyst to mention a rally to 4100.00.  He is now saying, “It is done.”

ZeroHedge observes, “Two months ago, and just days after the biggest permabull on Wall Street, JPM’s Marko Kolanovic, finally turned bearish just as the S&P hit fresh 2022 lows after pimping stocks non-stop all year into the biggest bear market in years, and said to fade US equity exposure – a move which we correctly said marked the bottom in stocks…

… Morgan Stanley’s Mike Wilson, arguably the biggest bear on Wall Street (with the exception of BofA’s Michael Hartnett and SocGen’s Albert Edwards), said that he “Expects A Rally Sending S&P500 As High As 4,150.” And, as shown in the chart below, Wilson was once again right in picking a key market inflection point (while Kolanovic was as usual wrong).

 

12:30 pm

SPX has declined beneath it 200-day Moving Average at 4044.00 and its mid-Cycle support at 4024.00.  This confirms a sell signal.  The decline may last a week, in which case the target may be the 50-day Moving Average at 3814.93.  However, there are multiple indicators of a longer decline, possibly 3 weeks.  In that case, the target may be the Cycle Bottom at 3520.42.

ZeroHedge remarks, “For the first time since the COVID lockdowns, Nomura’s Economic Quadrant work has transitioned from “Slowdown” to outright “Contraction”

This follows the broad weakness signaled by the last week’s Manufacturing and Services surveys with the US economy’s composite PMI the weakest of the major global economies…

 

11:00 am

WTI futures may have made an early Master Cycle low on November 28, day 249 of the Master Cycle.  The retracement of the rally from the 2020 low was 46% and the structure appears complete.  The reversal from the Cycle Bottom suggests a major turning point for crude.  However, there are some major cross-currents that may keep WTI down until the end of the year.

 

10:47 am

BKX, our liquidity proxy, has crossed beneath its Intermediate-term support at 104.64, confirming its sell signal.  The Current decline may last through the end of the year.  The 50-day Moving Average is at 102.45.  It is likely that the next test of support may come from the Cycle Bottom at 92.40.  It is possible that there are many banks with commercial loans may be in trouble by the year end, as many small businesses may shutter after a weak Christmas season.

 

8:40 am

Good Morning!

You may notice the changes on the chart.  A thorough analysis over the weekend leads me to believe that the initial decline of a Primary degree, Wave [1], was completed on October 13.  Intermediate Wave (A) may have been completed last week at 248 days in the current Master Cycle.  Intermediate Wave (B) may now be due.  It may last as little as one week with the Master Cycle low (258 days) ending at that point, or possibly to the end of the year.  We will know in the next 1-2 weeks. In that case, Wave (B) may  decline to the 50-day Moving Average at 3810.60, or possible lower.  A Cycle of 12.9 months may be completed by the first week of February at a nominal new high.  The 50% retracement of the January-October decline is at 4155.00.  A 61.8% Fibonacci retracement would take the SPX to 4311.00, possibly reaching the 1987 trendline.  To summarize, there may be a decline of a week or more, followed by a rally to one of the two targets by the first week of February.

SPX futures are down with a morning low of 4041.00.  A sell signal may be confirmed beneath mid-Cycle support at 4026.20.  Due care is noted as the decline approaches the 50-day Moving Average at 3810.60.

Today’s op-ex shows Max Pain at 4035.00.  Long gamma begins at 4050.00, while short gamma starts at 4000.00.  Dealers may attempt to bring SPX down to neutral territory between the tow gammas.

ZeroHedge reorts, “US stock futures fell on Monday as investors weighed the outlook for economic growth against the possibility of a softening in the Federal Reserve’s policy, or in other words, whether bad news is again bad news. At the same time, and just one week after China was swept by violent anti-covid zero protests, Chinese stocks in listed in the US rose sharply after Hong Kong-listed peers rallied and the offshore yuan strengthened past the key 7.00 level after Chinese authorities eased Covid testing requirements across major cities over the weekend. The financial hub of Shanghai scrapped PCR testing requirements to enter outdoor public venues such as parks or use public transportation starting Monday. Hangzhou, home to tech giant Alibaba dropped obligations to enter most public venues including offices and supermarkets, while Shanghai also eased rules.  As a result, Hong Kong’s Hang Seng Tech Index closed at session highs, soaring some 9.2%, the biggest jump since Nov. 11, after China eased Covid testing requirements across major cities over the weekend.

Meanwhile in the US, Nasdaq 100 futures were down 0.4% by 7:30 a.m. in New York, while S&P 500 futures dipped 0.5%. The indexes shrugged off a hotter-than-expected jobs report on Friday as investors and erased almost all early losses as they remained optimistic that the Fed would slow the pace of interest rate hikes at its meeting this month. The dollar remained near session lows, boosting most Group-of-10 currencies. Treasury yields climbed across the curve. Oil advanced after OPEC+ kept its 2 million production cut and amid growing signs China is reopening, while gold was little changed. Bitcoin rose more than 1%, gaining for a second day.

The S&P 500 is on course for its biggest fourth-quarter gain since 1999 as signs of a cooling in US inflation have led to a pullback in bond yields, but market participants warn the outlook for next year remains uncertain amid the risk to corporate earnings from the specter of a recession.”

 

VIX futures have risen in the weekend session, but have not achieved new highs.  VIX may have another two weeks to its Master Cycle Pivot.  However, it has met the requirements of a Primary Cycle (lesser to the Master Cycle).  It may allow for 2-3 weeks of a bounce from here.

This week’s op-ex is light and doesn’t offer a clear direction.  However, the monthly op-ex (December 21) shows Max Pain at 25.00, with huge long positions above and short positions beneath.  There may be a battle going on with long gamma loaded up to 70.00.

 

TNX has reversed from a probable Master Cycle low (276 days) on Friday.  If so, it begins a rally with growing strength through the end of the year.  As TNX rises, so does the VIX.

ZeroHedge observes, “After Powell’s words sparked panic-buying – and dramatic easing of financial conditions – some are wondering if The Wall Street Journal’s Nick Timiraos’ report this morning is an attempt tp jawbone back the market’s dovish perception.

Federal Reserve officials have signaled plans to raise their benchmark interest rate by 0.5 percentage point at their meeting next week, but elevated wage pressures could lead them to continue lifting it to higher levels than investors currently expect.

brisk wage growth or higher inflation in labor-intensive service sectors of the economy could lead more of them to support raising their benchmark rate next year above the 5% currently anticipated by investors.”

 

USD futures have risen, but remain beneath the 200-day Moving Average at 105.26 and mid-Cycle resistance at 105.89.  Today is day 250 of the Master Cycle, so we may expect a reversal in the next week or so.  Should the decline take another week. we may see the lower channel trendline at 102.00 being tested.

 

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December 2, 2022

9:47 am

TNX extended its Master Cycle low this morning to day 276.  However, it has reversed to a higher level.  This may be considered an aggressive buy signal, but not confirmed until TNX rises above the 50-day Moving Average at 38.87.  Once confirmed, we may see the 10-year yield rise through the first week of January.

 

9:42 am

VIX rose, but still within yesterday’s trading zone.  A rally above 22.63 may create a buy signal.

 

9:35 am

SPX opened at the mid-Cycle support at 4026.21 and has bounced.  Futures declined to 4003.00 before the open.  While a sell signal may be confirmed beneath the mid-Cycle, I would classify it as aggressive until the Intermediate-term support is crossed at 3881.31.

ZeroHedge reports, “We’re gonna need another ‘dovish’ Powell speech to calm this market down.

This morning’s hotter than expected payrolls print (and reaccelerating wage growth) is not what the market or The Fed wanted to see to keep the ‘pause/pivot’ dream alive and rate-hike expectations are spiking and rate-cut hopes are tumbling…”

 

7:30 am

I have an early appointment and won’t be back until after the monthly jobs report.

SPX futures were flat in the overnight session.  As you can see in the chart, SPX has entered the pivot window for its Master Cycle.  Today’s jobs report may be the catalyst that reverses this very strong retracement.  Should we see a stronger than expected jobs report, we may see a reversal that leads to a possible 60-day sell-off.  That is my original view.  However, a weaker jobs report may raise the hopes of investors, causing a choppy market through the first week of February.  That may cause me to re-assess the Wave structure.  This market is not letting us in on its secrets yet.

 

VIX futures are consolidating within yesterday’s trading range.  It also has entered its Pivot window for a possible Master Cycle low.  Today is day 248 of the current Master Cycle.  Again, two possibilities are available.  First, the VIX begins Wave 3of (C), rising above the neckline toward its indicated target.  Second, the VIX may remain trapped beneath the neckline in a choppy market, extending the day of breakout into 2023.

 

 

 

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December 1, 2022

8:00 am

Good Morning!

SPX futures are flat this morning after reaching a morning high of 4099.20.  At 279 days, the current Master Cycle is very long in the tooth.  As I had mentioned, SPX is in a (B), E, [e] Wave.  An extremely rare and unpredictable combination.  The next Master Cycle low, due in mid-December, may validate the current Wave structure which anticipates a Wave (C) decline of about 2 months.  This is still a bear market with the mid-Cycle resistance and declining trendline defining the tops.

In today’s op-ex Maximum Pain for options investors is at 4035.00.  Long gamma begins at 4100.00, while short gamma starts at 4000.00.

ZeroHedge reports, “Global stocks climbed and the dollar slipped to a three-month low this morning amid early signs of a softer stance on Covid restrictions from China and after Federal Reserve Chair Jerome Powell confirmed that the pace of interest rate hikes was set to slow. S&P futures were little changed, pausing a rally that added $1.1 trillion to the market value of S&P 500 companies. Nasdaq contracts dropped 0.2% following sharp gains in the previous session. ”

 

 

VIX futures consolidated above yesterday’s new Primary Cycle low.  A year ago I would not have anticipated the VIX in a sideways move between 18.00 and 40.00 for the entire year.  This may be about to change if the current Wave structure is correct.  Thus far, Wave 1 of (C) of [3] is 15.76 points, nearly double the size of Wave 1 of (C) of [1].  In March 2020, Wave 3 of (C) of [1] was 41 points.  That may be the minimum rally from here.  However, it we believe in proportionality, Wave 3 of (C) of [3] may take the VIX to or over 100.00.  The rule of thumb is that Wave 3 can never be the smallest in an impulsive series (1-2-3-4-5) and is often the largest.

CNBC airs Josh Brown’s take on the VIX.

 

TNX reached a new low at 35.69 (futures are lower) this morning on day 275 of an extended Master Cycle.  The average length of Master Cycles is 258 days.  However, Cycles may be stretched or shortened, depending on many variables.  Currently we see longer-term treasuries being bought, while short-term treasuries are sold, causing an inversion and lengthening the current Master Cycle.

ZeroHedge remarks, “Among The Fed’s favorite inflation indicators – it has apparently got many and picks and chooses as it pleases – is the Core PCE Deflator. Both the headline and core deflators dropped from September’s levels (+6.0% vs +6.3% prior and +5.0% vs +5.2% prior respectively)…

Source: Bloomberg

Of course, while this will be greeted with euphoria – ‘peak inflation’ – we do note that it is still the highest levels since 1983…”

 

 

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November 30, 2022

3:35 pm

SPX at 4100.00?  Usually the mid-Cycle resistance at 4027.23 would be the stopper for this rally.  However, due to other analysts calling for the SPX at 4100.00 I put the trendline across all the tops since January, not expecting it to meet under normal rules..  It is currently at 4100.00.  In a normally impulsive decline, this doesn’t work, but the corrective decline that we have seen thus far has spent a lot of time on the rebounds.  This makes for an emotionally confused market for most investors.  The average retracement is 38% of the time spent in decline.  This rally is 83% of the time spent on the last decline.

 

2:45 pm

SPX has made a new Master Cycle high at 4037.45 (thus far) on day 279 of the current MC.  The DJIA and NDX did not make new highs.  I have commented that the Wave (B), E, [e] combination is a rogue wave to the third degree.  The extra three weeks of rally in this Cycle appear to have been made to punish the shorts.  The tables may turn overnight.

Those that can stomach the gut wrench, this is an excellent time to add short positions.  The VIX made a new Primary Cycle low by a tick.  Good luck and good trading!

 

8:00 am

Good Morning!

SPX futures traded in a range from 3951.00 to 3973.00 in the overnight market and is currently flat.  The expectation is that Powell will offer some insight on “when the next pause/pivot” may happen.  Good luck on that.  SPX bounced at the Short-term support at 3936.62 yesterday, completing its first small declining impulse.  It is more likely than not that today’s activity may be flat in the morning and find its direction this afternoon.

Sentiment in the options market has turned more bearish.  Maximum pain for investors is at 3965.00.  Options favor calls above 3975.00 with long gamma beginning at 4000.00.  Puts are favored at and beneath 3960 with short gamma starting at 3950.00.  This could be a rollicking day for options since Powell has the ability to drop a bombshell at his presentation.

ZeroHedge reports, “US futures rose on the last trading day of November as anxious investors awaited a potentially monkey-hammering speech from Federal Reserve Chair Jerome Powell (although as JPM said, most of the downside is already priced in) and assessed a softer stance from China on Covid curbs. S&P 500 futures rose 0.2% by 745a.m. ET while Nasdaq 100 futures rose 0.3%. The underlying indexes have closed lower for three consecutive days amid Covid restrictions and unrest in China. In Europe, shares climbed the most in more than a week as data showed eurozone inflation slowed for the first time in 1-1/2 years. Benchmark Treasury 10-year yields slipped and are down more than 25 basis points in November.”

 

 

VIX futures made a marginal new low at 21.67 last night before rising back to a flat line this morning.  It remains above its Primary Cycle low made on November 23.  The Cycles Model infers a rally into the December monthly options expiration on December 21.

Today’s op-ex shows Max Pain at 25.00.  Short gamma starts at 24.00.  Long gamma begins at 27.00 with rising long conviction up to 40.00 with nearly 12,000 call contracts at that level.  The December 21 (monthly)op-ex still shows Max Pain at 25.00, but long gamma may have begun at 26.00 and the conviction level rises up to 70.00 with 161,590 call contracts at that strike.  This may have an effect on the price level, as this may impel the dealers to buy the VIX in the futures as the VIX rises.

 

TNX continues its rise, although almost hesitantly.  The Cycles Model suggest growing strength, especially next week, implying a breakout above the 50-day resistance at 38.87 and possibly above the Cycle Top resistance at 42.38.  The Model suggests rates may be rising through the year end.

RealInvestmentAdvice observes, “In Part one of this series, Our Currency The World’s Problem, we discuss the vital role the U.S. dollar plays in the global economy. With an understanding of the dollar’s role as the world’s reserve currency, it’s time to discuss how the Federal Reserve’s monetary policy machinations influence the dollar and, therefore, the global economy and financial markets.

Given the Fed’s recent extreme monetary policy actions, which haven’t been seen in over 40 years, it is more important now than ever to appreciate the potential global consequences of the Fed’s stern fight against inflation.

Triffin’s Paradox

In Part 1, we highlight the following two lines, which help describe Triffin’s paradox.

“To supply the world with dollars, the United States must consistently run a trade deficit. Running persistent deficits, the United States would become a debtor nation.”

“Simply the growing divergence between debt and the ability to pay for it, GDP, is unsustainable.”

Increasingly borrowing without the means to pay it off is unsustainable. The terms zombie company or Ponzi Scheme come to mind when considering such a system. That said, because the printer of the currency and taxer of its citizens is in charge, we can only ask how long the status quo can continue.”

 

USD futures consolidated within the prior day’s trading range.  It is on a buy signal.  USD may rally in strength to the next Master Cycle pivot expected in mid-December.  Lower liquidity and higher yields both put upward pressure on the USD.

 

BKX, our liquidity proxy, is consolidating beneath mid-Cycle resistance at 109.34, which shows the limits of its ability to rally.  It is on a sell signal with the Cycles Model implying weakness through the end of the year.  The Head & Shoulders formation may be triggered at the neckline at 97.00.  Since Wave [3] cannot be the shortest Wave, the minimum decline for the next segment of the Cycle (possibly extending to the end of January) takes BKX down to 65.00.  However, the Head & Shoulders’ lower target is still credible.

ZeroHedge (TME) says, “Liquidity is off 60%

Total Treasury market depth has declined 60% over the last year, to levels observed around previous crises…”

 

 

 

 

 

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November 29, 2022

2:55 pm

SPX bounced off Short-term support at 3936.50 and attempted a retracement which may have failed.  While it may have avoided short gamma at 3940.00 the first time, it may be revisiting it into the close.

ZeroHedge advises, “In the data-packed week, it is tomorrow’s speech by Fed chair Powell at Brookings titled “Economic Outlook and the Labor Market” (at 1:30pm) that is captivating markets.

As Goldman notes, it is the risk that Powell will once again unleash a market beatdown that is keeping sentiment depressed. As Goldman puts it “keep an eye on Powell speech wed for more verbal Financial Conditions tightening“. The Fed chair will discuss the economy and labor market; echoing the language in the post-meeting statement, FOMC participants argued that the level of the policy rate, the uncertain lags with which monetary policy affects activity, and the incoming data would all be important factors for the future path of monetary policy.”

 

7:45 am

Good Morning!

SPX futures rose to an overnight high of 3985.10, 37.2% of yesterday’s decline.  Since then it has fallen lower.  There are two potential outcomes.  The first is to complete a shallow impulse to 3925.00, then bounce.  The second is a much deeper impulse to the 50-day Moving Average at 3787.98.  Today is day 2 of a potential 12.9-day decline.  A potential target for Wave 1 of (C) may be the Cycle Bottom at 3521.34, or possibly lower by mid-December.

Today’s op-ex shows Maximum Pain for options investors at 3970.00.  Long gamma begins at 4000.00, while short gamma starts near 3940.00.  Interest in puts are rising.  Two things appear to be happening.  The first is that investors are buying same day options or next day options, forcing dealers to whipsaw their long or short positions on a daily basis.  The second is that, contrary to popular opinion, investors think they are buying “protection” or “insurance” against a decline.  However, this is not insurance.  They are simply transferring risk to the dealers.  One bad call could lead to losses by the dealers who may have to buy high and sell low in a whipsaw.

ZeroHedge reports, “And just like that, sentiment has turned on a dime… or rather a yuan.

One day after global stocks and commodities tanked following a weekend of violent protests swept across China, Beijing appears to have learned its lesson and overnight Chinese government health experts made an unscheduled overnight announcement in which they not only vowed to speed up Covid shots for the elderly – a move regarded as crucial to the reopening  – but to avoid excessive restrictions, fueling a new round of bets that Beijing is bending to the pressure of an economic reopening. A spokesman for the National Health Commission also said local officials must avoid excessive restrictions.

As a result, contracts on the Nasdaq 100 were up 0.4% at 7:30 a.m. in New York, while S&P 500 futures rose 0.2%, erasing earlier gains which pushed spoos as high as 3990. Both underlying indexes tumbled about 1.5% on Monday amid fears that protests in China about Covid restrictions would affect the pace of the reopening.”

 

 

VIX futures traded in a narrow range overnight as it consolidates its gains from yesterdays stock market rout.  The Primary Cycle low last Wednesday sets up the VIX for an approximate 17.2-day rally that may aim for one or both of the Head & Shoulders targets on the chart over the next three weeks.

Tomorrow’s op-ex shows Max Pain  at 25.00.  Short gamma starts at 24.00 while long gamma begins at 27.00.  The December monthly op-ex on 12/21 shows massive holdings on the options screen with Max Pain at  the 25 strike.

 

TNX has lift-off as it rises above its Master Cycle low put in on Monday.  The Cycles Model suggests rising yields through the end of the year.  The long-term target of 53.16 may take several months to accomplish.

ZeroHedge remarks, “Sometimes, just sometimes, the markets want to hear what they want to and discard what seems discordant — even if policymakers keep hammering home the same message.

And so it was on Monday when Federal Reserve speakers let traders know that they were underestimating their intent on how far rates may climb in this cycle. Fed St. Louis President James Bullard, who has often been an accurate bellwether for where benchmark rates are headed, put it bluntly:

  • The Fed needs to get to the bottom end of the 5%-7% range;
  • Markets are underpricing the risk that the policy committee may be more aggressive; and
  • The Fed needs to move farther into restrictive territory”

 

USD futures made a nominal new high at 106.76 in the overnight session.  The dollar may continue to rise through mid-December, per the Cycles Model.

 

WTI futures rose to a morning high of 79.56 as it performs a bounce.  A likely target may be 82.00, but a reversal to lower values may be quick to follow, as the Master Cycle may not be over for another week.  The 50% retracement value of the rally from April 2020 lies at 68.50 and may be a likely target for the current decline.  The Cycles Model also indicates possible tax loss selling into the year-end.

CharlesHughSmith observes, “It’s not just the price of oil that matters: how much disposable income consumers have left to buy more goods and services matters, too.

The Oil Curse (a.k.a. The Resource Curse) refers to the compelling ease of those blessed with an abundance of oil/resources to depend on that gift for the majority of state/national revenues. The risks and demands of developing a diverse, globally competitive economy don’t seem worth the effort when the single-source wealth of oil offers such a low-risk bounty of revenues.

This dependence becomes a curse when the market value of the oil/resources plummets. Having come to depend on that seemingly inexhaustible source of massive revenues, even states that have set aside prudent reserves soon find their expenses cannot align down to diminished oil revenues without unbearable political/social pain.”

ZeroHedge reports, “With oil tumbling ahead of the grueling 2023 recession, the last thing OPEC+ and (bullish) oil traders wanted to see is even more supply coming on line, and yet that’s precisely what the a core gulf hub is proposing. According to Bloomberg, the United Arab Emirates – which in recent years has aggressively sought to diversify away from oil and to become the world’s crypto hub – will look to revert back to its core competency and plans to expand its global energy – and especially energy spending – to boost oil and natural gas production capacity.

Abu Dhabi National Oil Co., also known as Adnoc, will invest $150 billion in the five years through 2027, it said in a statement Monday. That’s an increase on the previous spending plan of $127 billion over five years that was announced a year ago.”

 

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November 28, 2022

2:09 pm

SPX is on an aggressive sell signal which may not be confirmed until it reaches/passes Short-term support at 3922.41.  The decline may persist until mid-Cycle support and trendline at 3821.71 where it may bounce.  However, this decline may not allow very many opportunities to short after that.  The chances are good that this decline may reach 3500.00 or lower by mid-December.  Wave (C) may not have the bounces that were experienced in (A) and (B), so hang tough.

 

7:00 am

Good Morning!  I am writing early due to appointments/errands that need to be done.

NDX futures declined to 11620.00 this morning before a bounce.  It made its retracement top on November 15, a full 10 days prior to the SPX after reversing at the 100-day Moving Average at 11982.00, creating an aggressive sell signal.  The 50-day Moving Average lies at 11371.00, the location of a confirmed sell signal.  The decline may be swift and sharp, as Wave (C) of Wave [3] may spend the majority of its time beneath the Cycle Bottom at 10266.10.

ZeroHedge (TME) remarks, “The huge US equity net short is gone, but we are far from a meaningful net long. Noteworthy is the fact skew has caught some bids lately as people have closed out shorts. The increase in skew suggests people are switching into hedging the downside via puts, instead of running those delta 1 shorts.

ZeroHedge observes, “Apple shares fell nearly 2% in US premarket trading Monday on news that unrest at the world’s largest iPhone factory in central China could result in a production shortfall of iPhone Pro units this year, according to Bloomberg, citing a person familiar with assembly operations.

The person said Apple’s manufacturing partner Foxconn Technology Group’s factory in Zhengzhou, could wind up with a 6 million iPhone Pro production shortfall by the end of the year, adding the situation remains fluid and lost production numbers could change. ”

 

 

SPX futures fell beneath 4000.00 this morning after reversing at the mid-Cycle resistance at 4031.08.  Friday was a peak strength and reversal day, which is catching many off guard, since the expectation is a continuance of the rally.  What may follow is likely to be a 12.9-market day decline to complete Wave 1 of (C).  Wave (C) declines are broad and sharp, leaving no doubt that this is a bear market.

ZeroHedge reports, “US stock futures, and the entire risk complex tumbled on Monday amid growing concerns that China’s economic reopening will not only be a disaster but will also be accompanied by violence following protests against Covid restrictions over the weekend. The entire risk complex was sharply lower, with S&P 500 futures down 0.7% as of 7:30 a.m. ET, trading just around 4,000 having dropped as much as 1% earlier, while Nasdaq 100 futures fell 0.9%. Crude crashed to $74, the lowest price since December 2021, while Asian stocks and the yuan plunged. Cryptos also slumped while the dollar and Treasuries ceded earlier gains that were fueled by investors’ dash to safety; the 10Y was last trading at 3.67%. ”

 

VIX futures rallied to 22.50 after making a Primary Cycle low on Wednesday.  The next Master Cycle Pivot is due in mid-December and may be a significant new high.  It is due simultaneously with the December op-ex.

 

TNX futures made a new Master Cycle low this morning at 36.20 on day 272 of the Master Cycle.  Cash market values may be different from futures.  The new Master Cycle may be due to peak during the first week of January with a significant new high.

ZeroHedge (Russell Clark) comments, “Shorting long dated bonds has been a great trade. But the view, and the positioning that I am seeing is suggesting that most investors think that trade is done.

If anything, I would say long bonds has become a conviction trade for many investors.”

 

USD futures made a morning low of 105.26, challenging the mid-Cycle support at 105.70.  Should it rise above that level, we may have a confirmed buy signal.

 

Crude oil futures hit a new low at 73.61 in the weekend session.  The Current Master Cycle may have up to two weeks left, allowing a further decline.  Should WTI decline beneath the Broadening Wedge trendline at 68.00, then a further decline may be possible. The 50% retracement value of  the decline from April 2020 is at 68.50.  Beneath that lies the 61.8% retracement at 53.87, not very far from the Broadening Wedge target.

ZeroiHedge(TME) observes, “Oil – must hold approaching

Brent is approaching the huge 80 level. The entire 75/80 area is basically a must hold level for oil. Moving averages are not looking great. Note that the 200 day is “rolling” over into sloping negatively as well. Most people love oil and see that huge upside, but price action is moving against all these people that remain “fundamentally” bullish.”

 

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November 25, 2022

9:15 am

Good Morning!

SPX futures reversed yesterday from a high at 4040.00 and continued to decline today, a Cyclical Pivot day and day 272 if the old Master Cycle.  The new Master cycle may prove to be short, but lively!  The turnabout may be surprising for many, including ZeroHedge.

ZeroHedge reports, “US equities were set to end the Thanksgiving week higher, propelled by expectations that the Fed will ease off on its pace of monetary tightening following Wednesday’s dovish minutes while an 25bps RRR cut out of China sparked hope that Beijing will stimulate the world’s 2nd largest economy.

S&P 500 were higher by 0.1%, trading at 4038 after rising just shy of 4,050 overnight after the underlying gauge gained 1.6% this week. Nasdaq 100 futures dipped 0.1%, amid much lighter than usual trading volumes in a week shortened by the Thanksgiving holiday on Thursday. The US stock market will close early today.”

 

 

VIX futures also had a pivot on thanksgiving day and may be in full-fledged reversal this morning.

 

 

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November 23, 2022

3:25 pm

SPX has completed 30 trading days from the October 13 low, completing its final retracement push.  I had previously mentioned that Friday would be a day of strength and a pivot day, to boot.  It would be wise to prepare for the reversal into Intermediate Wave (C) of Primary Wave [3], a  very strong combination for the next leg down.

Remember, the Fed always follows the bond market.  The Cycles Model already says that yields are going higher!

ZeroHedge comments, “While prevailing consensus was that the Fed didn’t really say anything unexpected, or anything that wasn’t already telegraphed both in the Nov 2 statement and subsequent Fed speak, Wall Street commentators agreed that “the statement overall comes across as dovish” as BBG Economics chief Anna Wong put it, With Integrity Asset Management’s Joe Gilbert adding that “it is constructive that Fed participants were becoming increasingly aware of the lagged impact of all the rate hikes this year. Generally, this is bullish for equities and fixed income because there is now a slight change in consensus at the Fed which means that significantly more rate hikes are now less likely.”

Wong added that “there’s widespread agreement within the committee to slow the pace of rate hikes soon, with only ‘a few’ preferring to wait until the policy stance is more clearly in restrictive territory. We think Powell belongs to this latter group.

The market agrees with the dovish take and stocks have jumped to session highs while the market implied Fed Funds curve has dipped on the outer end,”

 

 

:30 am

Good Morning!

Thanksgiving guests are arriving for a four-day family event.  My wife and I are preparing for two dozen people for Thanksgiving dinner, including an introduction to our youngest son’s new fiancée.  Please excuse the brevity of this report.

SPX futures rose to 4014.40 in the overnight session.  They have since eased back to the flat line.  The item du jour is the FOMC report, due to be delivered at 2:00 pm.  Investors are not prepared to be disappointed.  The Master Cycle high may have been put in on November 15 (day 264).  The Cycles Model suggests a strong directional day (trending strength) on Friday.  It appears that whether the direction is up or down depends a lot on today’s FOMC performance.

ZeroHedge reports, “US equity futures were steady, trading in a narrow 15 point range before the release of minutes from the latest Fed meeting which may signal that the pace of rate hikes may slow. S&P500 futures up 0.1% by 7:30 a.m. ET, swinging between gains and losses, after the underlying index closed above 4,000 for the first time since Sept. 12 amid lighter trading before Thursday’s Thanksgiving holiday. Nasdaq 100 futures rose 0.1% after the tech-heavy index climbed 1.5% on Tuesday. Credit Suisse shares plunged below their record closing low after the bank warned of a fourth-quarter loss. Oil fell as the EU discussed imposing a price cap on Russian oil between $65 and $70 a barrel (which Russia will never comply with). The Bloomberg dollar index erased earlier declines. Ten-year US Treasury yields rose by one basis point.”

 

 

VIX futures remained steady after yesterday’s plunge to a Primary Cycle low.  The Cycles Model suggests a strong move is imminent, possibly as early as today.

ZeroHedge remarks, “US credit protection puke

CDX IG is printing the lowest levels in a while. The latest move from panic highs is the largest cumulative move lower since credit protection started rising in early 2022.”

Remember this:

“Rule 1. Markets are risky.

Rule 2. Trouble runs in streaks.

Rule 3. Markets have a personality.

Rule 4. Markets mislead.

Rule 5. Market time is relative”
― Benoît B. Mandelbrot, The (Mis)Behavior of Markets

 

TNX plunged this morning, but failed to make a new low.  The Cycles Model suggests a reversal is possible today with yields rising to the first week of January.  Stay on the alert.

Yesterday ZeroHedge reported, “After a subpar and tailing 2Y auction and a mediocre and tailing 5Y auction both of which took place on Monday in the holiday-shortened week, moments ago we got the week’s final coupon issuance in the form of $35BN in 7Y paper. It was ugly. In fact, it was almost as ugly as that infamous Feb 2021 7Y auction which sparked a brief selling panic across the Treasury market.

The high yield of 3.890% was below last month’s 4.027%, the first sequential decline in auction yields since July, but more notably it tailed then 3.863% When Issued by 2.7bps. This was the biggest 7Y tail since that infamous Feb 2021 seven year auction which sparked a flash crash across the curve and a mini freak out in the rate market.”

 

USD futures declined to 106.24 this morning.  While the November 15 low may be the Master Cycle low, it is possible for an extension to a newer low this week.  There is no buy or sell signal at this time.  We await the passage of time to determine the final outcome.

 

Crude oil futures resumed its decline today, declining to a low of 76.83.  The Cycles Model suggests a possible two-week decline that may meet the Cup with Handle target.  The 50% retracement of the rally from 2020 is at 68.50, so the Cup with Handle formation is credible.  The 61.8% retracement value is at 53.87, not far from the Broadening Wedge target.

ZeroHedge remarks, “Oil prices are tumbling this morning amid Europe’s Russian Oil Price Cap scheme discussions about a price cap between $65 and $70 and rapidly spreading lockdowns across China impacting demand.

“At current price levels, the plan seems ineffective,” PVM Oil Associates analysts Tamas Varga and Stephen Brennock said in a note, referring to the price cap.

“It will be crucial to see the details of the proposed cap to evaluate the price impact.”

Beijing asked residents not to leave the city unless necessary, to stem the spread of the virus.”

 

 

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November 22, 2022

8:15 am

Good Morning!

SPX futures rose to 3968.50 this morning on light trading as it bounces between the 100-day Moving Average at 3908.97 and the mid-Cycle resistance at 4036.48.   Today is day 271 of the Master Cycle and the chances of a new high are rapidly diminishing.  However, the shortened Thanksgiving week is very lightly traded, so there is the opportunity to push higher without much resistance.  Friday is the last opportunity for a new high, but it also qualifies as a potential reversal day, as well.

ZeroHedge reports, ” After trading in the red for much of the overnight session, US futures inched higher shortly after the European open after a volatile session in Asia marked by rising Covid cases in China, while a Fed president turned dovish and showed openness to slowing the path of rate hikes. Futures on the S&P 500 traded near session highs, up 0.4% to 3,972 by 8:00 a.m. in New York, while Nasdaq 100 futures gained 0.1% after struggling for direction. ”

 

 

VIX futures made a marginal new low at 22.23 this morning.  Although this decline does not qualify as a Master Cycle low, the Cycles Model suggests a possible end to this decline on Friday.

ZeroHedge comments, “Exuberant VIX is back

VIX is discounting the Thanksgiving turkey already…The short term VIX inverted vs SPX gap is getting rather wide. People continue sucking fear out of this market.

 

 

TNX continues to consolidate near the November 16 low (day 260).  While that low was timely, we are in a season that’s prone to short-term intervention.  There is a potential for a possible deeper low by Friday.  It’s probably best to go and relax over the holiday and come back ready for the fray to resume next week.

ZeroHedge reports, “After today’s mediocre sales of $42 billion in 2Y paper, moments ago the US Treasury completed the second auction of the day (courtesy of the week’s abbreviated schedule) when it sold $43 billion in 5Y notes in another average auction.

The high yield of 3.974% was the second consecutive decline after peaking at 4.228% in September. It also tailed the When Issued by a modest 0.7bps (vs a 1.8bps stop through last month). This was the 6th 5Y auction tail in the past 8 auctions.

The bid to cover of 2.39 came in below last month’s 2.48 but was above the 6-auction average of 2.37.

The internals were also fine, with Indirects taking down 66.2%, down from 68.0% last month, and above the 62.4% recent average; and with Directs awarded 18.7%, Dealers were left holing 15.1%, the lowest since February.

Overall, a mediocre, tailing auction but with stronger than expected internals. And with that we now look to tomorrow’s last for the week sale of 7Y paper ahead of the holiday.”

 

USD futures pulled back to 107.17, then bounced.  Today is day 260 of the Master Cycle, suggesting there may be room for one more low by the end of the week.  The 7-year treasury auction today may have a pivotal effect on the USD.

 

 

 

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