SPX made a new all-time high on Friday, just before the close. SPX futures have been trading in a very narrow range between 4163.88 and 4175.88. SPX has 17 days to its Master Cycle termination. However, the Cycles Model shows no strength over the next three weeks. The Cycle could just as easily end down as up.
ZeroHedge advises, “Now that even Wall Street’s perennial permabull, JPMorgan, has joined most other major banks including Goldman, Deutsche and Morgan Stanley in warning that the coming weeks and months could be treacherous for stocks (DB went so far as predicting a 10%+ correction in the next three months), and saying on Friday that “easy equity gains for the broad market are likely behind us” and as a result its “bullish conviction is now lower”, a caution which spooked retail and hedge fund investors alike, with Goldman Prime reported on Friday that its book “saw the largest net selling in 5 weeks (-2.1 SDs), driven by short sales and long sales (4 to 1) and equally by Single Names and Macro Products.”
Yet despite the selling stocks have continued to confound everyone, thanks to what we said would be yet another short squeeze, and rose back to all time highs amid mounting bearish sentiment.
And just to add to the confusion, a new catalyst has emerged which is almost assured to push the S&P decisively into record territory.
According to Goldman’s John Flood, the Buyback blackout period ended on Friday, with the strategist noting what we previously discussed, namely that buyback authorizations “are already up meaningfully vs prior year YTD values.” To wit, “2021 YTD authorizations are +75% vs 2020 YTD auths, +24% vs 2019 auths, and +26% vs 2018 auths (reminder, 2018 was a record buyback year).”
Of course, we already knew this as we reported last month that “Stock Buybacks Soar To All Time High”…
ZeroHedge reports, “S&P futures were flat, Nasdaq futures dipped ahead of FAAMG earnings while European stocks clawed their way higher on Monday and Asia rose as world markets began the week in a relatively upbeat – if quiet – mood following further signs last week that economies are recovering rapidly. There were no major moves, however, as investors refrained from taking on large positions ahead of this week’s Federal Reserve meeting, US GDP print and corporate earnings barrage.
At 7:30 a.m. ET, Dow e-minis were up 30 points, or 0.09%, S&P 500 e-minis were down 3.75points, or 0.08%, and Nasdaq 100 e-minis were down 48.75 points, or 0.37%.
NDX futures made a low of 13866.12 over the weekend session. However, Short-term support lies at 13749.38. No signal here, but it bears watching.
ZeroHedge explains, “The recent surge in hedge fund selling (as discussed last week in “Goldman Prime: Hedge Funds Sell Stocks 7 Of The Last 8 Days; Short Squeeze Coming“) appears to be accelerating, reinvigorated by last week’s dismal Netflix earnings and guidance, and as Bloomberg first pointed out has spilled over to the broader tech sector resulting in a broad liquidation before the sector’s heavyweights report this week.
The $161 billion QQQ ETF – a Nasdaq proxy darling of retail and institutional investors alike – has bled nearly $6 billion over the past five days in its worst stretch since the bursting of the dot-com bubble in 2000, according to data compiled by Bloomberg. It helped drag QQQ to its first weekly drop in over a month.
To be fair, with the exception of the ugly NFLX results, earnings season has hardly been disappointing for tech, with the few tech companies that have already reported surprising on earnings by 18% on average. And yet, as we warned, their stock prices have barely moved higher in the following 24 hours, as they were already priced to absolute perfection following the recent surge. It’s also why the pressure is on the rest of the FAAMG megacaps to deliver, including Amazon.com, Apple and Microsoft, which are all scheduled to report earnings next week.”
VIX futures rose to a weekend high at 18.17, testing the year-old Ending diagonal trendline at 18.20. The buy signal is the 50-day Moving Average at 20.70.
USD futures decline to a low of 90.68 before bouncing above Friday’s close. This has stretched the Master Cycle to 269 days. The turn is confirmed above the 50-day Moving Average at 91.56. The Cycles Model shows trending strength beginning this week and extending into options expiration. Should the liquidation of equities begin in earnest, demand for the USD may jump. The target for this move appears to be the Broadening Wedge trendline at 96.00. Roasted shorts, anyone?
TNX gapped to 15.95 (15.99 in the futures) this morning, suggesting the Master Cycle may have ended on Friday, day 260.00. Friday’s low was 15.31, as opposed to 15.29 on April 15. This suggests there may be no hesitation to get the rally underway, gaining strength over the next three weeks.