The Practical Investor

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

7:30 am

Good Morning!

SPX futures are testing the upper trendline near 5847.50 this morning as it begins to roll over.  The trendline may offer an opportunity for aggressive shorts to weigh in.  The  lower trendline, the 100-day MA and mid-Cycle support lie at 5784.64, giving confirmation of the sell signal beneath.  The steep rally doesn’t offer as clear a re-entry as one would wish and many shorts who were squeezed out may be reluctant to short again as confidence may have been broken.  This is the first real bear market rally and there will be more.  Instead of SPX reaching 6000.00 or 7000.00 this year, we may see SPX attain 3500.00 instead.

Today’s options chain shows Max Pain at 5875.00.  Long gamma may begin above 5900.00 while short gamma resided beneath 5845.00.

ZeroHedge reports, “US equity futures are lower as investors take profits on Thursday and tech stocks fell as investors worried about an economic slowdown after Steve Cohen warned the chance of a recession is 45% and today’s retail sales numbers are expected to be a miss. As of 8:00am ET, S&P futures are down 0.4%, rebounding from session lows after Walmart reported solid earnings; Nasdaq futures dropped 0.5% with Nvidia, Palantir and Tesla falling about 2% in early trading.  On Wednesday, the S&P failed at 5,900 for the second consecutive day. The silver lining according to JPM is that yesterday, NVDA turned positive on the year, joining META and MSFT; if the remaining members follow suit, there is another ~10% upside to the index assuming positive members are flat. YTD, AMZN is -4.2%, GOOG -12.6%, TSLA -13.9%, and AAPL -15.2%. In trade news, China removed curbs on rare earth exports to the US. Trump says India is willing to drop is tariffs on US goods. Brent sank below $64, down more than 3% after President Donald Trump said the US is getting closer to a deal on Iran’s nuclear program, fueling concern that additional oil supply may pressure the market. Bond yields and the USD are lower. Today’s macro data focus is on Retail Sales which are expected to remain unchanged in April (versus 1.5% prior); PPI, Jobless Claims, Philly Fed and Empire Manufacturing numbers are due at 8:30 am in New York, while Industrial Production prints at 9:15am. Also, traders are looking ahead to a speech by Federal Reserve Chair Jerome Powell.”

VIX futures rose to a morning high at 19.23 thus far.  A buy signal appears above the mid-Cycle support/resistance at 19.66.  The Cycles Model anticipated a high velocity rally for the next four weeks.

The May 21 options chain shows Max Pain at 22.00.  Short gamma resides between 16.00 and 20.00.  Long gamma prevails above 25.00 and 75.00.

USD may have found its retracement low at 100.44 in the overnight session.  Since then it has risen above Intermediate support at 100.69.  Should the rally resume, USD may simply bypass the 50-day Moving Average and target the mid-Cycle resistance at 104.43 in short order.   The Cycles Model offers another month of rally in which the target may be the Cycle Top at 110.53.

The Japanese Yen has risen to 68.71 thus far this morning, surpassing the 50-day Moving Average at 68.30 and offering a buy signal.  The Cycles Model anticipates a rally to early June, but the effects may last longer than expected.  Taking out a loan in Yen is, in effect, shorting the Yen.  While the interest rate may be very low, the currency loss may be enormous.

TNX futures rallied to 45.42 before the open, setting the stage for another rise in the cash market.  Trending strength is growing and may last over the next three weeks as the Cycle Top may be challenged.  A breakout above the neckline of the Head & Shoulders formationmay set the tone for a further rally this summer.

Gold futures reached a morning low at 3124.51, beneath the 50-day Moving Average.  This offers gold investors a triple confirmed sell signal.  The next layer of support lies at 3000.00.  However, a true impulsive decline may take gold beneath its Cycle Bottom at 2318.34.We may expect the decline to last as far as mid-July.

Crude oil futures retraced the rally down to the Cycle Bottom, making a low at 60.47 before a bounce.  This has been a difficult place to go long, yet the longer-term Cycles Model strongly supports it.  The possible target for the next 3 weeks may be the Cycle Top resistance at 78.09.

Bitcoin is easing lower as it consolidates beneath the Master Cycle high.  Round number support at 100000 provides a floor thus far and beneath it one may infer an aggressive sell signal.  Confirmation of the sell lies beneath mid-Cycle support at 93646.84 today.

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

7:30 am

Good Morning!

SPX futures consolidated beneath yesterday’s high on day 260 of the Master Cycle.  Monday’s gap up into the open is reported to be the second largest net buying in 5 years, mainly due to short covering.  Capitulation may have already occurred.  We will be able to determine that event has happened when buyers run out of money or simply lose confidence in their ability to make money in equities.  The Cycles Model anticipates that, once the buying (short covering) has stopped, the SPX may be due for a month-long decline.  Ending Diagonals are often completely retraced, at a minimum.

Today’s options chain shows Max Pain at 5880.00.  Long gamma may begin at 5900.00 while short gamma may start beneath 5850.00.

ZeroHedge reports, “US equity futures are modestly in the green with tech/AI stocks leading and small caps lagging as equities may see some profit-taking given the relentless strength of the rally. Stocks has now erased their YTD losses, and the recovery pace of the past 6 weeks is the fastest since the 1980s. As of 8:00am ET, S&P futures are up 0.2%, near session highs after reversing earlier losses; Nasdaq futures gain 0.4% with chips higher on new deals being made by Trump in the Middle East regarding chips/AI infra build. Pre-mkt, NVDA/TSLA are higher with the rest of Mag7 mixed but Semis are higher though other Cyclicals are slightly weaker. AI theme is higher, too. The yield curve is twisting steeper as USD strength fizzles sparked by concerns Trump may turn to dollar strength next (following overnight Bloomberg report there was discussion between US and SKorea on dollar strength). Commodities are lower as Energy sells off, and gold is flat around $3220. The macro data focus is on mortgage applications (up 1.1%) and XHB is +5% over the last two days.”

VIX futures are consolidating above yesterday’s low at 17.65 on day 267 of the Master Cycle.  A further decline may be minimal, if any, as VIX has reached a “technical floor” of support.  Once the reversal takes place, the Cycles Model calls for a month-long rally with rising strength being revealed next week.  A buy signal may be obtained with a rise above the mid-Cycle support/resistance at 19.64.

The May 21 options chain shows Max pain at 22.00.  Short gamma is back with investors crowding with puts from 16.00 to 21.00.  Long gamma begins at 25.00 and is filling in longst to 75.00.

USD futures may have made  a retracement to 100.11 this morning.  The Cycles Model shows trending strength coming back today, suggesting the pullback may be over.  Dollar shorts are licking their wounds, but more pain is yet to come, as the rally still has legs to go another month.

Japanese Yen futures rose to 68.66 this morning, potentially sending the cash market above the 50-day Moving Average at 68.26.  This may result in a buy signal with the Yen subsequently rising to challenge the Cycle Top at 71.17.   Those who borrowed in Yen may have to unwind.  The largest players in the carry trade are commercial traders who borrow Yen and buy Treasuries, making a profit on the spread.  However, the spread disappears as the Yen appreciates vis-à-vis the USD.

TNX may be consolidating after yesterday’s powerful move higher.  The Cycles Model calls for three more weeks of such moves with the Cycle Top at 48.09 a likely target.  Be aware that the neckline for the Head & Shoulders formation is just above the Cycle Top.  Should TNX break above it, yields are sure to go higher this summer.

Bitcoin is lingering beneath its retracement high made on Monday.  The Master Cycle appears to have run its course of 260 days.  Note that the rally in Bitcoin mirrors the rally in equities.  This suggests that Bitcoin may not offer any protection in the event of a market decline.

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

3:37 pm

As SPX completes its second day of throw-over, the room to move becomes narrower.    Top-picking is frustrating.  Most shorts were made between 5900.00 and 6000.00, just beneath the 50-day Moving Average on February 26 when it was 6006.00.  This rally may collapse when the last bear has thrown in the towel.

7:45 am

Good Morning!

SPX futures drifted lower, bottoming out at 5816.60 in the overnight session.  Yesterday’s spike rally took the form of a throw-over, having risen above the trendline of the Ending Diagonal.  Commercial traders (trend followers) may be buying this week as the SPX has crossed the median pivot level.   Short-term support lies at the combined 100-day and mid-Cycle support at 5780.95.  The 50-day Moving Average and 1987 trendline are at 5563.20.  The Cycles Model suggests the current Master Cycle may have played out, leaving the probability of an imminent decline to mid-June.  Ending Diagonals are often completely retraced.

Today’s options chain shows Max Pain at 5795.00.  Long gamma may begin above 5800.00 while short gamma may begin beneath 5770.00 and intensifies beneath 5750.00.

ZeroHedge reports, “US equity futures are modestly lower ahead of today’s CPI report, but well off session lows, as markets take a slight pause following yesterday’s surge and as trade war truce euphoria gives way to lingering concerns about inflation and economic growth. As of 8:00am ET, S&P and Nasdaq 100 futures were down 0.2% with Mag7 and Semis names weaker pre-mkt, pulling the index lower. UnitedHealth Group sank 10% in pre-market trading after suspending its 2025 outlook. In the latest trade war news,  US reduced the tariff on ‘de minimis’ shipments from China, per Reuters, from 120% to 54%, while China reversed its ban on Boeing jets. Appetite for safer assets picked up again, with Treasury yields falling and gold prices on the rise. The dollar slipped after gaining more than 1.4% yesterday, its strongest day since Nov 6, 2024, the day after the election. Today’s macro data focus is on CPI where the YoY numbers are expected to remain flat MoM despite an acceleration in the MoM prints. Earnings prints are not expected to be market moving today.”

VIX futures are consolidating near yesterday’s low after an exhausted close at the lower trendline.  This may be the last bottom-test for quite some time.

Tomorrow’s options chain shows Max Pain at 20.00.  Short gamma has a big presence at 18.00 while long gamma begins at 24.00 with a very large presence at 30.00.

TNX is consolidating with a slight slope downward.  It may have not yet reacted to this morning’s news of a treasury surplus.  The Cycles Model allows three more weeks in the present Master Cycle.  This may allow for a pivot lower to the mid-Cycle support at 42.48 or possibly lower, near 40.00.  Despite the “good news” from the Treasury Department, tariffs are considered inflationary in the longer term.

ZeroHedge remarks, “Two weeks ago, as part of its quarterly refunding announcement, the Treasury surprised the market when it unveiled a funding need for the current quarter that was $53 billion lower than it had initially forecast in February, and which we said “indicates that DOGE is indeed working and the US funding needs are actually declining.”

Needless to say, for a market that was habituated to Joe Biden’s debt-funded drunken sailor spending ways, the news that the US would needs less – not more – spending than previously expected, came as a shock, and yields slumped as less debt than expected would be required to fund the world’s most indebted government.”

Bitcoin is consolidating beneath yesterday’s Master Cycle high.  Should the Master Cycle pivot have been made, an extended decline may be underway.

USD is consolidating between Intermediate support at 100.89 and the 50-day Moving Average at 102.01.  The Cycles Model indicates a blast of trending strength may appear once the consolidation is done..  This may be the cause of pain for the USD shorts and add fuel to the rally as they cover.

Gold futures bounced off the Intermediate support at 3219.00 and may be consolidating beneath the Cycle Top resistance at 3287.98.  The Cycles Model suggests the decline may strengthen towards the end of the week.  A likely downside target in the near term may be the bottom trendline of the upward-sloping trading channel near 2900.00.

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

8:00 am

Good Morning!

SPX futures rose to a weekend high of 5846.80, then eased lower on day 259 of the Master Cycle.  Should the SPX open above the mid-Cycle support at 5778.85, a decline beneath that level offers a sell signal.  SPX is nearing the maximum retracement for a bear market rally.  Retail investors have been buying the dip while certain institutions have been selling.  The mechanical systems of commercial traders have been buying again.  But the rally has taken the form of an ending Diagonal, suggesting the end may be near.  Today’s blow-off may bring in the last retail holdout from this rally.

Today’s options chain shows Max Pain at 5650.00.  Long gamma begins above 5700.00 while short gamma may start beneath 5600.00.

ZeroHedge reports, “US equity futures and the dollar soared after China and the US agreed to slash tariffs and de-escalate a trade war that had sparked turmoil in global markets. Treasuries and gold tumbled after the US cut China tariffs from 145% to 30% while China slashed US tariffs from 125% to 10% for 90 days. With the countries agreeing that they do not want to de-couple, there is optimism that a longer-term deal can be reached. As of 8:00am, S&P futures surged 3% and Nasdaq futures spiked almost 4%. JPM writes that while Trade War 1.0 tariffs remain, as do sectoral tariffs but, this is an unambiguous positive for all global risk assets and will allow markets to look through any near-term weakness in macro data but if CPI, PPI, and Retail Sales surprise to the upside, then that will provide another tailwind to risk assets. Premarket Mag7 names are higher with many up more than 3%, Semis/Cyclicals are also higher as the market will need to reset its growth expectations higher. Commodities are higher, led by Energy, despite a spike in bond yields/USD.”

VIX futures dropped to a morning low at 19.87 on day 266 of the Master Cycle.  Usually the VIX turns about a week or two ahead of the SPX.  However, the decline from the April 7 high was on of the longest declines in recent memory, taking 35 days.  The Cycles Model suggests a strong reversal this week with growing strength in the new rally by the middle of next week.

The May 14 options chain shows Max Pain at 23.00.  Short gamma dwells between 19.00 and 22.00.  Long gamma may begin above 24.00 and remains strong to 35.00.

TNX rose to 44.69 this morning as it continues its rally into early June.  TNX is on a buy signal with a clear path to the Cycle Top at 48.06.

The Japanese Yen extended its retracement toward the 50% level this morning on day 270 of its Master Cycle.  This is a bit of a stretch which shows some institutional interference, possibly the Bank of japan.

Gold futures declined to 3211.29, beneath the trendline and Cycle Top at 3282.19 today, creating a sell signal.  The Cycles Model suggests the decline may have legs, lasting to mid-July.  Trending strength appears at mid-week with potentially dire consequences.

Crude oil futures rose to 63.59 this morning, before settling back.  It may retest the Cycle bottom at 60.76, which it crossed on Friday.  Oil futures may continue rising to the end of May.  A rally above the mid-Cycle resistance at 69.55 may indicate a new trend is forming.

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

10:09 am

BKX may have made its Master Cycle high yesterday while challenging the mid-Cycle resistance at 123.92.  This offers a potential aggressive sell signal that may be confirmed as BKX declines beneath the 200-day Moving Average at 122.84.  There is a tremendous hidden risk in the banking sector that may reveal itself as highly leveraged investments sour.

ZeroHedge notes, “While the media fixates on interest rates and inflation, a $250 trillion shadow banking monster quietly grows, hidden from traditional regulation. Hedge funds and private equity firms operate with 100x leverage, taking massive risks backed by the very banks holding your savings.”

8:00 am

Good Morning!

SPX futures rose to 5695.80 this morning, matching the top of Wave A in this corrective rally.  While individual investors remain bearish, the Commercials who buy systematically have poured in $100 billion in the past 10 days, keeping the SPX above the 50-day Moving Average.  The Ending Diagonal trendline shown in the chart provides the first breakdown of support at 5635.00.  Beneath it lies the 50-day Moving Average at 5571.00, giving a sell signal which is further confirmed at the 1987 trendline near 5560.00.  Pick your level.

Today’s options chain shows Max Pain at 5630.00 to 56660.00.  Long gamma begins above 5680.00 while short gamma resides beneath 5600.00.

Zerohedge reports, “US equity futures traded modestly higher pointing to a third day of gains, until just before 730am ET when Trump decided to play bad cop to Scott Bessent’s good cop and posted on Truth Social that “80% Tariff on China seems right!” but then added that the final tariff rate is “Up to Scott B.”

That comment promptly hit futures, erasing the market’s modest gains, but upon reflection and realization that Trump was probably just in one of his moods, futures resumed their ascent after yesterday’s trade deal with the UK and Trump’s comments to buy the market. The focus is on the start of China trade talks this weekend, but if we use the US/UK deal as a template, it is light on details with a seemingly minimal economic impact. As of 8:00am ET, S&P futures are up 0.2% and Nasdaq futures gain 0.3%. Pre-market, all Mag7 names are higher with cyclicals mixed but with a bias to Quality names. Markets also benefited from a slew of positive earnings, with Microchip Technology, Lyft, and Pinterest surging while Expedia plunged after it cut bookings growth forecasts. Bond yields are flat as the yield curve bull steepens and the USD sells off after its strongest day since Nov 6 (day after the US Pres. Election). In commodities, energy continues to see a bid with WTI now above $60/bbl, Ags are higher, and precious metals are outperforming base. There is nothing on the macro data calendar, and earnings are light today so today’s session will likely be investors trying to position for outcomes after this weekend’s US/China summit.”

VIX futures consolidated near the low at 21.88 this morning.  The new Master Cycle runs to June 15.  While comments are being made about the oacki of bullishness, the VIX options show little faith in either the bullish outlook or the bearish one.

The May 14 options chain shows Max Pain at 24.00.  Short gamma occupies the space between 19.00 to 23.00.  Long gamma kicks in above 25.00 but only runs to 35.00.  The May 21 options chain shows more bullish conviction up to 75.00.

TNX rose to 43.98, just shy of the resistance at 44.00.  There may be a pullback to test support at the 50-day Moving Average at 42.88 before ramping higher.  Otherwise the trend is higher until the first week of June.

Bitcoin may have made its Master Cycle high at 104353.74 in the last 24 hours.  With that in mind, I am neutral until either the Cycle Top at 107677.00 is challenged or the round number support at 100000.00 is defeated.

USD futures rose to 100.71, short of meeting the Intermediate resistance at 101.06.  USD is on a buy signal and shows a propensity to break through that resistance as well as the 50-day Moving Average.  The USD stands to gain should trade talks with China this weekend show success.  Adding fuel to a potential panic rally is the large short positions on the USD.

The Japanese Yen may be consolidating above its Master Cycle low at 68.41 made yesterday on day 266 of its Master Cycle.  The Cycles Model suggests today may be a day of strength for the Yen.  If so, the Yen may challenge its Cycle Top at 71.16.  A breakout above the Lip of the Cup with Handle formation at 71.55may cause much pain for those involved in the Carry Trade which involves borrowing against (shorting) the Yen.

Gold futures tested the Cycle Top and upper trendline today at 3275.00 and bounced.  The threat of losing support is tangible, with a potential two-month decline ahead.  Gold’s long-term outlook is positive.  However, a liquidity event may stand in the way of higher short-term values.

West Texas Crude rose to an overnight high at 61.45, breaking through the Cycle Bottom resistance at 60.28 and offering a confirmed buy signal.

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

3:12 pm

SPX may have completed an Ending Diagonal formation, which tells us it’s the end of the rally.  Confirmation comes when SPX makes a new daily low, which occurs beneath 6535.00 today.  Further confirmation lies beneath the 50-day Moving Average at 5581.25.

ZeroHedge notes, “While commenting to reporters after signing the first (of many) trade deal with the UK, President Trump told Americans that they “better go out and buy stocks now” as he looks forward to signing his “big beautiful bill.”‘

7:45 am

Good Morning!

SPX futures rose to 5698.40 this morning, just points away from the retracement high at 5700.70 made last Friday.  Yesterday was a high volatility day, according to the Cycles Model.  Naturally I interpreted that as a result of the FOMC announcement.  Whether the SPX makes a marginal new high or not, the fractal structure indicates an imminent decline to test the lows.  Note that (technical) overhead resistance appears at 5700.00, while the mid-Cycle resistance lies at 5775.90.

Today’s options chain shows Max Pain at 5635.00.  Long gamma may begin above 5640.00 while short gamma does marginally better beneath 5630.00.

ZeroHedge reports, “US equity futures storm higher, and are back to their post-Liberation Day highs on positive trade news (Imminent “comprehensive” trade agreement with UK the first of his promised deals; removal of chip export restrictions) and a neutral Fed (economy has strength to wait to see trade war impact hit hard data) even as China again reiterated that the US should cancel unilateral tariffs ahead the first official meeting between the countries this weekend amid reports the US is considering exempting child-related goods from its 145% tariffs on China. As of 8:00am ET, S&P futures rose 0.9% while Nasdaq futures are 1.2% higher, both near session highs. Elsewhere FTSE +40bps, DAX +1.2%, CAC +1%, Shanghai +28bps, Hang Seng +37bps, Nikkei +41bps. Intel rose more than 3% in premarket trading, while peers such as Nvidia and Micron also gained on news Trump will rescind restrictions regulating the export of semiconductors to various countries. Outside of tariffs, Norway and Sweden central banks left rates unch (expected) while we get the BoE this morning (25bps cut expected). US Bond yields are 4-5bp higher across the curve and USD is poised to have its best day 6 sessions with DXY +50bp. Today’s macro data focus is on jobless claims, NY Fed 1-year inflation expectations, and labor costs.”

VIX futures made a new Master Cycle low at 22.33 this morning, on day 262 of the current Master Cycle.  While the SPX Master Cycle may become “stretched” with a new high, the VIX is not.  The apparent calm may not last.

Bitcoin rose to 99869.10 this morning, being attracted by 100,000.00 (round number).  The fractal structure appears complete.  Should it halt near there, Bitcoin may begin its decline.  The Cycles Model anticipates the downdraft to last until mid-June.

TNX futures declined to 42.88 while the cash market bottomed at 42.95 this morning.  The consolidation may be over, or nearly so.  The Cycles Model suggests a resumption of the uptrend  with the Cycle Top resistance at 48.03 as the potential target.

The Japanese Yen is pulling back to 68.99 to retest Intermediate support at 68.69.  It may not last, since a surge in trending strength may be imminent.  Should that occur, the rally may be inclined to break through the Lip of the Cup with Handle formation.  The Cup with Handle is related to the Head & Shoulders formation, but has a softer target.  Longer term indicators suggest a target near 75.00.

Gold futures rose to 3421.94 before easing back into negative territory.  Although steep and painful, the retracement may be over without making a new high.  The retracement may be viewed as a “shadow Cycle” since this may be viewed as a possible extension of the April 22 Cycle top.

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

3:03 pm

SPX bounced off the 50-day at 5575.00. giving the dip-buyers hope.  While that may cause the SPX to close in positive territory, it does not eliminate the overbought condition that is found there.  Once beneath the support of the 50-day and the 1987 trendline there is a long way down before meaningful support may be found.

ZeroHedge remarks, “With no actions taken and no SEP to discuss (although the statement clearly hints at stagflationary uncertainty), all eyes (and ears) are now focused on every word that Powell says for hints about whether prices (inflation) or jobs (growth) are more of a worry (both are lower recently)…

.. and why he cut rates before the election when financial conditions briefly tightened but refuses to do so now…”

7:45 am

Good Morning!

SPX futures ramped to 5669.10 yesterday evening with no particular reason…well, there is a reason.  The powers-that-be did not want to see the SPX drift beneath the 50-day Moving Average at 5584.52 overnight.  In bull or bear markets it is a rare event to see stocks lower before a FOMC announcement.  The April jobs report took away any reason for easing.  Calls for a rate cut have been pushed back to July.  The NYSE Hi-Lo Index closed yesterday at -12.00, suggesting the rally is already winding down.  The markets are likely to be held in suspense until 2:00 pm when the FOMC announcement becomes public.  The Cycles Model anticipates a decline to mid-June.

Today’s options chain shows Max Pain at 5615.00.  Long gamma may begin above 5625.00 while short gamma gasins ascendancy beneath 5590.00.

ZeroHedge reports, “US equity futures are higher while global market are mixed ahead of the FOMC decision later today, following news tariff talks between the US and China will begin, and after a surprise stimulus by China. As of 8:00am, S&P and Nasdaq futures are 0.6% higher (though off the highs) on reports Bessent will meet Chinese Vice Premier He Lifeng in Switzerland this weekend in the first confirmed talks between the two superpowers. Bessent later said on Fox News that the meeting will be more about de-escalation than any sort of big trade deal. In premarket trading Mag7 names and Semis are leading the markets higher while RTY appears to be squeezing into outperformance. Cyclicals are poised for a strong session, too. Overnight China’s PBOC cut its reverse repo rates and lowered lender reserve ratio to help stimulate growth. India conducted military strikes in Pakistan in which Pakistan said it shot down five Indian jets. Attention shifts to the Powell and the FOMC at 2pm which is expected to yield no surprises as the CB preaches patience. Focus during the 2:30pm press conference will be on any commentary on how long Powell intends to wait for further clarity re tariffs/impacts (reminder no SEP). Bond yields are higher alongside a stronger USD which snapped three days of declines as the Taiwan Dollar slid for a second day. Commodities are bid higher led by Ags and Energy; gold/silver are modestly lower after another powerful breakout earlier this week.”

VIX futures eased down to 24.15 in response to the overnight surge in the SPX.  The Master Cycle low was put in on Friday in a timely fashion.  While the VIX shows relative calm, the VVIX may have made a buy signal yesterday.  The March 2020 high at 85.47 may be the minimum target for the VIX in the  upcoming surge.

TNX may be easing lower to test the 50-day Moving Average at 42.79 before resuming its rally.  The Cycles Model calls for a continued rally to the first week of June.  The intended target of this rally may be the Cycle Top at 48.03 and beyond.  Mid-May appears to be a particular hotspot for bonds.  Today the FOMC is expected to sit on their hands and do nothing, despite the Bank of China unleashing  liquidity to jumpstart their own economy.  The Fed’s quandary is that the inflation outlook is clearer than the growth outlook.

USD futures are in suspension pending the Fed outlook.  The Cycles Model suggests a minimum decline to 89.90 with the possibility of reaching the Cycle Bottom at 98.32 in the next couple of days.  However, the trend is higher, with the rally resuming by  the end of the week, extending to mid-June.  This would be a good place to exit, as the USD is heavily shorted and a squeeze may provide fuel for a significant rally.

The Euro has come down from its April 21 high and may be retesting its Cycle Top resistance at 114.48 before turning down next week.  The Cycles Model anticipate a further decline through mid-June, ending near the Cycle Bottom at 101.27.  Should a war develop between NATO and Russia, the decline may extend to August.

Bitcoin rose to 97647 in the overnight session, leaving the Friday high at 97939.99 as the Cycle Top.  The uptrend appears intact, but may be weakening.  Many investors misinterpret this action as a potential safety net in the event of a stock market decline.  However, the Cycles Model suggests otherwise, as the loss of liquidity may affect Bitcoin even more.

Crude oil is consolidating this morning after an abrupt rally off its Monday low at 56.46.  The rally begun on Monday may resume its upward course imminently.   The Cycles Model suggests the rally may continue to the end of May.

ZeroHedge remarks, “Oil pries pumped and dumped back tro unchanged ahead of this morning’s official inventory and supply data after hopeful (demand) signs of US-China trade talks battled with fearful (supply) signals from OPEC*+.

“There is a fear that the trade negotiations in Switzerland with China could backfire and turn into a demand destruction event,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA. Building market sentiment that a rate-cut is not in the cards anytime soon is also weighing on prices, he added.”

Gold futures rose to 3448.50 overnight, prompting some investors to proclaim a new all-time high.  Although the retracement has been steep, it has not exceeded its April 22 high at 3500.00.  I have to admit that the Cycles Model has not slammed the door shut on a new ATH, so we stay neutral until the end of the week.

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

12:07 pm

GKX (Agricultural Index) tested the mid-Cycle support at 375.56 this morning, making a 72% retracement low.  While the retracement may go lower, the odds are high that it may be complete.  The last two months have presented an opportunity to accumulate shares in anticipation of a very strong rally out of the low.  The Cycles Model anticipates a potential rally into the third week of June.  Owning agricultural commodities may be an ideal offset to declining stock prices.

ZeroHedge remarks, “During Tyson Foods’ earnings call on Monday, Brady Stewart—head of the company’s beef and pork supply chains—offered fresh insight into what may be the emerging bottom in U.S. cattle supplies, which have fallen to their lowest levels in over 70 years. His comments came in response to a question from one Wall Street analyst.

Barclays analyst Benjamin Theurer asked Stewart about the overall environment in the beef industry:

So it feels like you only had a small volume drop-in the quarter that could almost be explained by just the leap year and some of the calendar effects. So just wanted to understand a little bit better what you’re seeing in terms of supply of cattle and the cost of that into your operations and how you think about the earlier signs maybe as to some of the heifer retention? Is that building or not? So how should we think about just these throughout the cycle? Are we at the bottom or is it just still too early to tell? That would be my first question. 

Stewart explained that while cattle supply remains down year-over-year, record-high animal weights are helping to offset the decline in volume. He added that the U.S. cattle industry is likely at or near the bottom of its inventory cycle, with herd levels now at a 73-year low.”

7:45 am

Good Morning!

SPX futures made a morning low of 5603.40 thus far.  Should it go lower, the 50-day Moving Average lies at 5594.34.  Beneath it lies a sell signal.  The Cycles Model anticipates a decline to mid-June.  Third Waves may never be the smallest of the series of motive Waves.  Assuming a third Wave is next, the minimum target may be 4388.00 while the average target may be closer to 3550.00.  Underneath the hood, the NYSE Hi-Lo Index closed at a marginal 34.00 on Friday, then closed at its low of 26,00 on Monday, at the tipping edge of its range.  The mean value of the Hi-Lo is -30.00, so a reversion to the mean may plunge the Hi-Lo well into negative territory.

Today’s options chain shows Max Pain at 5655.00.  Long gamma may begin at 5660.00 while sort gamma starts at 5650.00.  This morning’s plunge has tested a sizable put wall at 5600.00.

ZeroHedge reports, “US equity futures slumped for the second day, dragged down by earnings and a lack of positive news on trade negotiations. As of 8:00am, S&P 500 futures dropped 0.9% as risk is pared into tomorrow’s Fed announcement and the index failed to breach through technical resistance; Ford slumped after suspending its guidance and warned tariffs will reduce 2025 adjusted EBIT by about $1.5 billion; Nasdaq futures 100 dropped 1.1%, with all Mag7 stocks lower as Tesla and Meta led declines. Palantir tumbled 8% after the software firm’s results failed to meet investors’ expectations, while Ford slipped 3% after the carmaker pulled its financial guidance and flagged a tariff impact of about $2.5 billion on 2025 earnings. German stocks tumbled Estoxx 50 after incoming German chancellor Friedrich Merz suffered a shock setback when he fell short of a majority in an initial vote in the lower house of parliament to confirm him as Germany’s next chancellor. The yield curve is twisting steeper as USD comes for sale. Commodities are higher with WTI crude oil futures rebounding more than 2% from Monday’s YTD low close and gold is marching back to its ATHs. Trade Balance data is the macro data focus.”

VIX futures rose to a morning high of 25.04, still short of the 50-day Moving Average at 25.98.  On a 25-year look-back, the mean value for the VIX appears to be near 18.67.  Note that last week’s low was above that value for the first time since April 2020.

Tomorrow’s options chain shows Max Pain at 24.00.  Short gamma resides between 20.00 and 23.00.  Long gamma may begin above 25.00 and extends to 40.00.

USD futures remain in a corrective decline to a probable target near 98.90 with a possible extension to the Cycle Bottom at 98.38.  Once met, trending strength may reappear by the end of the week.  The Cycles Model anticipates the USD rising to mid-June.

TNX may have begun consolidating  after a sharp rise from its Master Cycle low.  While a correction (pullback) to the 50-day Moving Average at 42.80 may be in order, the uptick may not be over.  An expanded correction may push TNX to 44.00 or higher before the correction is complete.

Bitcoin continues to decline from its Master Cycle high mad last Friday.  Confirmation of a sell signal lies beneath the mid-Cycle support/resistance at 93204.84.  The new Master Cycle may decline to mid-June.

The Japanese Yen made a new high this morning at 70.13 after making its Master Cycle low last Thursday.  The New Master Cycle promises to rise above its Cycle Top at 71.09 and the Lip of the Cup with Handle formation at 71.55.  Should that occur, We may witness the source of a huge liquidity drain in the equities markets accompanied by higher rates in the bond market.  Note that there is resistance at 79.46.  Should the Yen fail to overcome it a new, deeper decline may ensue.

Gold futures rose to a morning high at 3405.71, exceeding the top of its correction at 3386.00.  This may be an expanded correction that indicates an overly bullish sentiment in an overhanging market.  The alternate view is that a marginal new high may occur by the end of the week.

Crude oil futures are consolidating before a possible final decline to a three-year low.  There are tow possible targets for this delcine.  The first is the 61.8% retracement of the 2020-2022 rally near 52.00.  The fractal model suggests a deeper decline to a range near 50.00.  With both of these targets in mind, Crude Oil may be in what is called an accumulation phase.  Given the historic decline and nearby targets. crude offers a viable alternative to equities or bonds.

ZeroHedge observes, “The OPEC price war has made landfall in the US.

Following our report earlier that Saudi Arabia has declared a new price war on OPEC+ quota-busters such as Kazakhstan, and non OPEC+ members such as US shale producers, today after the close Diamondback Energy, the largest independent oil producer in the Permian Basin, made a historic pronouncement today when it said that production has likely peaked in America’s prolific shale fields (something we also mentioned earlier in the day) and will decline in the months and years ahead after crude prices plummeted.”

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

1:33 pm

The Agriculture Index has been in an accumulation phase for the past two months after a rally from the August lows.  GKX may continue to decline to the mid-Cycle support at 375.18.  However, the Cycles Model anticipates an imminent strong reversal out of this low.  The ensuing rally may be a counterpoint to the likely decline in equities.  In other words, a hedge to a declining market.

1:15 pm

BKX has risen above the d 200-day Moving Average at 122.67 and is testing the mid-Cycle resistance at 123.60.  While it may have another week of time in the current Master Cycle, it has nearly achieved its price target, which is mid-Cycle resistance.   It’s time to prepare for a decline to the Head & Shoulders neckline.  Along with the decline in the BKX may come a decline in overall liquidity for the broader markets.  Today’s rise in the TNX shows a growing reluctance to finance debt, starting with Treasury debt.  Investors are waiting for the May FOMC announcement on the 7th at 2:00 pm.  That may be the focal point for the BKX as well.

7:50 am

Good Morning!

SPX futures hit a  weekend low at 5633.60 while on its way to test the50-day Moving Average at 5603.83.  The Master Cycle may have been completed on Friday at 5700.70.  A further decline beneath the 50-day Moving Average invites a sell signal to be confirmed beneath the 1987 trendline near 5550.00.  The earnings season is almost over, with average earnings better than expected.  However, companies are hesitant to provide forward guidance.  24% of reporting companied mentioned the word “recession” vs. 2% in the previous quarter.  Investor belt-tightening may be putting a drag on forward expectations.

Today’s options chain shows Max Pain at 5650.00.  Long gamma may begin above 5690.00 while short gamma prevails beneath 5635.00.

Zerohedge reports, “US equity futures are lower after the S&P gained 2.9% last week and erasing all post-Liberation Day losses. As of 8:00am, S&P futures were down 0.9%, putting the index on track to snap its longest streak of gains since 2004; Nasdaq futures dropped 1.0% with the Mag7 weaker, pulling markets lower, and cyclicals under pressure. Berkshire Hathaway stock is down 2% after Warren Buffett surprised Berkshire’s annual meeting on Saturday by announcing that he plans to step down at the end of the year. Overnight, Trump’s latest flurry of tariff comments gave little clarity on the path forward for markets: the president suggested some deals could come as soon as this week, but also that he had no current plans to speak with Chinese President Xi Jinping; he also said that a trade deal may come as soon as this week (India? Japan? S Korea?). Trading outside the US has been subdued to start the week, with several financial market including Japan, Hong Kong, China and the UK, closed today. The USD is weaker and bond futures are flat around 4.30%. Crude oil slumped after OPEC+ announced it is increasing supply (411k bpd), hurting oil prices but providing a disinflationary offset to tariff.  Today’s macro data focus is on ISM-Services with the Fed on Weds.”

VIX futures rose to 245.63 this morning.  It may be rising to challenge the 50-day Moving Average at 25.67 where a buy signal awaits.  The Cycles Model anticipates a rising VIX to mid-June.  The big picture shows a possible Cup-with-Handle formation.  A possible target under this formula may be in excess of 100.00.  A Cup-with-Handle is a continuation formation that may indicate acceleration of the trend.

The May 7 options chain shows Max Pain at 24.00.  Short gamma prevails between 20.00 and 23.00.  Long gamma begins at 25.00 and extends to 40.00.

TNX futures rose to 43.33 this morning while the cash market rose to 43.30 thus far.  The Cycles Model shows a possible high trending strength day, reinforcing the reversal from Friday’s Master Cycle low.  Indications are that rates may continue rising to the first week of June.  That allows TNX  plenty of time to challenge the Cycle Top at 48.02.

ZeroHedge observes, “Interest rates are linked to inflation, but they’re also linked to risk.

As a result of recency bias, where we assume the recent past is a permanent state of affairs, many believe near-zero interest rates are “normal.” They aren’t. As the chart of 10-year US Treasury yields–a proxy for interest rates throughout the economy–illustrates, rates in the 3% or lower were an anomaly that only occurred in the relatively brief period of 2011-2022.”

Bitcoin is consolidating after the weekend decline from Friday’s Master Cycle high.  A decline beneath mid-Cycle support at 92108-9.00 offers a possible sell signal.  The Cycles Model suggests a probable decline to mid-June.

USD is pulling back after a breakout higher.  It is possible that the pullback may decline to 99.00 or slightly lower in the next couple of days.  However, trending strength may reappear by the end of the week, suggesting much higher prices.

Gold futures have bounced to a weekend high of 3331.00 as it may have completed its corrective bounce from the Cycle Top.  If so, gold may resume its decline with intensity increasing by mid-month.  Gold may be anticipated to decline over the next two months.

Crude Oil futures made a weekend low of 55.39 as it declined further into its final probe of the current downtrend.  A possible target may be near 50.00 over the next couple of weeks.

The Lord’s Prayer

Our Father, who art in heaven, hallowed be thy name.  Thy Kingdom come, Thy Will be done, on earth as it is in heaven.  Give us this day our daily bread and forgive us our trespasses, as we forgive those who trespass against us.  And lead us not into temptation, but deliver us from evil.  Amen.

4:25 pm

SPX has completed a 30-day correction Cycle from its April 2 high to the April 7 low, then May 2 high.  The panic swings, both up and down, have made this a nightmare roller-coaster ride for investors.  This may be called an Expanded Flat correction where A is the shortest and B is a multiple of A with C being equal to B.

Several items make this correction unique.  First, the unusual length of time.  Usually corrections take only three weeks.  This one has taken over four weeks due to its intermediate size.  Second, Wave B is 1.305 times the size of Wave (1).  Usually it would be a fraction of  motive Wave (1).  Third, it broke through the 1987 trendline, while forming an Ending Diagonal Wave C.    A quick reversal on Monday may confirm this analysis.

7:50 am

Good Morning!

SPX futures bounced from the 50-day Moving Average at 5612.35 but did not make a new high.  Futures peaked at 5651.30 then eased lower.  A decline (close) beneath the 50-day offers a sell signal with further confirmation beneath the trendline near 5550.00.  Equities are running on fumes as the NYSE Hi-Lo Index closed at only 1 new 52-week high yesterday, giving warning of an imminent reversal.  The Cycles Model suggests the decline may be underway with trending strength appearing by mid-week.  The ensuing decline may last to mid-June.

Today’s options chain shows Max Pain at 5560.00.  Long gamma may begin above 5580.00 while short gamma resided beneath 56550.00.

ZeroHedge reports, “US equity futures gained ahead of the April Payolls report, but were well of their highs, after China said it is assessing the possibility of trade talks with the US, the first sign that negotiations could begin between the two sides since Donald Trump hiked tariffs last month. As of 8:10am ET, S&P futures are up 0.4% while Nasdaq 100 contracts add 0.2%, limited by weakness in the tech sector as Apple and Amazon.com shares fall in premarket after their respective updates appeared to underwhelm investors. If the S&P 500 closes in the green on Friday, it would mark a ninth day of gains, the longest winning streak for the US benchmark since November 2004. Asian markets were also broadly higher and Europe’s Estoxx 50 advances 1.5% in early London session, with risk sentiment stoked after China hinted at the possibility of trade talks. Bond yields are unchanged, reversing an earlier drop, oil and USD are both lower, while gold rebounds +0.7% from recent losses. Today, all eyes on NFP at 8.30am ET to assess market sentiment; Consensus expects a 138k print vs. 228k prior and the Unemployment Rate to hold at 4.2% (more in the full preview here).”

VIX futures are consolidating above yesterday’s low, leaving it as a possible Master Cycle low (a completed Cycle).  Should the turn occur today, it may be strong and sharp with follow-0through over the weekend, as trending strength may appear quickly.  VIX has not followed the SPX path to significant new lows, suggesting investor caution.

The May 7 options chain shows Max Pain at 24.00-25.00.  Short gamma dwells between 20.00-24.00, while long gamma may begin at 25..00 and extends to 40.00.

TNX futures dipped beneath the mid-cycle support at 42.31, but rose above it this morning, confirming the buy signal for the 10-year yield.  The next resistance is the 50-day Moving Average at 42.83.  Once above it, the way may be clear for a rally to the Cycle Top at 48.00.  Note the Neckline of a head & Shoulders formation just above it.  The finance minister of Japan threatened to use their US Treasury holdings, the largest of any foreign government, as a negotiation card against the tariffs being proposed by Trump.

USD futures are consolidating within the uptrend established at the Master  Cycle low.  The month of May may show a very strong USD as war is threatened in Europe and the Middle East.  The  flow of money into the USD may be so strong that the EU countries may install capital controls to keep liquidity intact in Europe.

Japanese Yen futures may have made their low this morning at 68.53, completing a foreshortened Master Cycle.  If so, the yen may rise to challenge the Cycle Top and Head & Shoulders neckline, gravely threatening the Yen carry trade.  The carry trade has been especially influential in the rise of the Magnificent 7.  Analysts don’t know exactly how large the Yen Carry really is, but point to a recent figure of $350 billion in short-term external loans in the public domain.  Private loans to US banks and hedge funds may be much more substantial.

Gold futures rose to 3276.85 as it back-test of the trendline overnight.  It is on a sell signal which may be confirmed by a further decline beneath the Cycle Top at 3228.47.

Bitcoin has pulled back from its Master Cycle high made yesterday at 97505.38.  The Master Cycle appears exhausted.  The Cycles Model anticipates a decline may ensue until mid-June.  A spike in volatility is suggested this weekend.