The DJIA has made yet another all-time high while the SPX refuses to go down and it remains within 40 points of its high. Tomorrow is day 258 for the Dow Cycle, only three days earlier than the SPX. You can see why I had been calling for a crash decline into next week for the SPX, since it would hit within days of its scheduled time. However, I cannot ignore the Dow, which may just pull the SPX along with it. Trend strength is especially hot this Friday and again on Thursday, the day before options expiration. Had the decline begun today, the trend strength would have been negative. While things may change quickly, I must warn that the prospects of new highs in the SPX are growing.
ZeroHedge reports, “Heading out of the Covid era, it looks as though value investing is officially back. $100 billion has poured back into the investments that were once left for dead, as investors either “broaden the bull market”, to borrow Cathie Wood’s term from several days ago, or just become more risk adverse and head out of risky, speculative, tech plays in favor of value.
In fact, value investing, as a strategy, has now surpassed levels last seen before the pandemic, according to Bloomberg. And with $1.9 trillion more in stimulus about to hit the market, the rotation could continue.
An Evercore note out Monday read: “Value crushed it for the right reasons.”
As part of the shift, value investing ETFs have brought in new money for 10 straight weeks. Assets have jumped $100 billion since the start of November, Bloomberg notes.”
The 10-year Treasury Note auction went through with flying colors. However, he yield is still above 15.00 which is considered the danger zone. In addition, the trend strength may last yet another day and the Elliott wave structure allows yet another probe higher. At this time it is a relief to see that the auction went well, but patience is required to see if there is more than meets the eye.
ZeroHedge reports, “When we advised readers to brace for a “blockbuster” 10Y auction just before noon, little did we know that the post alone would spark a buying frenzy, that sent the 10Y yield from above 1.54% to just below 1.51% ahead of the 1pm auction, actually pushing the yield to red on the day after blowing out earlier as high as 1.565%
So fast forward to 1pm when moments ago the Treasury sold 10Y paper at a high yield of 1.523%, well below where the 10Y traded when we said to brace for a blockbuster auction, but 1 basis point above the 1.513% When Issued which was crushed lower – eliminating any concessions – thanks to our earlier post.
In other words, what we had expected would take place at the auction, took place just ahead of it.
That doesn’t change the fact that the 10Y auction was indeed very superb, and not even remotely similar to the catastrophic Feb 25 7-Year auction.”
Exuberance has got the best of the market, or possibly the algos attempting to raise prices for the inevitable selling spree that may ensue. The move may be labelled as an expanded flat correction, where the top of Wave (C) matches the top of Wave (A). A fake rally based on a fake report by the BLS. Now we await the 10-year Treasury Note auction.
SPX futures continue to hover at Short-term support at 3875.44 after making an overnight low of 3857.12. The Master Cycle offers the probability of a 4-6 day decline from here that could become volatile as it approaches quadruple witching hour during options expiration on March 19. One possible catalyst for the panic decline is the probability that the 10-year Treasury Note yield may probe well above its prior high. The 10-year Treasury Note auction is being held today.
(8:35 am) SPX futures are probing toward the Ending Diagonal trendline at 3890.00. There now appears a concerted effort to gain altitude in equities and suppress the VIX as we come into a very newsworthy day.
(9:20 am) ZeroHedge writes, “”This Is Nuts!” – Stocks Explode Higher After Fabricated CPI Print”
ZeroHedge reports, “U.S. equity futures and global markets drifted without direction on Wednesday as the rally in tech shares stalled and U.S. bond yields ticked higher ahead of a critical 10Y bond auction while investors nervously awaited a reading on inflation later in the day amid fears that the economy could potentially overheat. As Reuters puts it, “it all seemed a bit subdued” after Tuesday’s roaring 20% surge in electric car doyen Tesla, 4% jump in the Nasdaq and biggest one-day gain for global heavyweights Amazon and Microsoft in well over a month.
NDX futures are lower, having bounced off the neckline/lip trendline in the overnight session. The NDX is the most bearish of stock indices while the DJIA just made a new all-time high at 32150.32 yesterday on weakening momentum. The great rotation from growth to value ma be over, bu t will it favor growth again, as some pundits declare?
(8:40 am) ZeroHedge reports, “All eyes this morning are on consumer prices as we near the precipice of last year’s collapse and the (artificial) explosion in year over year comps that the short-term collapse will create (temporarily, if The Fed is to be believed). February consumer prices rose at 0.4% MoM – the fastest pace since July, lifting the year-over-year price rise to 1.7% – the highest since Feb 2020…
This is the ninth straight monthly advance in consumer prices.”
VIX futures made a new low at 22.97 this morning, testing the upper boundary of the massive gap left a year ago. Last year starting on February 24th, the VIX rose from 17.53 to 49.48 in 4.3 days. Will we see something similar this week?
USD futures are modestly higher as it awaits the news of the CPI and 10-year Treasury auction. The USD normally would rise to is mid-Cycle resistance at 92.74 or the 200-day Moving Average at 93.11. However, demand for USD may skyrocket should the 10-year yield approach 1.7%.
TNX futures made a high of 15.66 this morning and appear to be on their way to challenge the previous high. As mentioned previously, TNX has remained pined near the high and should remain so for another day or so, despite the very long Master Cycle. Today is day 278 in the current Master Cycle. Trending strength is set to expire tomorrow.
I am starting early to highlight where we may be in the Cycles schematic. One probability shown here (not my highest choice) is that we may have seen the culmination of the Master Cycle on March 4 (day 249). Three strikes against it are (1) It’s early. (2) It’s shallow, and (3) It leaves 74 days to the culmination of the next Master cycle in mid-May.
The best alternate view is that the (current) Master Cycle is missing a panic decline that may end at the close of Monday, March 15 (day 259) or early on Thursday March 18 (day 262).
It is likely that if we see the decline extend until next week, we may see a hockey stick save into options expiration and an attempt to restore confidence in the markets through the end of March. It should be a very active month.