TNX bounced back above 15.00 after a brief foray beneath it. Today may be the last show of strength as TNX is due for a decline that may take it down to the 50-day Moving Average. A Trading Cycle low is due during or shortly after March options expiration.
ZeroHedge remarks, “Following yesterday’s impressive 10Y auction, which only tailed as a result of traders realizing just how massive the short overhang in 10Ys remains (first pointed out here) which sparked a furious rally in the 10Y two hours ahead of the auction’s 1pm deadline, the situation in the repo market has stabilized somewhat, but still remains clearly troubled, with Bloomberg writing that the cost to borrow 10-year Treasuries in the repo market has retreated from extremes hit on Thursday after the 10Y auction, though the security still remains special ahead of the March 15 settlement.
According to ICAP, the daily repo rate for 10-year Treasuries was around -1.60%/-1.85%, while Break Capital quoted it at -1.75%/-2% earlier, confirming something we have noted for the past week: funding markets continue to respond to the heavy supply of cash in the front end.
The big question for traders is what this means for today’s 30Y bond auction at 1pm, and whether the $24BN reopening will be met with the same enthusiasm as yesterday’s benchmark sale, especially when considering the massive bond sale from Verizon which is tapping a whopping seven-part offering to help pay for its 5G spectrum commitment. The sale encompasses maturities from three years to 40 years, and the combined size – perhaps up to $25 billion, if not slightly more – is substantial. According to Bloomberg, “it’s potentially one of the five largest corporate deals ever.”
SPX made a new all-time high. This modified the Wave structure and gave us a new upside target of 4030.00 to 4060.00 in the SPX. However, keep in mind that Minute Wave [c] equals Minute Wave [a] at 3980.00. Considering that we may be in the final day or two and that Cycle Top resistance is at 3972.67, we may want to keep our euphoria level moderated.
Good Morning, and welcome to my world!
SPX futures rose to 3929.12 in day 255 of the Master Cycle. The SPX and the DJIA could both top out today leaving the current structure intact. Or we could see the SPX make new all-time highs. I am holding out on my original count, shown here. But there is a massive rotation between value and growth in equities. Value is all but played out, but will growth revive? Regardless of which may make the last gasp, we are on a ledge overlooking a massive precipice. Don’t kid yourself, the next stimulus is already spent.
ZeroHedge reports, “US equity futures and world stocks jumped to their highest in over a week after the latest CPI report calmed investor nerves about inflation which coupled with a solid 10Y auction and a surprise pledge from the ECB which pledged to ramp up its buying of government debt in coming months in a bid to a contain rising bond yields that threaten to derail the region’s economic recovery. The ECB announcement helped already low yields drop further and pushed the MSCI’s All Country World Index to its highest in just over a week, up 0.7% on the day. Tech stocks got a further boost – led by Chinese semi companies – after China’s main industry association said it will work with its U.S. counterpart to discuss supply-chain safety and trade restrictions
Dow E-minis were up 118 points, or 0.37%, S&P 500 E-minis were up 30.25 points, or 0.77% and Nasdaq 100 E-minis were up 248 points, or 2% At 7:45 a.m. ET”
The DJIA is on day 258 of its Master Cycle today. It is nearly spent, with overhead (Cycle Top) resistance at 32475.18. Wave equality may be reached at 32500.00, should it probe higher. The reversal from the Cycle Top will begin the great descent. In other words, the tank is nearly empty. Investors have been throwing money at the DJIA with both fists. But this market does not have a money back guarantee.
NDX futures soared to 13013.00 this morning, changing the complexion of the Waves. This is actually a better fit, due to the Primary Degree being used to illustrate the Wave structure. The 50% Fibonacci retracement of the decline is at 13043.00, while the 61.8% fib retracement is at 13236.00. If the Master Cycle ends today, the lesser retracement will do. Should it extend over the weekend, the higher target may be reached.
So the question is, will growth enter a new dynamic phase? Chances are not. What we may be seeing is a short-covering bounce.
ZeroHedge reports, “On Sunday, when looking at the latest prime brokerage data from Goldman we noted that around mid-week the PB desk saw the “largest global short sales since May” with the GS Prime book net sold driven by short sales outpacing long buys 1.7 to 1.”
… and predicted that a “Mega Squeeze” was Coming as “Last Week Saw Biggest Hedge Fund Shorting Since May“
“What does all of this mean for markets”. we asked rhetorically and answered that in a week where stocks first spiked then tumbled only to reverse, and where substantial damage was done on HF P&L, immediately after a furious burst of shorting, which has pushed gross short exposure to the highest level since the start of 2020…”
ZeroHedge further observes, “Summary:
The Nasdaq 100 is currently in its 15th largest drawdown since 1 January 2003 down 10.9%. History suggests that the drawdown could last 121 trading days if this is an average drawdown in terms of its recovery profile. This we think would profoundly alter investor psychology as the new group of retail investors arriving at equity markets last year have never experienced slow grinding equity markets for very long. Our thesis is that growth investing and its near term support will hinge on the drawdown length and thus is a key indicator to monitor going forward.
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Nasdaq 100 is 15 trading sessions into the current drawdown down 10.9%and our bubble stocks basket is down 27.9% since the peak. Listening to many growth investors, both professional and retail, it has been a violent move, and many has been taken by surprise, or at least, many had underestimated the interest rate sensitivity and given it much thought. While painful for many investors we could see our bubble stocks basket experiencing a 50% drawdown taking the basket’s total return index back to levels from September last year – if this happens it would entail a 32% decline in bubble stocks from current levels. Outsized gains typically come with subsequent volatility and potentially dramatic drawdowns. That is the lesson of history, and this is no different.”
VIX futures made a new low at 22.04 this morning. It is challenging the open gap left a year ago when the lock down began. If the Wave Structure is correct, we should see a probable target of 100.00 being met by this Summer and a possible target of 160.00 by year end.
TNX has pulled back even more from the top, as it leaves behind the Master cycle ending on March 5. today is the last day of strength with a probable small bounce before declining in earnest. The new Master Cycle may last until after the April options expiration, so there is time and probable gains to be made going long the UST.
USD futures are lower, hitting a new low at 91.51. The Next Master Cycle low is due at options expiration in April.