February 5, 2021
2:13 pm
What has been missed today is that TNX has broken out, albeit by a tick. Since this has been overlooked while the SPX is making new all-time highs, it will surely be a topic of speculation next week.
2:05 pm
VIX was pounded by t the short vol crowd into a new low, pulling forward the Master Cycle from January 21 to a new low on day 269. This stretched Cycle is ready to “snap back” on those speculators. Today’s action had nullified the Triangle formation. I have seen several usually accurate chart patterns getting blown up by this mad crowd. It may end in tears.
1:50 pm
At 1:00pm SPX peaked at 2894.58, challenging its Cycle Top at 3892.29. It has since reversed from that high and fell beneath Cycle Top resistance. The significance of this is that it occurred exactly 8.6 market days from the last high at 3870.90. Today is day 267 in the extended Master Cycle, 8.6 days from the normal calendar high. This is why I have been warning since yesterday that, had it reversed yesterday afternoon, the January 26 high would be the top. As it happened, higher top was made today. I have noticed that reversals have been made with precise timing, even on an hourly basis. That suggests a rather large reversal is in the making. For most, it will be without warning…
Most analysts are looking for a crash up.
ZeroHedge remarks, “Now that the “huge gamma strike” at 3800 has been blown away, the next big Call Wall for the S&P500 is at 3900 with SpotGamma noting that “a very large Combo resistance bar at 3905.” However, now that momentum is again solidly higher and markets have pushed into the 3850-3900 range, positive gamma has increased in the S&P complex to a fairly robust $1.5BN, meaning that the higher stocks ramp, the more buying interest there will be as dealers rush to delta hedge.
As SpotGamma further notes, such a high gamma reading is a rare high for the post-Covid era as indicated below (orange dots last 30 days).”
7:15 am
I have an 8:15 appointment and a fairly heavy snowfall last night that needs removal. I may not return for analysis until early afternoon.
SPX futures rose to 3886.12 in the overnight session after breaking above the previous high in the last half hour of the cash market. Yesterday I warned that a 4.3-day Cycle would be complete in the final hour of the day. That warning remains this morning. Cycles may expand or contract to a lesser degree due to external events. This morning’s jobs report may be one of them.
ZeroHedge notes, “After last month’s dismal payrolls report, according to which the US labor market contract by a whopping 140K workers in December (primary as a result of 372K restaurant workers losing their jobs amid the latest round of covid shutdowns), renewed optimism has emerged that the worst is over for the US market and that tomorrow when the BLS reports the January payrolls, the surprise will be solidly to the upside.
Or maybe not all that solidly: as Newsquawk reports, the expectation is for headline nonfarm payrolls to rebound in January from the negative reading in December, but analysts do not seem convinced that January’s data will fully pare back the December downside, despite increasingly constructive labor market signals. While initial jobless claims data had worsened (until today when it unexpectedly smashed expectations), continuing claims data has improved; the ADP’s gauge of payrolls surprised to the upside in January, raising hopes that similar can be seen in the BLS report; within the ISM business surveys, the employment subcomponents improved in both the services and manufacturing sectors, the former rising back into growth territory.
February 4, 2021
2:45 pm
A warning that the SPX will have completed a 4.3 day rally from the low at 3694.12 at 3:00 pm. That may be the end of the Cycle. At this point, the SPX may also have completed yet another Orthodox Broadening Top. Point 5 does not have to exceed the top of Point 3 at 3870.90. In fact, not exceeding Point 3 is even more bearish than if SPX rose to the Cycle Top at 3885.48 or round number resistance at 3900.00. Cycle Wave c is exactly 1.39 times the length of Cycle Wave b at this point. A decline beneath the trendline at 3850.00 may infer anaggressive sell signal.
7:30 am
Good Morning!
SPX futures have wavered between Short-term support at 3810.47 and the trendline at 3847.50 in the overnight market. The attempts to ramp it above 3850.00 to boost momentum may be failing. Lower supports are at 3780.00 and the Ending Diagonal trendline is at 3765.00. A very large call option position lies at 3800.00, but a growing number of puts lie at 3750.00.
Yesterday’s high at 3847.50 is reminiscent of the 1987 Wave (B) high on October 3, 400 months ago. The market had crashed in only 17 days from the top. Day 17 falls on February 26, the end of the current Master Cycle.
ZeroHedge reports, “Global markets were flat, and European stocks and US equity futures unchanged, struggling to eek out a fourth day of gains on Thursday as a rising USD and rising bond yields refocused attention on inflation and normalising economies. At 7:30 a.m. ET, Dow e-minis were up 4 points, S&P 500 e-minis were up 3.75points, or 0.1%, and Nasdaq 100 e-minis were up 40.5 points, or 0.29%.”
NDX futures rallied, but remained beneath the Ending Diagonal trendline resistance at 13500.00. NDX did not make a new high and chart watchers are monitoring tis closely.
Investing.com — U.S. regulators may huddle to discuss the retail stock frenzy of recent days, a deluge of earnings starts with Merck and BMS and ends with Peloton (NASDAQ:PTON) and Ford, weekly jobless claims are due and the dollar hits a two-month high on brighter prospects for the U.S. economy. Here’s what you need to know in financial markets on Thursday, February 4th.
1. Yellen to meet with regulators on trading frenzy
Treasury Secretary Janet Yellen may meet with U.S. financial regulators to discuss the implications of the frenzied trading in a handful of heavily-shorted stocks over the last couple of weeks.
The meeting, called on Tuesday, will be attended by the heads of the Securities and Exchange Commission, the Federal Reserve, the Federal Reserve Bank of New York and the Commodity Futures Trading Commission, according to Reuters. It still isn’t clear exactly when the meeting will start.”
VIX futures have ventured up to the 50-day Moving Average at 23.50, but thus far have been repelled. Since then it has declined to the lower Triangle trendline at 22.84. We shouldn’t be surprised to see this as an attempt to spark buying interest in the stock indices.
USD futures appear to have made a final attempt at challenging the trendline at 91.50 before easing back down. The Cyclical period of strength appears to have passed and USD has nearly three weeks to a potential Master Cycle low.
BKX appears to be completing its retracement to the Cycle Top at 104.55. That would be a reasonable target, since it lies just above a 50% Fib retracement. There may be a period of strength lasting through Tuesday.
TNX continues to rise and may be poised for a breakout. At that point, we may see punters piling on through the options market. The reason I say this is because the next Master Cycle (high) ends at options expiration.
Supply and demand is keeping DBA pinned just beneath its Cycle Top at 16.53. However, liquidity constraints may push DBA down to 14.50 over the next month. This is a portent of food shortages over the next two years or longer. Instead of bottom fishing in the SPX, one may find it more attractive to buy the low in DBA near the end of the month.
ZeroHedge reports, “China’s pig herd is on alert again as disease outbreaks ramp up this winter. Reuters reports the new outbreak of diseases could hamper the hog recovery after the African swine fever contagion a few years ago wiped out about half of the country’s herd.
Government data shows China’s pig herd expanded by 31% in 2020. But with new outbreaks of swine fever in the northeast and northern provinces and rising Porcine epidemic diarrhea (PED), the widespread increase in diseases this winter has been very concerning to farmers.
“The disease challenge right now is bad,” said one farmer, who declined to give his name to Reuters because the Chinese Communist Party (CCP) has banned him to speak with the media.”