February 25, 2021

12:38 pm

NDX is on a sell signal and declining fast to its Head & Shoulder neckline.  Beneath that is confirmation of a 15% plunge from the top.  The 200-day Moving Average is at 11564.00.  The 2011 trendline lies at 8900.00.  Could they be met or exceeded by the end of April?

ZeroHedge observes, “‘Stonks’ are puking this morning (led by Nasdaq) since the cash markets opened.

And while most of the attention for the plunge has been focused on rate-velocity anxiety, we suspect there is another, even more powerful reason.

Starting at around 1500ET yesterday, the ‘old’ WallStreetBets ‘Short-Squeeze’ stocks exploded higher once again amid a major gamma squeeze in GME…”

 

12:24 pm

TNX is at a new 1-year high and roundly beat its Head & Shoulders target.  With all the hoopla from ZeroHedge, the reversal cannot be far away.  Base on today’s actions, the 10-year auction tomorrow may be a milestone.

 2:30 pm update  TNX hits a new high at 16.14.

ZeroHedge remarks, “Yesterday, when looking at the latest CTA positioning, we said that “CTAs Are The Most Short Treasurys Since 2018… And Getting Shorter” warning that we could see a massive flush if and when the 10Y broke above 1.50%. Well, one look at the 5Y future today and it looks like we were right.

Making matter worse, the CME today reported that its Ultra 10-Year Note and 30-Year Bond futures broke volume records on Feb. 23, as the U.S. Treasuries rout paused before resuming the next two days, meaning that real money is now also aggressively selling rates.”

2:45 pm

ZeroHedge reports, “This is as close to a failed auction as we have ever come…

Ahead of today’s closely watched 7Y treasury auction, where the bulk of the recent Treasury rout has been concentrated as traders hammered the belly of the curve, we said that “If the 7Y tails a lot, watch out below” as that would only add insult to today’s furious selloff injury. Well, that’s precisely what happened, because with the 7Y pricing at 1.195%, this was a whopping 4.1bps tail to the 1.151% When Issued.

The auction was, in a word, catastrophic. 

Starting at the top, the bid to cover tumbled from 2.305 to 2.045the lowest on record, and far, far below the 2.35 recent average.

But if that was ugly, the internals were even worse, with the Indirects plunging from 64.10% to just 38.06%, the lowest since 2014, as no foreigner suddenly wants to even smell US debt!”

 

12:08 pm

VIX is now above the 50-day Moving Average at 23.55.  This is considered an aggressive buy for the VIX (Sell the SPX).  Further confirmation lies at the mid-Cycle resistance at 25.95 and a breakout at 27.01.  These are your markers for considering your actions.  The Feb 23 high at 27.01 is a likely candidate for the end of the Master Cycle.  This is the first positive Cycle since October.  If this is the beginning of the uptrend, we may not see the  Master Cycle high until the end of April!

 

12:01 pm

SPX has just crossed beneath Short-term support at 3891.92.  Aggressive shorts may be considered at this time.  Further confirmation lies at mid-Cycle /Intermediate-term support at 3852.17.  3850 is where puts begin to outnumber calls which forces the dealers to go short to cover the gamma.  The trendline at 3805.59 may be considered the next hurdle to cross.

ZeroHedge remarks, “Did TINA just die?

The 10Y Treasury yield has soared back in line with the S&P 500 dividend yield for the first time since Jan 2020.

And for foreigners, Treasuries haven’t been this attractive since 2015…

So it appears ‘there is an alternative’ to record-expensive US stocks now?”

 

Good Morning!

I’m back in business after the horrible outage down it Texas.  I found out that it was where my server was.  Apparently the power failure corrupted not only my files but the backup program as well.  My website has been running for 20 years and many of the programs were patched as updates were applied.  The patches finally gave way under the stress.  I have relocated to a new and more powerful server and have restored the month of February.  The prior history may be gone.

SPX futures are down, but not under 3900.00, a critical level.  Since we are so near the end of the current Master Cycle, we may see it end on a high, given that the DJIA has just made a new all-time high.  The Master Cycle is scheduled to end by Monday, which would be day 259.

ZeroHedge reports, “It’s not just the surge in meme stocks that is a case of deja vu all over again: the big action this morning is in another closely watched asset – the 10Y – where yields have soared by almost 10bps, rising from 1.38% to a one-year high of 1.46%, rising just 4bps shy of the closely watched 1.50% level which Nomura predicts will spark an equity selloff.

“Inflationary signals, including a surge in commodity prices, are higher than we have seen in years,” said Geir Lode, head of global equities at the international business of Federated Hermes. “The prospect of a sooner-than-expected economic recovery has led to a surge in the U.S. 10-year yield.”

And amid fears that the stock rout will only get worse, Nasdaq futures fell 1% on Thursday, sliding for seven out of the last eight sessions, as investors rotated out of technology-related stocks…

… and into small cap and reflationary shares that will benefit from an economic rebound later in the year. The Russell 2000 index rallied and S&P500 eminis were modestly in the red. At 715 am ET, Dow e-minis were up 5 points, or 0.01%, S&P 500 e-minis were down 12.35 points, or 0.3%, and Nasdaq 100 e-minis were down 123.5 points, or 1%.”

 

NDX futures are down after being repelled at mid-Cycle and trendline resistance.

ZeroHedge comments, ”

We bought NASDAQ for the yields down logic…

The Market Ear Picture

…but what do you do when yields are up, and continue higher?

The rate of change in this rates move is violent, catching most by surprise. We are approaching 1.5%, a level that was not in many excel models only a few months ago.

NASDAQ has just woken up to the yields move. NASDAQ futs vs US 10 year inverted chart.”

 

TNX futures rose to 14.68, while the cash market rallied to 14.66 this morning.  The Price Target has finally been met on day 265 of the current Master Cycle.   Its now time for a reversal that is likely to retest the supports under it.

ZeroHedge observes, “A little over a month ago, on January 7 when looking at the technicals in the Treasury market and when the 10Y was trading at just over 1%, we warned that “it’s about to get ugly”…

… revealing that the key catalyst for further downside in rates would be when trend-following funds such as CTAs liquidated their long positions and flipped from long to short, an event which Nomura’s Masanari Takada said would take place when “10yr UST yields remained above 1.10%”…. which they clearly have in the past few weeks.”

 

VIX futures are off yesterday’s low, but haven’t broken through the 50-day Moving Average.  We may still see a volmageddon event, as the Wave count appears to be a perfect (1)-(2), 1-2.  This suggests an extended Wave 3 of (3) is due to follow.

 

USD futures made a new low at 89.69 this morning in day 260 of the current Master Cycle.  Stay tuned for a reversal to the mid-Cycle resistance or higher.

 

In the past week I had warned that the target for WTIC is 63.15.  This morning WTIC futures hit 63.79 on day 255 of the current Master Cycle.  A reversal may be imminent.  The calls for a new commodities super Cycle may be premature.

ZeroHedge remarks, “Amid all the issues ignited in the Texas turmoil, and as oil prices roar to post-COVID highs, analysts across the energy space appear to be outdoing each other with their bullish forecasts.

Source: Bloomberg

Brent Crude prices could hit $70 a barrel in the second quarter of 2021, while they are set to average $60 this year, Bank of America said this week, raising its average price outlook by $10 a barrel from its previous projection.”

 

 

 

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