1:53 pm
TNX has risen above Intermediate-term support at 16.05 and has challenged the 50-day Moving Average at 16.24. A rally above the 50-day gives TNX its buy signal. The 7-year Note auction did well today. The 10-ear Note auction is held on June 9. There is about 1 week left in the current Master Cycle, unless extended.
ZeroHedge reports, “What a difference three months makes: on this day in February, a catastrophic 7Y auction was this close to failing, and sparked a violent market selloff first in bonds, and then in stocks, leading to a flood of fears that the Fed had lost control over inflation. Fast forward to today, when moments ago we get the final of the week’s coupon auction results when the Treasury sold $62BN in 7 year paper in what can be best described as a stellar auction.
The high yield of 1.285% was below last month’s 1.306 and the lowest since February; it also stopped through the When Issued 1.291% by 0.6bps, the first stop through since January.
The bid-to-cover of 2.412 was impressive, rising from 2.314 last month, and not only well above the 6-auction average of 2.264 but also the highest since September.
The internals were also solid, with Indirects taking down 59.6%, the highest since January. And with Directs taking down 20.7%, or just above April’s 20.6%, Dealers were left holding 19.7%, the lowest since January.
Overall, this was easily the strongest 7Y auction of 2021, and a far, far cry from the dismal February 7Y auction which sparked so much turmoil in the market.”
10:15 am
The GSCI Ag Index has started higher this morning after completing a 61.8% retracement of its most recent rally. It has also retested the neckline of the Head & Shoulders formation which may activate the pattern.
9:55 am
The VIX ix pressing on the merging trendlines of the Ending Diagonal formation and the open gap left on February 19, 2020 at 17.08. Should the Master Cycle extend to a new low, today would be day 253. The Cycles Model also suggests that VIX may go higher today, as well.
10:20 am
Addendum: VIX has made a lower low, extending the Master Cycle to today in all probability.
ZeroHedge observes, “We have seen extreme moves in VIX over past weeks. On April 14, in our note, Time to hedge – VIX guy is back, we outlined our long VIX logic. We wrote;
“The recent move higher in SPX has resulted in an epic vol reset with VIX trading at post corona levels, currently around 16.5.
Vol is not dirt cheap given the low realized vol environment, but there are risks to consider going forward.”
Our biggest VIX contra indicator, the VIX guy, timed that call perfectly again and we saw VIX go from 16.5 to recent highs at 29. We are now back to hoovering around 17.5 as people once again realize they bought way too expensive protection in panic, confusing direction with pace once again.”
8:00 am
Good Morning!
I am expecting may 9 year-old grandson to arrive any minute for a short stay, so I may be distracted. I’ll do my best for the blog.
NDX futures declined through mid-Cycle support at 13665.00 and bounced, but resistance seems to be holding. Should this decline continue, the loss of mid-Cycle support may be considered an aggressive sell signal. The 50-day Moving Average is not far below, at 13466.54 gives us a confirmed sell signal. Today is a critical day, Cycles-wise, the 430th day from the March 23, 2020 low.
ZeroHedge observes, “While tomorrow’s data calendar is chock full of closely-watched data, including the latest Initial and Continuing Claims, the second revision to the Q1 GDP print, and most importantly the Fed’s favorite inflation indicator, the core PCE, it’s debatable that any of these will have much of a market impact especially now that the market appears confident that the peak inflation impulse is behind us and the Fed is unlikely to unveil tapering at Jackson Hole.
However, one thing which could have a dramatic impact on tomorrow’s market is the massive rebalancing of BlackRock’s Momentum Factor (ticker MTUM) ETF, in which the $16 billion exchange-traded fund is set to see an “astounding” 68% of its portfolio holdings change in favor of value shares over tech as it chases the hottest trends on Wall Street.”
SPX futures have made a shallow decline and are still hovering above the mid-Cycle support at 4166.65. Short-term support is just beneath at 4157.01. A decline beneath those supports gives us an aggressive sell signal with confirmation beneath the trendline at 4150.00. These points also correspond with the change in gamma from positive to negative.
ZeroHedge reports, “U.S. stock index futures ticked lower ahead of an economic data dump that will reveal the latest durable goods, cap goods orders, jobless claims, GDP, PCE, and Personal Consumption data, amid fears that signs of an improving economy would lead the Federal Reserve to start tapering following comments on Wednesday that the Fed’s Quarles is open to talk about adjusting the Fed’s bond purchases. At 7:15 a.m. ET, Dow e-minis were up 3points, or 0.01%, and S&P 500 e-minis were down 6.50 points, or 0.16%. Nasdaq 100 e-minis were down 45.5 points, or 0.33%, as tech giants Apple, Amazon.and Tesla slipped between 0.2% and 0.7%.”
VIX futures are actually positive this morning after making an overnight low at 17.27. The key move today is breaking the 50-day Moving Average at 19.00 for a buy signal. The Master Cycle low may have been made on Tuesday (day 251), but we will need confirmation such as mentioned above.
TNX futures gapped higher out of its retracement low yesterday. As mentioned yesterday, TNX is getting a triple dose of strength through the next week.
USD futures made an overnight low at 89.86. Tuesday’s low (day 266) was not broken, giving us some evidence that the low may be finally in. The USD appears to have six weeks of rally ahead. The Broadening Wedge trendline appears to be the target for this rally which may be fueled by short-sellers covering.