7:45 am
A globally Synchronized Crash is looming
Wave 3 of Intermediate Wave (1) has just begun in the Shanghai Composite Index. The minimum decline in Wave (1) appears to be point 6. It may go lower. China and the US have the two strongest markets, as you will see. While it peaked on February 18th, it was able to hold off the decline until now.
ZeroHedge reports, “Good economic news is bad news for markets now.
A better-than-expected ADP jobs report sent the dollar and bond yields higher and stocks lower Thursday. A strong payroll report Friday would give more ammunition for folks calling for earlier QE tapering. In a sense, policy normalization has already started after the Fed announced plans to wind down its emergency corporate-credit facility. From that perspective, the peak of liquidity is near.
In China, the authorities are already mopping up the dollar liquidity awash in its domestic market. On Thursday, two Chinese policy banks, China Development Bank and the Export-Import Bank of China, announced selling of dollar notes in the onshore market, the first such sales in years. It followed a move Monday when the PBOC required lenders to hold more foreign currencies in reserve.
Both aim to reduce the dollar supply and ease pressure for yuan appreciation. As a result, one-year yuan swap points dropped to the lowest since January, reflecting higher dollar funding costs. The yuan rally has also stalled.”
The Nikkei 225 Index peaked on February 16, but try as it might, it could not recover. An attempted Wave (5) on May 10 truncated in a failed rally that normally have made a new high.
SPX futures are dead in the water, waiting for the May employment survey. The EW structure calls for another probe to 4215.00 to 4220.00 in a possible flat correction. A Minute Wave [ii] may go as high as 4234.00, but no higher. I will update this commentary as things develop.
ZeroHedge reports, “US stock index futures fluctuated listlessly in a narrow range on Friday as investors braced for a crucial report that is likely to show jobs growth accelerated last month, possibly fanning fears over inflation and easing of the Federal Reserve’s support. At 7:30am emini were down 11 points, or 0.03%, S&P 500 e-minis were up 3 points, or 0.08%, and Nasdaq 100 e-minis were up 22 points, or 0.16%. The meme mania was dormant this morning with reddit stocks all lower after peaking two days ago. Treasuries were steady and the dollar rose modestly to fresh 3-week highs. Gold dropped and bitcoin slumped after a Elon Musk tweet trolled cryptos.”
8:40 am – A big miss…futures rally.
ZeroHedge reports, “With so much of the recent labor market discourse focusing on widespread shortages resulting from Uncle Sam’s generous unemployment benefits (15 million people still collecting some form of weekly unemployment benefit), today’s jobs report which is expected to show a substantial rebound from April’s big miss, was set to be defining: another big miss and the shortage narrative would dominate for a long time, a big beat would meanwhile spark renewed reflation worries.
Well, it appears that “shortages” won out in the end because moments ago the BLS reported that in April just 559K jobs were added, which while a big improvement to April’s upward revised 278K, was another big miss compared to the 674K expectations.”
TNX moved above the 50-day Moving Average at 16.24 on the jobs report. The Cycles Model suggests a strong rally over the next two weeks or more. It is now on a buy signal.
USD futures rose to 90.63, challenging Intermediate-term resistance at 90.51. This triggers a buy signal. The Cycles Model suggests a rally through the July 4 holiday.