For those who wish

For those of you who wish to support a spiritual message during the Lenten Season I recommend looking up theholyfaceproject.com.  As a Catholic Christian I find this project worthy of support.  In fact, I have gone on a limb and have contracted 4 billboards in the Lansing area, with an option to expand to 12 until June 30.  I have found other communities who also have an interest in promoting this message and I am coaching them in setting up their own projects.  These billboards contain no advertising.  They simply have the face of Christ as seen on the Shroud of Turin with theholyfaceproject.com beneath it.

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

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January 27, 2023

3:36 pm

BKX may have met its Master Cycle high today on day 259 of its Master Cycle.  The Cycles Model suggests a burst of negative energy early next week.  Banks are facing troubles on multiple fronts and the Cycles are primed for a strong reversal.

ZeroHedge observes, “We’re at a fascinating juncture here in the markets.

Stocks have sold off hard for a little over a year now but have rallied once again in the short run. The result is that the S&P 500 Index has formed a fairly tight coil or pennant pattern over the past several months. And, as my friend Peter Atwater points out, this coil is merely a visual representation of a fierce battle going on in the markets.”

 

3:10 pm

VIX has extended its Master Cycle to day 270 today in a very confusing, corrective formation.  However, it, along with the SPX, has also completed a 12.9-month Cycle today.  There are multiple major indices at the point of reversal today.  This is no time to “short vol” behavior.  Goldman’s biggest bear has capitulated.

ZeroHedge comments, “The “Buy Any Semblance of a Dip” mentality across markets is so evident right now as “risk” is being re-deployed to start 2023, after a year’s worth of de-positioning in Assets and hiding in Cash, following the global central bank “FCI Tightening” macro regime of 2022 instructed you to do just that.

Last night’s EPFR Fund Flows report captures that “re-risking”, where we see an impulsive 92-93%ile rank almost across the board INFLOW in Global Equities, Global Bonds and Global IG Credit…alongside an actual (nascent) Money Markets OUTFLOW, following a +$222.5B of MM INFLOW over the past 1Y period as “Cash became an actual alternative”…

 

7:20 am

Good Morning!

I thought it would be appropriate to give a panoramic view of the markets, since they are approaching an important Pivot point.  SPX is approaching its 12.9-month Cycle Pivot point, technically due at the end of January.  Given the lateness in the month, We may safely infer that a major reversal may be made at any time, especially since Wave (C) of Primary Wave [2] is approaching the minimum requirement of making a higher high above 4100.96.  Looking at the chart, we can see that the 50% Fibonacci retracement may be reached at 4142.02 and the Weekly mid-Cycle resistance is just above it at 4162.60.  Should SPX continue its rally, either of these points may be the final reversal point.  However, once 4100.00 is reached, all bets are off.

 

Likewise, the VIX may have reached its 12.9-month pivotal low on January 13.  There is a lot of energy stored in the 12.9-month Triangle formation with a result of a target not seen since March 2020, a Cyclical 34-month (34.4) duration.  VIX has literally put market watchers asleep.  The message that there is no risk in the market is being swallowed hook, line and sinker.  The Cycles Model suggests trending strength may reappear early next week.

Note:  I am out of the office for the duration of the morning.  I will attempt to add short-term commentary later this afternoon.

 

 

 

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January 26, 2023

10:30 am

NDX is nearing its down-trend line near 12100.00 this morning on day 251 of the Master Cycle, reaching a morning high at 12018.41 thus far.  We are just a week away from the scheduled top, but may come early when certain targets are met.  This may be one of them.  Note that NDX did not reach the trendline in December, so this may be its last chance to test the downtrend.  Those not following the Cycles patterns think a breakout is possible with clear skies above.  However, many NASDAQ companies have been hollowed out by debt and own few tangible assets.  Should interest rates rise, they may find it impossible to weather the storm.

ZeroHedge notes, “The current move higher in stocks has all the hallmarks of being a bear-market rally and thus fated to end in disappointment.

Equities have bounced as much as 14% off their October lows, the third +10% bounce in this bear market. But as Wednesday’s disappointing earnings from Microsoft highlight, the market is vulnerable to abrupt reversals. A Federal Reserve still in tightening mode, elevated financial conditions and an inverted yield curve show why it will remain so. This is not an advance to buy and close your eyes.

Bear-market rallies are a microcosm of manias, from tulips to crypto. Their power comes from convincing even the most hardened skeptic. A rapid rise in prices creates its own good-news force-field, drawing in the final, few remaining non-believers. It is only then they deliver their cataclysmic finale.”

 

8:00 am

Good Morning!

SPX futures are now above the descending trendline, making a new high at 4041.00.  Yesterday’s fake-out challenged the 200-day Moving Average at 2961.61, then bounced to the trendline at the close.  The Cycles Model calls for up to another possible week in the current Master Cycle.  Should the rally find its legs, it may go as high as the Cycle Top currently at 4252.08.  However, keep in mind that there are two resistance levels (not shown) prior to that, at 4065.00 and 4100.00.  Finally Germany admitted they are at war with Russia.  What comes after that?  The weekend looks very volatile.

In today’s op-ex, Maximum Pain for options investors is at 3995.00, while 4000.00 is hotly contested by both puts and calls.  Long gamma may begin at 4050.00, while short gamma starts at 3950.00.  While short gamma was contested yesterday, it appears that long gamma may have its turn today.

ZeroHedge reports, “In a mirror image of Tuesday’s action, when MSFT earnings hammered stocks (after first headfaking them higher) only to see the selloff reverse completely during the course of Wednesday trading, on Thursday US equity futures and tech stocks were set to gain after an upbeat earnings report from Tesla reinforced optimism about the health of Corporate America. As of 7:30am, Nasdaq 100 futures were up 0.7% while S&P 500 futures rose 0.3%. Tesla jumped about 8% in premarket trading after the electric-car maker reported better-than-expected profit and said it was on track to deliver about 1.8 million vehicles this year. Risk sentiment was boosted by news that US energy giant Chevron had authorized a massive $75 billion stock buyback, representing 22% of its outstanding shares, helping elevate energy stocks around the globe. Asia stocks jumped to 9-month highs as Hong Kong returned from break and European stocks rose by 0.4%. Meanwhile, the dollar continued to weaken as speculation continued to mount that the Fed is drawing closer to the end of its rate-hiking cycle, and would follow in the footsteps of first Canada and then Indonesia, both of which have officially paused. Bonds and gold edged lower.”

 

 

VIX futures consolidated in a very narrow range between 19.02 and 19.28.  It has been two weeks since the Master Cycle low.  The Cycles Model suggests that the new trend may strengthen next week.  Analysts have watched the VIX trending sideways-to-lower for an entire year.  Unfortunately, many have drawn straight lines from that to suggest a continuing downtrend.

 

TNX is consolidating with a slight upward tilt.  Unfortunately, TNX has up to two weeks left in its Master Cycle with the most likely outcome being a decline to its 200-day Moving Average currently at 33.36 n as little as a week’s time.  The Cycles Model shows strength returning just as the reversal is due.

ZeroHedge reports, ” After yesterday’s blowout 2Y auction which printed barely above 4%, and showed just how little faith the bond market has in Powell’s “higher for longer”, moments ago we got an even more impressive 5Y auction which not only showed relentless buyside demand but blew away several records.

Printing at a high yield of 3.530%, this was not only the 5th consecutively lower 5Y yield, and some 70bps below the September high of 4.228%, but it was a whopping 44bps below December’s high yield of 3.973% and also stopped through the When Issued 3.554% by a whopping 2.4bps, which was the second highest stop through on record going back to Jan 2016 (only Oct 21’s 2.5bps was bigger).”

 

USD futures have declined to 101.30 and threaten to make new lows.  The Cycles Model shows today may be a day of strength with the possibility of extending the Master Cycle low on day 273.  It also implies a possibly strong reversal just as seen in the SPX yesterday.  The Cycles Model suggests a “tidal wave” rally out of this low that may last through the month of February as both domestic and foreign investors pile in to the USD as a safe haven.

 

Gold reversed this morning down to 1932.20, testing the Cycle Top support at 1924.63.  A breakdown beneath that level gives us a sell signal.  If so, gold is due for a possible 60-day decline.  The outcome is still tentative, but be aware of the possibility.  Remember, gold is not a currency.  It is a commodity, subject to market rules.

ZeroHedge highlights the thinking of the gold bugs:

“Gold is enough, Beautiful gold, Lovable gold, Spendable gold..….”

Gold – can’t eat it, can’t use it, but its everything crypto never was: tangible, exchangeable, a store of value, and a kitty for when things get tough. In uncertain markets…. Don’t forget the yellow stuff.”

 

 

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January 25, 2023

9:57 am

SPX declined through the 200-day Moving Average at 3961.00 (not shown), giving a sell signal.  The next level of support is the 50-day Moving Average at 3935.00.  Mid-Cycle support lies at 3920.00.  Intermediate-term support at 3910.00.  SPX has crossed a huge put wall at 3975.00, which may accelerate the decline much further.  Today is a trending strength day and it has appeared in spades.  The NYSE is blaming the decline on “manual error.”

ZeroHedge reports, “In a brief two line explanation, the New York Stock Exchange said a “manual error” caused wild price swings and trading halts for hundreds of company stocks when the market opened on Tuesday. It wasn’t clear just how easy it is to trigger such an error or who was responsible for the rollercoaster trades which sparked shock and outrage across Wall Street.

According to an updated statement on its website, the New Jersey-based exchange which doubles as a TV studio in New York said that the root cause of the issue, which the exchange operator says has been resolved, was tied to the company’s so-called “disaster recovery configuration” at the start of the day. Over 1,300 trades and some 84 stocks were impacted and marked as “aberrant.”

 

8:10 am

Good Morning!

SPX futures declined to a morning low of 3980.90, testing short gamma.   Today is day 250 in the current Master Cycle.  With a little more than a week to go, SPX is still caught in the downtrend.  Today the trending strength ramps up.  We may finally have an insight about the true trend by the end of the day.  Cyclically, the 200-day Moving Average at 3964.03 and the mid-Cycle support at 3931.06 defines the trend.  The trendline at 4018.00 defines resistance, but not trend.

Today’s op-ex shows Maximum Pain for options investors appears at 3995.00.  Long gamma starts at 4020.00 while short gamma goes into high gear at 3975.00.  This is the nexus of an epic battle for control of the markets.

ZeroHedge reports, “US equity futures slumped on Wednesday after Microsoft started off the tech giants’ earnings parade by pulling off the old pump and dump, first jumping on Azure/Cloud results which beat estimates, but then erasing all gains and slumping during the company’s conference call after the company’s guidance disappointed, forecasting slower earnings and weaker demand (separately, hours later customers reported difficulties across multiple regions in accessing Microsoft 365 services, which the company attributed to networking issues). Earnings reports from companies such 3M, Boeing and chipmaker Texas Instruments also reinforced concerns about the health of corporate America and added to investors’ jitters as they await updates from the likes of Tesla and IBM. Fears also grew that a decision to send German and US tanks to Ukraine would provoke an escalation in the war.

As a result, contracts on the tech-heavy Nasdaq fell 1.3% at 7:15 a.m. ET while S&P 500 futures dropped 0.8%, and traded right around 4,000. The Bloomberg Dollar Spot Index was little changed, leading to mixed trading in Group-of-10 currencies. Treasuries edged higher, mirroring gains in most UK and German government bonds. Brent crude was little changed, while gold and Bitcoin fell.

 

 

VIX futures rose to a morning high of 20.15 thus far, still within yesterday’s trading range.  A rally above 20.50 snaps it out of its short-term downtrend while the trendline and 50-day Moving Average lie at 21.61 gives us a buy signal.

In today’s options chain, Max Pain is at 21.00.  Short gamma is weakening but prevails beneath 19.00.  Long gamma begins at 22.00 with weakening conviction at 35.00.

 

TNX has been losing ground beneath Intermediate-term resistance at 35.89 and may be due to retest the 200-day Moving Average at 33.23.  Alternatively, there are potentially two more weeks in the current Master Cycle which may allow TNX to reverse course.  The reason is that the uptrend defined by the mid-Cycle support and 200-day Moving Average as not broken.  This allows the rally to continue, preferably above the trendline.  Note the dealer takedown in the following article.  Rising interest rates may increase the dealer takedown beyond their capability to absorb the excess after the Directs and Indirects take their share.

ZeroHedge reports, “Back in November, when the 2Y auction hit a cycle high of 4.513%, markets knowingly nodded muttering that the bond market was agreeing with the hawkish Fed. Since then however, things haven’t gone according to plan with each auction printing at an lower and lower yield, culminating with today’s sale of 2Y paper which priced at just 4.139%, down from 4.390% in December, and the lowest since August. It also stopped through the When Issued 4.152% by 1.3bps, the third consecutive stop through which prior to December had tailed 3 of the past 5 times.

The Bid to Cover confirmed the stellar demand, jumping from 2.713 to 2.944, the highest going back all the way to the flight to safety bond market chaos of April 2020.

Finally, the internals were also phenomenal, with Indirects – or foreign buyers – awarded a whopping 65.0%, the third highest on record, and well above the recent average of 57.4%. And with Directs taking down 18.7%, it meant that Dealers were left holding on to just 16.3% which was also one of the lowest on record.”

 

USD futures continue to consolidate in a narrow trading range.  That may not last, as the USD trending strength may be about to explode higher.  The emergence of trending strength, especially on the weekends, suggest a non-economic event, such as war, is about to be revealed.

 

Gold futures fell from their Master Cycle high at 1943.80 yesterday precisely to its Cycle Top support at 1920.75 this morning.  A sell signal lies beneath that level.  The Cycles Model also shows some disturbance starting this weekend.

 

 

 

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January 24, 2023

11:05 am

BKX, our liquidity proxy, may have made its Master Cycle high yesterday , on day 255.  There is still a possibility of exceeding its November 11 high at 110.57 in the next few days.  If I were a banker, I would be selling all of my bank shares as a crisis is looming.  It’s not just rising interest rates and nonpayment of loans leading to losses.  The growing US government budget threatens to exceed the banks’ capabilities of servicing the national debt.  The current arrangement requires the Primary Dealers to assume all debt not sold in public auctions.  This may exceed the banks’ balance sheets in very short order.

ZeroHedge reports, “A group of 43 Democrats want to completely eliminate the debt ceiling, which they say Republicans have ‘weaponized’ – which would give the government a blank check to borrow without any limit from Congress.”

Ed. Congress is the home of idiots.

 

10:17 am

SPX may have made a reversal at the descending trendline at 4022.00.  It may come back to retest the resistance at that level.  However, it has tested short gamma at 3990.00 and a decline may accelerate beneath that level.  The market has halted several times which may either be a technical break or a natural halt as several mega-caps have declined more than 10% at the open.

ZeroHedge reports,”Update 2 (11:15am ET): The NYSE says it is continuing to investigate issues with today’s opening auction and “impacted members may consider filing for Clearly Erroneous or Rule 18 claims.” The NYSE adds that “In a subset of symbols, opening auctions did not occur”

* * *

Update (9:52am ET). According to the NYSE, as of 9:48am, all systems are back to normal, although that is an understatement in a market where nobody knows what the correct opening price is! We are still waiting for the NYSE to give a detailed explanation of what caused this latest “broken markets” episode.

While it is still unclear what was the “technical glitch” that sent the world’s biggest companies into a multi-trillion market cap rollercoaster, Bloomberg reports that “a wave of sell orders targeting financial services stocks swept across American equity exchanges at the open of trading Tuesday, sending companies including Wells Fargo & Co. and Morgan Stanley to brief but sharp plunges from which they mostly quickly recovered.”

 

7:30 am

Good Morning!

NDX futures made a morning low at 11812.00.  A decline beneath yesterday’s low at 11800.00 confirms the decline.  A decline beneath the 50-day Moving Average at 11415.00 confirms the resumption of the downtrend.  The mid-Cycle line at 11901.00 provides overhead resistance.  The downtrend line is at 12000.00 may provide the last resistance, should NDX rally further.  The end of January marks the end of a 12.9-month Cycle from the all-time market high.  Whether the markets go higher or lower in the next two weeks, what comes after may offer a whole new dimension to the decline.  Futures have paused as major tech giants Microsoft and Texas Instruments report earnings today.

Today’s op-ex shows Maximum Pain for options investors at 11830.00.  Long gamma stats at 11850.00 while short gamma begins at 11800.00.

ZeroHedge remarks, “Over the weekend, we reminded readers that on Thursday, JPM’s trading desk – despite turning increasingly bearish in recent days – cautioned against shorting the rally because as Matt Reiner on the Cash Trading Desk warned, “something I’m noticing in Tech, and don’t think many are talking about it – LO’s are quietly adding in Mega names, and consistently too – The demand has been on and off the desk now since Jan 2 this year, but the numbers are starting to adding up – I bet the demand in the near term continues (GOOGL, AAPL, META, AMZN).” As he further explained “If we see the MegaCaps rally, that will likely drag the index higher given the recent increase in market breadth.”

We followed up with statistics from Goldman’s Prime desk, which confirmed that indeed there had been a dramatic reversal in sentiment when it comes to giga-tech market “generals” as “hedge funds net bought US Info Tech stocks for a second straight week led by Semis & Semi Equip names (after being sold in 10 of the 11 prior weeks).”

 

US30  futures have declined beneath the 50-day Moving Average at 33570.00.  I show this as a contrast to the NDX, since the decline may already be underway for the DJIA.

 

SPX futures made a morning low at 4006.10.  Critical short-term support is at 4000.00, while overhead resistance is at 4022.00, a very narrow trading range.  The breakout tells us the direction of equities (especially SPX and NDX) over the next two weeks.  The daily tracing bands are narrowing, suggesting a powerful breakout is possible at those levels.

Today’s op-ex shows Max Pain at 3995.00.  Long gamma reigns above 4000.00, while short gamma takes over beneath 3975.00.  Dealers and hedge funds are grossing up on longs.  A decline from hers may be disastrous.

ZeroHedge reports, ” The rally in US tech stocks and European markets paused on Tuesday as investors prepared for earnings updates from industry giants, including Microsoft and Texas Instruments. US equity futures fell after the tech-heavy Nasdaq 100 posted its best two-day gain since November, as traders braced for the worst tech earnings slump since 2016. Europe’s region’s Stoxx 600 Index erased an early advance to fall into the red. At 7:30am ET, S&P 500 futures were 0.2% lower and Nasdaq futures were down 0.3%; the tech-heavy benchmark is up8.5% in January, on pace for its best month since July even as profit estimates are declining and as Federal Reserve officials advocate for more policy tightening to combat inflation if at a slower, 25bps pace. The USD rose; Treasuries were unchanged while commodities were mixed with strength in natgas, nickel, oil and precious metals.

 

 

VIX futures remain neutral, consolidating within the mid-range of yesterday’s trading.  The Master Cycle low on January 12 is only 10 days from a 12.9-month Cycle in the VIX.  What this means is that the VIX has begun a new 12.9-month Cycle with a bullish bias.  The next Master Cycle high may be near the end of February.

 

USD futures are hovering in place.  The Cycles Model indicates a change in trending strength starting as early as tomorrow.  The following two weeks may show strength upon strength as tje Master Cycle continues to rise through the end of February.

TheEpochTimes reports, “A recent report by the Congressional Budget Office (CBO) projects that two major Social Security funds in the United States will dry out in the coming decades, with one of them running out within the next 10 years as younger members in the programs are set to lose more than older members.

“If the gap between the trust funds’ outlays and income occurs as CBO projects, then the balance in the trust funds will decline to zero in 2033 and the Social Security Administration will no longer be able to pay full benefits when they are due,” the CBO stated in its report, published in December (pdf).

The Old-Age and Survivors Insurance Trust Fund will be exhausted in 2033 and the Disability Insurance Trust Fund will be exhausted in 2048, the agency said. If the trust funds are combined, the money will be gone by 2033.”

 

Gold futures made an overnight high of 1943.70, stretching the Master Cycle peak to day 277.  Gold is trading as an inverse of the USD.  As USD gains strength, gold May decline, gaining strength to the downside.  he new Mster Cycle also lasts until the end of February.

 

TNX ix rising but may be stopped by Intermediate-term resistance at 35.96.  Should that be the case, TNX may have another two weeks of decline to retest the mid-Cycle support at 33.64.  Another possible target may be the 200-day Moving Average at 33.22.

 

 

 

 

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January 23,2023

11:24 am

SPX is challenging the downtrend line at 4025.00.  A close above that implies a potential extension of the rally for as much as 2 more weeks in a panic rally driven by long gamma.  However, it is also at a critical Cycle Pivot point.  Should SPX reverse in the next couple of hours it may relapse back into a panic decline that may last two more weeks.  This is a very critical juncture.

ZeroHedge warns, “Just as we warned last weekthe short squeeze is back again, perhaps as traders relished the start of the Fed blackout period (ahead of the Feb 1 FOMC) and the coming start of buybacks, with buyback blackout ending next weekend.

…and adding to this re-reversal in sentiment, is the latest note from Goldman prime (also available to pro subs), according to which there has been a notable shift in market sentiment as “hedge funds net bought US Info Tech stocks for a second straight week led by Semis & Semi Equip names (after being sold in 10 of the 11 prior weeks).”

 

8:00 am

Good Morning!

SPX futures have been treading in a narrow band from 3963.00 to 3978.00 over the weekend.  The 200-day Moving Average is at 3969.00 and appears to be hindering the retracement.  The trendline defining the decline appears at 4025.00 and has thus far been unbroken.  Trending strength reappears this week and may last for the next two weeks, ending in a probable Master Cycle low.

Today’s op-ex shows Maximum Pain for options investors at 3970.00.  Calls prevail above 3980.00 and long gamma above 4000.00.  Short gamma begins at 3950.00.  However, the sentiment for puts is not as strong as for calls.

ZeroHedge reports, “US equity futures were little changed, trading in a narrow ten point range during a muted overnight session on Monday as investors braced for a moderation in Fed rate increases after the Fed mouthpiece suggested a 25bps hike is now the baseline (coming at a time when the Fed is now in a quiet period until the Feb 1 FOMC meeting), while bracing for a busy week of earnings. S&P 500 and Nasdaq futures each rose 0.1% at 7:45 a.m. ET after both underlying benchmarks rallied on Friday. The tech-heavy Nasdaq 100 Index has posted three weeks of gains, the longest winning streak since mid-August. 10Y TSY yield rose 2bps to 3.50%, while the dollar rebounded from nine-month lows against the euro and a group of other currencies, after a slew of Federal Reserve officials laid out the case for a downshift in the Fed’s rate-tightening campaign. China and most Asian markets were closed for the Lunar New Year holiday.’

 

 

VIX futures have consolidated between 19.99 and 20.33.   Volatility may stagnate until next week when trending strength comes back.

 

TNX is rising, but has not broken through overhead resistance.  It is on an aggressive buy signal due to the Master Cycle reversal off the mid-Cycle support at 33.61.

 

 

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January 20, 2023

1:09 pm

SPX has met its 38.2% Fibonacci resistance and daily mid-Cycle resistance (not shown) at 3935.00 and appears to be pulling back. The 50% retracement value is 3950.61.  It has met the required Cyclical time period of three days from the high at 4015.39.  Dealers want to avoid long gamma, so we may anticipate a decline back beneath the 50-day Moving Average at 3922.00.  I wouldn’t be surprised to see SPX close near 3900.00 since that level is so hotly contested.

ZeroHedge remarks, “By now everyone, of course, knows that the Fed has broken what was once called “the market” beyond repair. Add to that zero liquidity, a still healthy army of HFT bots and the explosion in 0DTE option trading…

… and what you have is a market that looks like this on a daily basis.

Nowhere is this brutal swing more visible than in the furious ebb and flow of shorting and squeezing activity. ”

 

9:38 am

BKX opened at the 50% retracement value of its 2-day decline.  Resistance is at mid-Cycle resistance at 105.37 and the 200-day Moving Average at 106.35.  The Cycles Model suggests the decline may intensify next week.  The trigger for the Head & Shoulders formation is at 96.50.  Rising rates, rising USD and mass layoffs are setting up a potential crisis in the banking sector.  The FTX implosion is creating a significant headwind.

ZeroHedge notes, “One week ago we looked at the latest consumer credit data where we found not one but two flashing red alerts:

  • First, the total amount of credit card debt hit a new all time high, which however was to be expected from one of the most consistently increasing series across all US economic data, and one which predictably is correlated to the US savings rate which is at all time lows.

  • Second, thanks to the Fed’s crusade to spark a great recession, the average rate across US credit cards just rose to an all time high 19%+”

 

 

7:40 am

Good Morning!

SPX futures have been consolidating between 3895.00 and 3915.00 in the overnight session.  Both the 50-day and Intermediate-term resistance are at 3918.00.  The mid-Cycle resistance is at 3934.50.  Final support is the 100-day Moving Average at 3865.27.  All the technical indicators point downward.  Whether the decline starts today or after op-ex remains to be seen.

Today’s op-ex shows 3900.00 being hotly contested by both 37,610 puts and 34,364 calls this morning.  Long gamma starts at 3950.00, while short gamma may begin at 3850.00 .  There may be intense pressure to keep SPX in its narrow range.  A breakout out of the current range may reinvigorate gamma in the prevailing direction.  Otherwise gamma falls off after today’s expiration.  Nomura warns today is “Gonna Be Spicy.”

ZeroHedge reports, “S&P futures are modestly higher this morning trading in a narrow range, with tech stocks leading on the back of solid earnings by Netflix. Contracts on the S&P 500 Index rose 0.3% while those on Nasdaq 100 were 0.6% higher even as the underlying gauges were poised for the biggest weekly losses since before Christmas.

Today will be the last day before Fed’s blackout period before the Feb 1 FOMC; today is also the largest non-quarterly option expiration day on record for indexes: according to Goldman, $797bn of single stock options will expire today, the largest since Jan-2022 and the fourth largest on record. From an index perspective, $1.3trn of options will roll today, the largest non-quarterly expiry on record.”

 

VIX futures remain in a tight consolidation between 20.28 and 20.63.  The Cycles Model suggests a rising trend through the month of February.

The January 25 op-ex shows Max Pain at 21.00.  Puts volume has fallen off, while Calls volume is rising.  Long gamma begins at 26.00.

ZeroHedge remarks, “Yesterday saw a notable dynamic play out as VIX trended lower in the face of equity index weakness, which suggested that traders were ‘less bearish’ than the previous day…

In fact, as SpotGamma detailed with their HIRO tool – measuring the real-time impact of options hedging – as the day progressed, traders bought the dip primarily through call options (i.e., bought call options)…”

 

USD futures are also consolidating after Wednesday’s Master Cycle low on day 265.  The Cycles Model shows gathering strength by next week with a potential (new) high by the end of February.  A confirmation of the buy signal lies above the trendline at 103.50.  The next move has all the earmarks of a crisis in-the-making.  Many foreign governments and corporations have issued debt in USD.  Rising interest rates and USD may crush foreign economies, including Japan and Europe.

 

TNX appears to be rising sharply out of its Master Cycle low yesterday.  The Cycles Model suggested this move today and also infers a very strong three-week rally out of the low.  The reversal from mid-Cycle support at 33.56 gives us an aggressive buy signal (UST sell).  Confirmation comes above Intermediate-term resistance at 35.93.

 

 

 

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January 19, 2023

6:40 am

Good Morning!

I have a breakfast appointment and ay not return until after the open.

SPX futures have continued their decline overnight, reaching a low thus far at 3888.00.  The 50-day Moving Average has been breached at 3916.00, confirming the sell signal after a month-long rally.  Should a bounce occur, the 50-day May provide overhead resistance.  This may prove to be a nasty decline, since most investors are now long.  SPX is deep into short gamma which may compound the intensity of the decline.  A Goldman analyst insists there was no apparent reason for the meltdown.

 

9:46 am

SPX gapped down at the open beneath the 50-day Moving Average at 3918.36 and may be aimed toward Short-term support at 3887.79 where a bounce may be generated.    While short gamma begins at 3910.00, it intensifies beneath 3880.00, where over 5,000 contracts were bought since the open.

ZeroHedge reports, “One day after the S&P had its worst day since Dec 15, failing to hold the 200dma, US equity futures entered Thursday extending recent losses with a third straight session in the red as renewed recession fears and the start of the earnings season weighed on risk appetite, sparking a risk-off tone that spread across global markets, from Japanese shares to oil contracts, sent bond yields lower and hit commodities. Pre-market Mega Caps and Metals/Miners were the biggest laggards. The dollar was flat, the VIX jumped above 21, and 10Y yields reversed earlier losses. The macro focus for today includes housing data, Philly Fed, and 3x Fedspeakers. Plus, there is a 10Y TIPS auction and NFLX kicks off MegaCap Tech earnings.

Contracts on the S&P 500 edged down 0.8% as of 7:30 a.m. ET and contracts for the Nasdaq 100 lost 0.7%.Stoxx 600 gauge halted a six-day rally. Most Treasuries erased gains, and the euro advanced, as hawkish remarks by ECB Governing Council member Klaas Knot reaffirmed the central bank’s aggressive stance.

 

 

VIX rallied up to the Triangle trendline and 50-day Moving Average at 21.97 this morning.  A confirmed buy signal lies above that level.  The Cycles Model calls for a 5-week rally from the Master Cycle low that may break through all overhead resistance.

The January 25th op-ex shows short gamma beginning at 20.00, while long gamma starts at 25.00.  However, Long gamma trails off above 32.00, as it appears there is little conviction of rising volatility.  This is where opportunities may abound.

 

TNX futures made a morning low at 33.21, challenging mid-Cycle support at 33.53.  The cash market has opened above that level and is rising, giving us at Master Cycle low on day 273.  A new Maser Cycle High may be due in three weeks.

 

USD may have put in its Master Cycle low yesterday, as today’s futures have stopped declining.  A possible buy signal exists at the trendline near 103.80.  The Cycles Model calls for a rally extending through the end of February.

 

 

 

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January 18, 2023

12:52 pm

SPX has given a sell signal…

NDX has also declined beneath its Intermediate-term suort at 11495.00, giving a sell signal.

 

9:46 am

BKX may have made its Master Cycle high yesterday, on day 274.  The Cycles Model calls for a potentially sharp two-week decline beneath the neckline of the Head & Shoulders formation.  Following a retest of the neckline, the Model indicates a probable decline through the month of April.  By that point, the markets may be in a full-fledged panic Cycle.

ZeroHedge observes, “The credit cycle is turning, which points to wider credit spreads, increasing loan-losses at banks, and rising equity volatility.

Credit has exploded higher since the pandemic. But all good things must come to an end, with credit busts typically following close on the heels of credit booms. Cracks are now emerging in lending markets as the sharpest monetary policy tightening in decades begins to bite.”

 

8:00 am

Good Morning!

NDX futures rose to 11622.30, challenging yesterday’s high at 11616.00.   While the DJIA has exceeded its 61.8% Fibonacci retracement at 33762.00 and the SPX  has approached its 50% retracement at 4142.00, the NDX has thus far fallen short of even a 38.2 % retracement at 12856.00.  In addition, the NDX target for a Primary Wave [2] would most likely be near the mid-Cycle resistance at 11937.87 in the time left to complete the current Master Cycle (February 2).   I mention this due to the fact that NDX has closed above the 200-day Moving Average which has been a stopper of rallies for the past two months.  Today is a day of reckoning for the direction of the markets for the next two weeks.

In today’s op-ex, Maximum Pain for options investors is 11540.00.  Long gamma begins at 11550.00 while short gamma prevails beneath 11520.00.   QQQ (closing price: 281.54) shows Max Pain at 279.00.  Long gamma begins at 280.00 while short gamma prevails beneath 277.00.

ZeroHedge comments, “Last Monday, we showed the latest JPM prime brokerage data, which revealed that “high SI stocks in the US have seen a ~6 week period of persistent short additions. The magnitude and duration of these short additions is on par with the largest we’ve seen in past years and the cumulative additions put shorts in these types of stocks back at multi-year highs.”

This striking observation of near-record shorting by hedge funds, prompted JPM to muse that “given the consensus bearish view of Equity markets, driven by expectations for the Fed to hike us into a recession, a sharp squeeze would catch a number of investors offsides” and conclude that we are setting up for a tech-led squeeze higher as shorting gets extreme.”

ZeroHedge observes, “SPX – right on it

SPX futures trading right on the 200 day moving average and the longer term down trend. Our squeeze logic from January 8 (here) played out very well. The set up from here is a lot “harder”. Why not an overshoot to properly frustrate the crowd?”

 

 

SPX futures rose to an overnight high of 4013.50, not surpassing yesterday’s high.  The difficulty is that the 200-day Moving average at 3978.00 must be broken to reinstate the decline.  Further confirmation may come beneath the mid-Cycle support at 3938.50.  Sentiment is turning more bullish as this retracement wears on for three months.  A decline starting here ay be catastrophic, since no one is properly hedged.

Today’s op-ex is a very confused bag with Max Pain at 3975.00.  Long gamma may begin at 3980.00 while short gamma starts at 3970.00.  Options are too close to call.

ZeroHedge reports, “US stock-index futures were muted on Wednesday, swinging between gains and losses, as investors initially welcomes a dovish announcement by the BOJ which refrained from further expanding its yield curve control band, then turned to corporate earnings for more clues on the health of corporate America amid growing prospects for a recession. Nasdaq 100 and the S&P 500 futures were up 0.2% as of 7:15 a.m. in New York. Treasury and JGB yields tumbled after the BOJ kept monetary settings unchanged, while the yen first slid against the dollar but then recovered all losses amid expectations the BOJ has only bought a few weeks of time. WTI crude added 1.7% this morning and has been holding above $80 amid optimism around China reopening demand. Dollar is weaker; DXY at 102 helping gold trade back over $1900.”

 

 

VIX futures have sunk to a morning low at 18.92 and remains near the low.  Today is day 261 in the current Master Cycle, so there is a possibility of making  new low.  Last Friday’s low was on day 256, so the VIX is straddling its low point.

 

TNX is lower this morning and may finally reach mid-Cycle support at 33.50.  This makes a very stretched Master Cycle at day 272.  Futures have declined to 33.99, exceeding the December low.  The Cycles Model poses an interesting point that TNX may move explosively out of its low by Friday.  Retail Sales and the PPI may have driven yields lower this morning.  One must observe, however, that our military stockpile is diminishing while the war in the Ukraine intensifies.  At some point, congress will be coming back for more money to rebuild our military stockpile.  The resulting rising interest rates may be the downfall of the “soft landing” scenario.

ZeroHedge writes, “US Retail Sales Tumbled in December” and “US Producer Prices Plunge Most Since COVID Lockdowns

 

USD futures declined to 101.27 as Retail Sales and PPI reinforced the sentiment for lower rates.  This stretches the current Master Cycle to day 265.

 

 

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January 17, 2023

3:28 pm

SPX short covering is showing fatigue after this morning’s brief foray above 4000.00.  The formation is an Ending Diagonal that may signal a reversal at the break of the lower trendline at 3980.00.  The Cycles Model calls for a 13-(market) day decline from here to the next Master Cycle low.  Should it break down, the decline intensifies starting tomorrow.

While JPM is telling us a short squeeze may be imminent, while Nomura says there’s a big disconnect in the market right now.  Which is correct?

 

11:28 am

The Ag Index has risen above its 50-day Moving Average at 460.31 this morning.  This confirms a buy signal that lasts until the end of January.  Should the Ag Index move above the mid-Cycle resistance at 486.67, the next Master Cycle (starting in February) may be a slingshot move higher until the end of March.

ZeroHedge reports, “Last year was a bad year for corn — the latest US Department of Agriculture (USDA) report shows drought conditions and extreme weather wreaked havoc on croplands.

USDA unexpectedly slashed its outlook for domestic corn production amid a severe drought across the western farm belt. Farmers in Nebraska, Kansas, and Texas were forced to abandon drought-plagued fields.

The agency estimated farmers harvested 79.2 million acres, a decline of 1.6 million acres versus the previous estimate — the smallest acres harvest since 2008.

The unexpected cut to US harvested corn acres means grain supplies are a lot tighter than realized. A report Thursday showed the corn area in the world’s largest producer is at the smallest since 2008 with crops failing in states such as Texas and Nebraska. That’s due to persistent drought conditions in the western part of the country that could also hit harvests for wheat plants that are currently dormant for the winter. — Bloomberg”

 

8:00 am

Good Morning!

SPX futures have declined to a low of 3981.40, it 200-day Moving Average.  Beneath this level may constitute an aggressive sell signal.  The mid-Cycle support at 3940.00 may confirm that signal due to short gamma.    Additional supports are at 3921.50, then 3912.40.  If the SPX is entering a Wave 3, the decline will cut through these supports like melted butter.  If not, we may see further rallies.  The 50% retracement of last year’s decline is at 4140.04.  The 61.8% retracement is at 4311.00.

Today’s op-ex shows Maximum Pain at 3985.00.  Long gamma starts at 4000.00 while short gamma begins at 3950.00.

ZeroHedge reports, “US stock futures slipped for a second day as investors braced for a busy week of parsing earnings reports for signs of an earnings recession, falling profitability and an economic slowdown. Contracts on the S&P 500 fell 0.2% at 7:10 a.m. ET, recovering from a -0.5% drop earlier, while Nasdaq 100 futures dropped 0.3% after trading in the cash market was closed on Monday for a holiday. The dollar was flat after rebounding from an 8 month low on Monday while the US 10-year Treasury yield rises to top about 3.55%.”

 

 

VIX futures rose to 20.22 this morning after making a new low not seen in a year.  A reversal from the Cyclle Bottom may constitute a buy signal on the VIC, to be confirmed above the Triangle trendline at 22.00 and the 50-day Moving Average at 22.26.  Perhaps they may converge later today.

Tomorrow’s op-ex shows Maximum Pain at 22.00.  Short gamma starts at 20.00 while long gamma begins at 25.00.  Short gamma nearly disappears after tomorrow’s op-ex.

ZeroHedge observes, “Some risk indicators are moving sharply higher

In case you missed it, but the most recent move in VVIX is actually up, not to mention the move higher in the SKEW index. This is not a predictor of equities moving lower, but shows you that people have started paying up for hedges. The last squeeze has managed forcing people into chasing longs, and they are hedging part of that “forceful” chase.”

 

 

TNX is moving higher, topping out at 35.79 this morning.   Intermediate-term resistance is at 36.22 while the trendline is at 36.50.00.  A move above them constitutes a buy signal.  The Cycles Model shows new trending strength later htis week, which goes into full bloom in early February.

ZeroHedge comments, “By now everyone knows that for the past year has seen the Fed unleash an unprecedented crusade against not only runaway inflation – having been responsible for the surge in prices in the first place thanks to trillions in post-covid “MMT” helicopter money – and employment – hoping to contained the soaring inflation by means of a broad economic recession – but has also targeted prices of equities and bonds, i.e., risk assets, which after a decade of merciless and relentless asset bubble blowing have been suddenly forsaken by the money printing institution of the US which has been doing everything in its power to hammer every rally and crush animal spirits (if only for the time being, a time when weekly angry phone calls from the senile occupant in the White House demanding the Fed make everyone equally poor impinge on the Fed’s true first commandment which is to make a handful of people very rich while monetizing the US debt in the meantime).

In its determined pursuit of lower asset prices, the Fed has been engaged in the fastest rate hiking campaign since Volcker broke the back of double digit inflation 40 years ago. But as rate hikes are about to downshift again to 25bps, before hitting pause (and going into reverse in the second half of ’23 according to the market if not the Fed)  the Fed is left with another, more powerful tool to crush risk prices: QT, the same Quantitative Tightening that Goldman’s head of hedge fund sales last week said that “While All Attention Is On Rates, The Real Risk Is That Global QT Is Just Starting.

 

USD futures have settled near Friday’s low, but not lower.  That was day 260 of the Master Cycle and a likely bottom.  However, there is no clear reversal, so we wait for a rally above the trendline at 103.50.  The Cycles Model infers that, should the Master Cycle be complete, the enuing rally may last through the end of February.

ZeroHedge advises, “Know your tails. In a year facing an unusually wide set of outcomes, knowing what the tail risks are and how to hedge them is of paramount importance.

The top three tail risks I see facing the global economy – and three havens offering a refuge – are:

  1. Stubborn or resurgent inflation —> commodities and other real assets
  2. US recession —> shorter-dated Treasuries or bills (or even cash)
  3. Global funding crisis —> US dollar”

 

Gold futures may have reversed from its Cycle Top at 1922.13 on Friday after an unusually long (270 days) Master Cycle.  The Cycles Model shows gold in  a projected decline to the end of February, opposit an USD rally in the same time period.

 

 

 

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January 13, 2023

1:30 pm

ZeroHedge remarks, “While some were more interested how banks did in Q4 – a quarter which we already knew would see catastrophic banking revenues (due to the lack of IPOs and bond offerings thanks to the plunging market), and mediocre at best for FICC and equity trading offset by very strong net interest income courtesy of soaring credit card fees – we were much more curious in how banks saw the future not by their always cheerful conference calls, but by how much loan loss reserves they took out in anticipation of the coming recession.

The results were concerning: let’s start with the largest US commercial bank, JPMorgan, which in Q4 almost double its reserve build from $808MM to $1.4 billion, the biggest reserve build since the fateful Q2 2020 quarter when covid locked down the US economy and nobody knew what would happen.

 

10:21 am

BKX , our liquidity proxy, put in its Master Cycle high yesterday, day 269 of the former Master Cycle.  It has declined beneath mid-Cycle support/resistance at 105.59 and is on a sell signal.  It may retest yesterday’s high, but the reversal has been overdue.  Today starts the earnings season for banks and one can see massive increases in loan loss reserves due to deteriorating conditions and rising rates.  The Cycles Model warns that something may break over the weekend.  Here ae the headline articles:

Losses ‘Accelerate’ For Goldman’s Credit-Card Division

JPM Slides … As It Boosts Credit Loss Reserves By $1.4BN

BofA Reports Solid Q4 Earnings… As Credit Loss Provisions Soars Above $1 Billion

BOJ Loses Control Of Bond Market As New YCC Band Breaks Amid Selling Panic

FitchRatings reports, “Fitch Ratings-New York/Chicago-10 January 2023: U.S. banks face rising deposit costs and sustained higher unrealized losses on securities portfolios given the growing probability that the Federal Reserve (Fed) maintains elevated interest rates for an extended period to combat inflation, Fitch Ratings says.

Weaker credit performance is expected to be the primary focal point for U.S. banks’ financial performance in 2023, but the industry response to meaningfully declining deposits will also be an important issue to monitor.”

 

9:00 am

Good Morning!

SPX futures have declined to the mid-Cycle support at 3943.18 after reversing at the 200-day Moving Average at 3994.39 at 2:00 pm yesterday.  What is interesting about that time is that it is 12.9 market days from the December 22 low and 30 days (4.3 weeks) from the December 13 high.   Crossing beneath mid-Cycle support gives us a sell signal.  We are now in the midst of earnings reports, so buckle up for a rough ride for the rest of the month.

In today’s options-driven market, Maximum Pain for options investors is at 3935.00.  Long gamma starts at 3950.00, while short gamma begins at 3900.00.  One may conclude that this morning’s decline may be dealer driven to maximize options pain.

 

VIX futures have rebounded to a morning high at 19.41 after making a new low not seen since April 4.  Yesterday’s new low takes the form of a double zigzag, which was totally unexpected since the prior low in early December had fulfilled all the requirements of a completed Triangle formation.  Unfortunately, Wave (E)s are rogues and can go “outside the box.”  Today is day 256 of the current Master Cycle.  A closer look at the Cycles Model suggests the reversal may come over the weekend, catching many unawares.

Buy Protection when you can…

Next Wednesday’s monthly VIX expiration shows Max Pain at 24.00 with 101,725 put contracts (short gamma) starting there.  Long gamma begins at 24.00 with 114,243 call contracts.  A low VIX at op-ex would be an unmitigated disaster for the dealers, as there are over 600,000 put contracts between 18.00 and 24.00.  However interest in calls is growing.

ZeroHedge remarks, “Last time VIX was here…

Expect to see a few of those calls soon, but they are wrong. Volatility is mean reverting, while the underlying assets can trend. Anyway, the VIX is puking further today and could be closing at the lowest levels since April 2022. Second chart shows the slightly shorter term view. The gap between VIX and SPX that started forming in mid December remains wide as people “suck fear” out of this market.”

 

 

TNX futures may have bottomed out last night at 34.18, but the morning cash market shows a higher low, leaving yesterday as a potential Master Cycle low at day 266.  Yesterday’s 30-year Treasury auction may have laid a trap for unexpected investors, not anticipating the market could turn on a dime.

ZeroHedge observes, “What a blowout auction.

After a stellar 3Y, an impressive 10Y (both of which came in far stronger than expected, prompting us to correctly say there were zero jitters about today’s CPI print in the bond market), moments ago we got an absolutely blowout, record 30Y auction.

The high yield of 3.585% was fractionally above last month’s 3.513%, but stopped through the When Issued by 2.4bps, one of the biggest stop throughs on record which was especially remarkable when considering the powerful rally across the curve going into the auction and lack of concession as the curve had tried to steepen on several occasions, and failed.

Th Bid to Cover of 2.451 was well above last month’s 2.249 and was the highest going back all the way to September 2021.

But it was the internals that were blowout, with foreign buyers, or Indirect bidders including central banks, private investors and sov wealth units, awarded a record 74.63%, the highest on record (and far above last momth’s 61.57%) as foreigners just couldn’t get enough.”

 

 

USD futures may have made a new Master Cycle low in the overnight session at 101.72.  However, it appears to be bouncing off that low.  Today is day 260 of the current Master Cycle.  The Model suggests a possible reversal over the weekend, with potential strength.

 

 

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