NDX just made a new all-time high, confirming the Ending Diagonal formation in it, also. It appears that the Cycle Top resistance at 14058.60 may be the stopper. A nearby trendline (not shown) is at 14100.00. Standby for some fireworks!
SPX futures are down, making an overnight low of 4101.62. We await the crossing of the Short-term support at 3997.28 (4000.00) for an aggressive sell signal, unless otherwise indicated by the VIX and Hi-Lo. I have carefully considered all of the indicators (VIX, Hi-Lo, etc.) and have concluded that the end may be closer than we think. This observation supports an Ending Diagonal, which has been camouflaged by all the stimulus and liquidity thrown at the market. An Ending Diagonal may end this week.
ZeroHedge reports, “After trading flat for much of the overnight session in anticipation of today’s key event, the CPI report (due out at 830am ET), US equity futures and European markets tumbled at precisely 7am after a report that the US will pause Johnson & Johnson vaccines amid health concerns, potentially dealing a blow to efforts to reopen the world’s largest economy.
Futures on the S&P 500 fell and reopening sensitive Russell 2000 contracts lost almost 1% after the New York Times reported and FDA confirmed that the US would will call for an immediate pause in use of Johnson & Johnson’s single-dose coronavirus vaccine after six U.S. recipients developed a rare disorder involving blood clots. All the six recipients were women between the ages of 18 and 48. One woman died and a second woman in Nebraska has been hospitalized in critical condition, the NYT reported.”
The Shanghai Composite just crossed beneath mid-cycle support at 3401.15, which doubly confirms its sell signal. If my thesis that China equities will lead the decline is correct, this is a warning shot that the air is being let out of the bubble.
ZeroHedge reports, “Last Tuesday we reported that”China Credit Impulse Is Set To Collapse As Beijing Orders Banks To Curtail Loan Growth For Rest Of 2021“, and just a few days later we got the latest confirmation of this critical – for the global economy – transition.
Overnight, China reported that the sequential growth of total social financing (TSF) moderated in March following a strong rebound in January and February, with robust loan growth offset by a contraction in shadow lending.
As mentioned before, the NDX appears to be following the tech-heavy Shanghai Composite. NDX futures are putting up a valiant struggle, but have not gone higher than 13833.00 in the overnight session. I am sticking to my guns that the peak was made in mid-February and this secondary high is due for a collapse at any time. The NDX may lead the domestic equities on their way down by following China’s lead globally.
ZeroHedge observes, “On one hand, the coming earnings season (77% of the S&P 500 market cap will announce results between April 19 and May 7) will be one of the strongest on record at least when measured on a Y/Y basis for the simple reason that Q1 2020 was the first quarter of the covid pandemic. On the other hand, as Deutsche Bank’s Binky Chadha writes, the sellside now expects impressive beats having lifted the bar high enough to where just mere “strong” EPS reports may not be sufficient (incidentally, consensus currently forecasts aggregate sales growth of 5%, margin expansion of 66 bps to 9.9%, and EPS growth of 19%. However, median EPS growth will be only 10%). Finally, as Goldman notes, no matter how strong earnings are, they will not matter and instead all investors will care about is future guidance which however may be quite disappointing due to the recent surge in input costs which could lead to a big hit to projected profit margins.”
VIX futures appear to be consolidating within yesterday’s trading range. Options expiration for the VIX is tomorrow and it may perhaps continue range-bound until options expire.
TNX hit an overnight high at 17.03 before pulling back. With only a week left in the Master Cycle, it appears that the path of least resistance is down to the 50-day Moving Average. Nervous investors in stocks may still think of treasuries as the primary “safe haven,” pushing down yields as they exit stocks.
ZeroHedge observes, “The Fed tipped its hand today, and unveiled its “viral reaction function” revealing the timetable according to which the Fed will start talking about QE tapering.
As discussed previously, James Bullard, president of the St. Louis Federal Reserve, said in an interview with Bloomberg Television that getting 75% of Americans vaccinated would be a signal that the pandemic was ending, which is a necessary condition for the central bank to consider tapering its bond-buying program. According to our calculations, extrapolating current vaccination rates would mean that – all else equal – we could see the Fed’s 75% bogey be hit in just two short months.”
USD futures appear to be testing Intermediate-term support at 91.89. Should the support hold, USD may end its Master Cycle at the Cycle Top at 95.02. There are two weeks left in this session and a liquidation in the equities markets may find solace in the cash dollar.
Gold futures bounced this morning, but did not break out of yesterday’s trading range. It appears that the April 8 high at 1759.40 was the end of the Master Cycle (day 248), unless something dramatic happens in the next week or two. If my observation is correct, the next Master Cycle low is due in early June. The whipsaws of the past nine months may give way to an utter collapse in that period, ,due to the multiple bearish formations.