NDX broke through the neckline/lip of the Cup with Handle formation. This should prepare us for a panic decline that is likely to catch on to the SPX and DJIA. The Hi-Lo indices appear to be off kilter (going higher) or it may be that retail is still buying smallcaps. The final figures aren’t available until tomorrow’s open.
ZeroHedge reports, “Things have accelerated south as the day wears on, with US equities all down hard led by a 2.5% plunge in big-tech.
Nasdaa is now down almost 1.5% since the end of February (and down almost 5% from Monday’s exuberant highs)…
TNX is approaching/testing its 15.00 pain threshold for stocks. It appears that the target may be 17.00 or higher which may set off a panic in equities. The 5-year note is also approaching its threshold at .75.
ZeroHedge remarks, “Just around the time we showed that 5Y breakevens have soared to 2.50%, a level last seen just before the 2008 global financial crisis (and when oil was trading at $140), Mizuho rates strategist Peter Chatwell cautioned that with the 5Y nominal yield rising dangerously close to 0.75% again, this is “warning #2 for stocks and credit.”
NDX closed beneath its 50-day Moving Average at 13112.96 yesterday. NDX futures rallied above the 50-day overnight but appear to have retreated back beneath it this morning. Should it be unable to hold its grip on that support, the next target is the neckline/lip of the Cup with Handle formation. This formation is as bearish as it gets.
There are two scenarios that present themselves. The first is that investors are caught offsides and off guard. The panic is so profound that the bottom literally falls out in just a matter of days. The second scenario posits that the Master Cycle ended last Friday at the low (day 256). What happens next depends on whether downside support is broken.
SPX futures tested Short-term resistance at 3897.01 in the overnight session, but has pulled back down. Mid-Cycle support must be broken to resume its bearish pace. A close beneath the trendline and the 50-day Moving Average at 3806.62 confirms the crash scenario.
ZeroHedge reports, “Once again market sentiment has reversed violently – or rather the opposite – overnight, with yesterday’s late day spoo slump inspired by the short squeeze in Rocket Mortgage – which forced hedge funds to liquidate their best positions – being faded and on Wednesday Emini futures jumped 0.6%, global shares gained with European indexes echoed positive moves in Asia, as a recent retreat in Treasury yields fuelled demand for riskier assets… even though the 10Y has rebounded 5bps to 1.45% overnight as focus again turned back to the stimulus-fueled recovery from the pandemic. The MSCI world equity index gained 0.4% while oil halted its longest losing streak since December.
At 0730 a.m. EST, Dow E-minis were up 202 points, or 0.64% and S&P 500 E-minis were up 21.5 points, or 0.56%. Small caps were sharply higher with Russell 2000 futures up 1.1% while Nasdaq 100 E-minis were up 86.5 points, or 0.65% as a swift global roll out of vaccines and a new round of stimulus bolstered bets on a quick economic rebound, with investors also focusing on private employment and service sector reports. Bank of America, Goldman Sachs and Morgan Stanley were up between 1.2% and 1.7% in trading before the bell.
VIX futures declined to 22.45 in the overnight session, making a 76% retracement and may have completed its correction pattern. A breakout above the Cycle Top resistance at 34.62 confirms that Wave (3) is in progress.
USD futures are consolidating after yesterday’s gains. The next move will be very painful for dollar shorts as it breaks out to a new high. The Cycles Model suggests unusually high trendline strength today in the USD which may be a result of short covering.
Gold futures are being hit hard as the decline approaches round number support at 1700.00. Trend strength may grow as the decline may break down even further through the weekend. The Cycles Model suggests three more weeks of decline, profoundly disappointing the gold bugs.
SchiffGold opines, “Gold and silver continue to struggle with significant selling pressure. Last Friday, gold dropped some $40 as bond yields rose yet again. There continues to be this expectation that rising inflation and economic growth are going to force the Fed’s hand and cause it to pivot to tighter monetary policy sooner than expected. But in his podcast, Peter Schiff reminds us that inflation is not a threat to gold. And he says anybody betting against the yellow metal and on the dollar is going to lose.”
TNX resumed its rally as futures hit a high of 14.74. The final probe higher may peak between Thursday and Monday in an extended Master Cycle. No one is expecting this to happen.
Investing comments, “(Bloomberg) — President Joe Biden’s $1.9 trillion relief plan, plus the prospect of more stimulus later this year, is setting the stage for a shift away from historically low Treasury yields that’s likely to lead to a pickup in volatility in currency markets.
U.S. yields have marched higher even before the plan’s arrival — offering an inkling of what may be in store. BlackRock Inc (NYSE:BLK). sees as much as $2.8 trillion in additional fiscal spending this year and the risk of a further rise in long-term rates. BNY Mellon’s John Velis says a 2% 10-year Treasury yield is possible by April as part of a “tantrum without the taper” of Federal Reserve bond purchases. And volatility in currencies is so low that it’s all but certain to go up, says Harley Bassman, creator of a widely watched gauge of Treasury-market movements.”