11:38 am
Food prices are taking a breather that may last through early June, per the Cycles Model. The downside target is near the 50-day Moving Average at 410.00. Crops and livestock are being affected by the soggy southeast and the hot, dry western part of the country. It can only get worse as some farmers debate planting at all rather than running up expenses to plant only to have a meager harvest.
ZeroHedge observes, “Triple-digit heat will hit truckers across the Southwest over the next couple of days.
From the Central Valley of California to southern Arizona, temperatures will soar into the 90s to above 100 degrees in many spots Thursday and Friday. This includes places in California like Redding, Stockton, Fresno, Bakersfield, El Centro and Death Valley; Phoenix, Tucson and Yuma in Arizona; as well as Las Vegas.
This won’t be a record-breaking heat wave, but these highs will be anywhere from 7 to 15 degrees above normal for mid-May. Even though the high may only reach the upper 80s in Sacramento, California, this would be 10 degrees above normal.”
11:32 am
While the SPX acts like it may recover to the untrained eye, the NYSE Hi-Lo Index says, “Nope!” This is the hallmark of a short squeeze, where no new highs are being made, just losses for the shorts.
11:23 am
A retracement to the Broadening Wedge trendline was in order this morning before the short squeeze ran out of fuel. The bounce this morning overlapped the initial decline, suggesting an extended decline may still be ahead.
ZeroHedge observes (tongue in cheek), “It seems that the “non-transitory” inflation panic that gripped markets yesterday, resulting in the biggest one-day drop in the S&P since February, is gradually transitioning to “transitory” again, and even though today’s y/y PPI print of 6.2%, the highest on record, reaffirmed the soaring prices narrative…
… today the “transitory” inflation mood is reasserting itself, with Emini futures surging almost 100 points from the overnight lows…
… and the battered FAAMG sector is solidly in the green as closely watched 5Y breakevens slide and nominals are down to session lows:”
7:40 am
Good Morning!
NDX futures bounced after a further decline to 12915.00, as suggested yesterday afternoon. The bounce may go as high as the 50-day Moving Average at 13366.86. The structure of this decline appears to be a Leading Diagonal which may have yet another leg down as low as the 200-day Moving Average at 12450.77 after the bounce.
I have been been looking for an explanation of why the top occurred on May 7. The daily Master Cycles Model suggested either a top or a bottom might occur nearer to May 19. (It still may show up in the NDX.) So this is a little out of character. It turns out that May 7 may have been the end of a Monthly Master Cycle. The span from March 23, 2000 to May 7, 2021 is 253 months! The Actual 258 month Cycle ends in mid-October, where another Master cycle low is anticipated. Interesting…
ZeroHedge reports, “US equity futures fluctuated – first rising then sliding for a 4th session – in a volatile overnight session which saw global stocks fall to a six-week low as inflation fears continued to depress investor sentiment. One day after the S&P suffered its biggest one-day percentage drop since February it feels almost impossible how quickly sentiment has shifted and that the S&P hit an all time high just 4 days ago on Monday. It’s been non-stop selling since then.
Losses this week have pulled the S&P 500 4% off its record closing high on Friday, while the tech-heavy Nasdaq is about 8% below its April 29 all-time high. At 700 a.m. ET, Dow e-minis were down 144 points, or 0.43%, S&P 500 e-minis were unchanged and Nasdaq 100 e-minis were up 40.25 points, or 0.29%.The dollar rose to a one-week high and yields were stable, as investors awaited producer prices data, another inflation gauge, to see if a rise in prices would be strong enough to prompt a sooner-than-expected increase in interest rates. ”
The NDX Hi-Lo Index cratered at the close at -63.00. What bid there might have been at mid-day evaporated by the close, leading to further losses and a possible break of the underlying trendline.
SPX futures declined further overnight to 4029.38 challenging the 50-day Moving Average at 4043.96 before bouncing to 4077.00 this morning. The bounce may go a bit higher this morning, but the decline does not appear to be over.
Investors are being told to “tough it out.” “It won’t last.” they say. But everyone has their selling point. Insiders and smart money have been piling toward the exits for weeks, which explains why stock buybacks have not had a positive effect. Unfortunately, the average investor will worry, but do nothing until they cannot stand the pain any more. Their selling point may be too little, too late.
Yesterday afternoon I reported that the NYSE was being bid and to expect a bounce. The bid disappeared by the close with the NYSE Hi-Lo Index closing at 17.00, clearly on the sell side. This may explain the rather lackluster bounce this morning.
VIX futures rose to an overnight high at 28.93 before easing back down above the trendline at 25.00. The VIX still has room to move higher. The next resistance appears to be at the January high at 37.31. Thus far, the spike in the VIX has raised speculation that it may go down again, giving a boost to to stocks.
TNX rose to 17.00 in the early morning session. The Cycles Model shows another spike of strength to end the week which could easily break above the previous high at 17.65.
ZeroHedge reports, “With the 10Y yield trading right on top of last week’s high…
… many traders were expecting a relatively smooth sailing for today’s 10Y refunding auction in light of the sharp jump in yields which built in a generous concession ahead of today’s $41 billion auction.
And they were right: printing at a high yield of 1.6840%, today’s auction was virtually unchanged from April’s 1.680% and stopped through the When Issued 1.697% by an impressive 1.3bps, the biggest stop through since February.”
USD futures made a shallow decline, then appear to have recovered in the overnight session. Tuesday’s proposed Master cycle low occurred on day 252 in the current run. The new Master Cycle may run nearly eight weeks, with an especially strong start this next week as investors seek to avoid a nasty short squeeze going into options expiration.
ZeroHedge observes, “Last Friday’s shockingly bad payrolls report is fading into the memory following a blistering CPI report, a hot PPI and moments ago, another very strong initial jobless claims report according to which adjusted initial claims dropped to just 473,000, a decrease of 34,000 from the previous week’s revised level, stronger than the 490K expected…
… and the lowest level for initial claims since the last pre-covid print on March 14, 2020 when it was 256,000. The previous week’s level was revised up by 9,000 from 498,000 to 507,000. The 4-week moving average was 534,000, a decrease of 28,250 from the previous week’s revised average. This is the lowest level for this average since March 14, 2020 when it was 225,500. The previous week’s average was revised up by 2,250 from 560,000 to 562,250.”
The Nikkei 225 Index plummeted over 1000 points in this morning’s session to 27132.50 before a small bounce. It is interesting that Monday’s reversal in the Nikkei cut short (truncated) a potential rally to new heights. This shows that the turn in the markets is worldwide.