8:20 am
Good Morning!
SPX futures have dipped to 4052.62 this morning, not enough to call a reversal, but showing some exhaustion. By coincidence, the Cycle Top support at 4034.50 is precisely at the Fibonacci target for this secular rally. The first indication of a reversal les beneath that level while the trading channel trendline lies at 4000.00. Should yesterday’s high be the top, the Cycles Model suggests a 17-day decline may ensue. This high may also mark the end of a 252-month Cycle starting on March 23, 2000.
ZeroHedge reports, “Global stocks hit record highs on Tuesday, supported by strong economic data from China and the United States, although US equity futures slipped as concern China is curtailing loan growth tempered optimism stoked by the U.S. economic rebound. Nasdaq underperformed as investors locked in some gains on renewed reflation concerns hopes while currency and bond markets paused for breath after a month of rapid gains in the dollar and Treasury yields. At 715 a.m. ET, Dow E-minis were down 41 points, or 0.11%, S&P 500 E-minis were down 8 points, or 0.20% and Nasdaq 100 E-minis were down 11.5 points, or 0.23%.”
VIX futures dipped to a low of 17.37 this morning. It may be an effort to boost stocks in a tail-wags-the-dog back door effort to launch a momentum rally. VIX may have already made its Master Cycle low last Thursday, but recognition of the Master Cycle bottom is still dim.
NDX futures dipped to 13525.50 tis morning as it, too is nearing exhaustion. There may be an attempt to reach the Cycle Top resistance at 13707.03. Wave (C) equals Wave (A) at 13678.00.
TNX slid lower this morning but the weakness may be over as TNX rallies for the next 12 market days. This may be the last straw for equities, as the potential target appears to be 19.71.
ZeroHedge observes, “One look at the S&P500, which closed today at a fresh all time high well above 4,000, suggests that after a period of rangebound trading and some modest quarter-end market jitters, traders once again don’t have a worry on their mind with even mega cap tech stocks ramping in recent days as concerns about reflation and higher rates are seemingly fading away.
Commenting on the market’s endurance and willingness to push higher even amid higher yields, Bloomberg’s Ye Xie notes that after a record services PMI, and nearly 1 million jobs added, “treasuries barely changed much over the past two days.” As he notes, “that perhaps suggests a lot of bad news for bonds is in the price. After all, the markets have now priced in four rate hikes through the end of 2023, when the Fed indicated it plans to keep rates unchanged throughout.” And with yields stalling, the dollar’s rally seems to also be losing some momentum (ironically, just as Goldman covered its dollar short), and as the DXY index is sitting right at the 200-day moving average. As for equities, Xie notes, “yield stability allows for some breathing room as stock benchmarks hit new records.”
He is right… the only question is how much longer with this yield stability persist. Because if Deutsche Bank rates strategist Steven Zang is correct, the next move higher in yields is on its way.”
USD futures hit a new low at 92.52 in the overnight session. However, the pullback may be complete. USD futures have a date with options expiration day, as that may be the end of the current Master Cycle. The Cycle Top resistance at 95.43 appears to be the likely target, although it may go to the Broadening Wedge trendline.
ZeroHedge comments, “It may not be quite a “Thomas Stolper reco“, but the dollar reaction to Goldman’s announcement on Friday to close its long-running dollar short is certainly one that brings back a few memories of the infamous Kermit photo.
In a Friday note from Goldman’s Zach Pandl titled aptly “Tactical Retreat“, the bank’s chief FX strategist said that “after a choppy few months we are closing our recommended USD short trade, expressed vs a basket of G10 commodity currencies (AUD, CAD, NOK, & NZD).” While we doubt Goldman’s trade reco was the catalyst, the Bloomberg dollar index has tumbled in kneejerk response, sliding to a two week low as US stocks soared on Monday, one day after the blockbuster payrolls report.”
West Texas Intermediate Crude futures bounced back to retest its 50-day Moving Average at 59.58 after falling through that support yesterday. There appears to be an early Master Cycle low on March 23 at 57.25. If so, we may have seen a flat correction that may lead to a substantial decline over the next month. The outcome may be clearer by Friday, as a brief spike testing the Cycle Top may be due.
ZeroHedge observes, “After its exuberant rip on the day that the latest OPEC+ deal was announced last week, crude prices have collapsed, with WTI plunging back below $60, as reality sets in on what that supply surge really means (combined with Iranian output rising) and demand fears (as European nations lockdown and China demand lags).
The OPEC+ decision to gradually raise output “was contrary to some expectations that the group would take a status quo approach over the near-term,” said Robbie Fraser, manager, global research & analytics at Schneider Electric.
It also “suggests that members are both confident about a continuing demand recovery, and potentially cautious as U.S. shale looks to bounce back from 2020 losses.”
But the rise in OPEC+ output combined with concerns over Chinese import demand may be factors in Monday’s weakness.”