NDX has now declined beneath the Lip of its Cup with Handle formation. The Cup with Handle formations may target the bottom of Wave . This may happen as early as the end of April, which also corresponds with the end of the current Master Cycle in the VIX!
This first Bearish Cycle from the high on February 16 to the high (Wave ) on March 16 lasted 21.5 market days. The next Cycle (Wave ) of 21.5 market days may be a high-to-low Cycle similar to the 2020 decline.
VIX has challenged its 50-day Moving Average at 23.44. After a brief pullback, it may advance to the next level, the mid-Cycle resistance at 25.03. The most common buy signal (SPX sell signal) is at 25.00. The Hi-Lo Index opened at 7.00 and rose to 25.00, well within the sell signal parameters. What this means is that the SPX now may have a triple confirmed sell signal by the end of the day.
- SPX beneath the 50-day.
- VIX above the 50-day.
- Hi-Lo beneath 50.00.
SPX bounced at the 50-day Moving Average at 3866.58, as expected, and has fallen through that level. It may now test the two trendlines at 3840.00 and 3850.00. This level also corresponds with the next tranche of call options. As these options are wiped out, Dealer gamma becomes more negative and the selling intensifies. We may see a larger bounce back to the Lip of the Cup with Handle formation at that point.
ZeroHedge remarks, “We warned this morning that ‘if’ we start to sell that selling could be quite material as implied by the trio of vanna charts below (SPX, IWM, QQQ) wherein dealer exposure gets more long as markets drop (and so they need to sell futures), with and we would anticipate a quick visit of the 3800 level in SPX.
And, after a brief attempt to ignite some momentum at the cash open, things have escalated rather quickly…
But this move has sparked breaks of some serious technical levels across the indices.
The S&P is back below its 50DMA…”
SPX futures are testing the 50-day Moving Average this morning at 3865.71. The erosion of prices is speeding up as even retail sentiment has changed. There may be a half-hearted bounce at the 50-day but, once beneath it, selling may intensify. Call options at 3900.00 and higher are losing value fast, which may change the outlook for those that have been riding the wave higher through options.
ZeroHedge reports, “US equity futures faded a modest overnight rebound on Thursday, ahead of data that is expected to show a small drop in weekly jobless claims after last week’s surprise spike, while the tech-heavy Nasdaq looked set to stabilize after its latest 2% rollercoaster drop in the previous session. The dollar and 10Y yields were unchanged from Thursday’s close, while oil turned lower after a rally spurred by the blockage of the Suez Canal fizzled. It wasn’t clear what was the reason for the persistent late – and as of today, early – selloff, but increasingly many are speculating that the month-end rebalance by pensions is winning the battle, if not the war, against the quant buying we noted in “Month-End Set For Epic Clash Between Forced Pension Selling And Quant Buying.”
At 730 a.m. ET, Dow e-minis were up 27 points, or 0.09%, S&P 500 e-minis were flat, and Nasdaq 100 e-minis were up 24 points, or 0.18%.
VIX futures are surging higher, hitting 22.01 in the morning session. The technical breakout is at the 50-day Moving Average at 23.41, which should be anticipated very soon. There appears to be no anticipation of a higher VIX in the media.
The NYSE Hi-Lo Index closed at its lowest point since October 28 and is firmly on a sell signal. It was positive until 3:00 pm when the usual end-of-day ramp turned into a rout. This is a new phenomenon which has only started in the last two weeks. Since the Hi-Lo is a lagging indicator, it was not discovered to be this bad until this morning, when final calculations were recorded.
ZeroHedge observes, “Back in 2013, long before anyone had heard of it or plagiarized it, we first defined the term 3:30 pm Ramp Capital to describe the clockwork meltup of stocks in the last half hour of trading.
In the nearly decade that has passed since then, both the term Ramp Capital and the phenomenon which it describes have become household items, so much so that JPMorgan’s clients get upset when the requisite last hour lift is missing.”
NDX futures declined to 12706.00, just short of a technical breakdown at 12704.10. The NASDAQ Hi-Lo Index closed at -230.00, the lowest since March 24, 2020.
ZeroHedge advises, “With ‘Ramp Capital’ dead, investors are growing anxious that the huge and hotly-anticipated quarter-end rebalancing flows will overwhelm any BTFD enthusiasm (as ‘weaponized gamma’ retail players appear to have jumped ship).
As Nomura’s Charlie McElligott notes this morning, it does indeed look like the much-hyped “pension quarter-end rebalancing” flows are evidencing themselves in the market, effectively VWAP buying TY vs VWAP selling ES over the course of the day the past two sessions, as evidenced by our futures bid-ask “imbalances” monitor across all lot sizes.
Particularly looking at ES (S&P E-Mini) imbalance, we see the last two days (Pink yesterday 3/24, Light Blue 3/23) being two of the four most “sold” of the entire past month window”
TNX is still easing lower, but may be preparing for a double burst of strength early next week. The current Master Cycle is due to expire after options expiration in April with new highs anticipated. A decline to the Cycle Top at 15.30 may be in the cards before its next big move higher.
ZeroHedge reports, “After yesterday’s massive 2Y auction went swimmingly, nerves were soothed ahead of tomorrow’s closely watched 7Y “bellybuster” auction because, as a reminder, it was the catastrophic 7Y auction that sparked turmoil in the bond market.
But maybe that was a bit premature because moments ago the US Treasury sold a record $61BN in five year paper…
… in what could best be described as a subpar auction.
The auction stopped at what was once seen as a red-line for 5Y paper, 0.850%, tailing the When Issued 0.847% by a somewhat concerning 0.3bps. Putting the lousy 1pm performance in context, this was the 4th auction in the last 5 when the 5Y has tailed.”
USD futures are now testing the 200-day Moving Average at 92.77. The current Master Cycle is not due to mature until options expiration in April. This gives a green light to advance to the combination Broadening Wedge trendline and Cycle Top at 96.04. The advance, which has been orderly thus far, may become chaotic, as long-time short sellers are forced to cover.
The velocity of money is near its all-time low as fearful investors hoard cash. Much of the money coming out of stocks and bonds will simply be hoarded in cash.
ArmstrongEconomics observes, “While central banks are hard at work trying to come up with the magic bullet to kill cash and avoid having to bail out bankers again, they are faced with what has been termed the “Paradox of Cash,” whereby the demand rises in the face of declining use of cash in normal transactions. In Europe, studies show that about one-third of all households are hoarding cash. Interestingly, they seem to be just hoarding it rather than spending it. The supply of physical money has doubled over the last 10 years, yet its actual use has been declining. This is no doubt the result of negative interest rates. Why keep money in a bank and be charged a negative interest rate for not spending? If you do not earn interest anymore, then why keep savings in a bank to begin with? This is creating the Paradox of Cash.”