TNX has broken above its 100-day Moving Average and is testing the 50-day Moving Average at 15.98. With the Master Cycle low last Friday, an aggressive buy signal (Sell UST) with confirmation at the 50-day. Friday appears to be particularly vulnerable to a sell-off in 10-year bonds.
VIX staged a breakout above its 50-day Moving Average, then pulled back. This is good positioning for a buy signal. Most will not recognize the risk-off signal until the VIX rises above the trendline at 25.00. The Cycles Model suggests that the bottom is in.
NDX fell through the short-term trendline, giving a sell signal. Generally, the target on an Ending Diagonal break is the source of the trendline. Confirmation comes at the crossing of the 50-day Moving Average at 13689.33.
ZeroHedge remarks, “The dollar spiked immediately after The Fed admitted it was more than just thinking about thinking about tapering… and raising rates….
Gold dumped as the dollar spiked…
Bonds were hammered…
And stocks tumbled…
How quickly will Powell walk back and de-emphasize all of this?
VIX futures are in a consolidation/correction mode after rising to 17.39 in the overnight session. Monday’s low appears to be the final Master Cycle low at day 271. It’s not likely to stretch further. The Cycles Model calls for rising strength through mid-July and possibly into the last week of July.
ZeroHedge writes, “Sell in May didn’t work. The only thing that worked in May was to be long gamma/vol going into the May panic (recall our late April long “VIX guy” note here). The VIX collapse that occurred later was not as “sexy” from a trading perspective, sure protection collapsed post mid May, but you did not want to be short gamma those moves as the initial upside panic was almost as violent as the sell off.
Here we are, waiting for Fed and Powell’s “grand” meeting. VIX is up some from “panic must sell lows” last week, but protection remains overall low(er).
Low VIX does not necessarily mean it is cheap. Nobody has, missed the low realized vols lately, with SPY realized vols at “depressed” levels.”
The Shanghai Composite Index is in the news this morning as it appears to be the first global index to break down in June. Recently I have connected the relationship with the tech-heavy Shanghai Composite to the NDX. As it turns out, The Shanghai put in its (lower) Master Cycle high on Friday, while the NDX made its high on Monday. Today it made an intraday low of 3513.56 and closed at 3518.33, beneath Intermediate-term support/resistance at 3524.23. This puts the Shanghai on a sell signal.
ZeroHedge reports, “Chinese stocks tumbled on Wednesday, as fears that the government plans to rein in commodity prices weighed on metals shares, while foreign investors continued to sell ahead of a policy decision from the U.S. Federal Reserve. An across the board miss across all economic data merely confirms that the deflationary tidal wave sparked by China’s plunging credit impulse is getting worse by the day.
China’s benchmark CSI 300 Index closed down 1.7%,as declines in material and technology stocks offset a rally in financial and energy companies. The tech-heavy ChiNext tumbled more than 4%, dropping below the 3,200 level that had supported the gauge’s rally this month. Hong Kong’s Hang Seng Index slipped 0.7%, led by automakers and technology shares.”
NDX futures are flat after a close just above the short-term trendline at 14000.00. A decline beneath that level offers an aggressive sell signal that would be confirmed beneath the 50-day Moving Average at 13669.21.
SPX futures are also flat after a potential Master Cycle high on Tuesday, day 249 of the Master Cycle. This leaves the rest of the week for a revision of the Cycles, but today’s Fed decision may be the deciding factor.
ZeroHedge observes, “US equity futures rebounded from a modest overnight drop in a rangebound session, coiled as investors turned cautious ahead of a policy decision from the Federal Reserve which some such as DB’s Jim Reid have called the “most important for Powell’s career” (preview here). Oil extended a powerful rally and the dollar fell. Emini S&P futures were unchanged at 4,236.5 following Tuesday’s modest drop which snapped a three-day winning streak amid weakness in technology and real estate; Nasdaq 100 futures rose 0.2%. The 10-year Treasury yield hovered around 1.5%. The dollar edged lower versus major peers, and bitcoin dropped back under $40,000.
“The FOMC meeting is unlikely to offer any surprises today as the Fed has painted itself into a corner,” Kaia Parv, head of investment research at FXPRIMUS, wrote in emailed comments. “The Fed is clearly hesitant to disturb the markets since an increasing portion of U.S. household wealth is tied to equity investments.”
USD futures continue to consolidate this morning with downside support at 90.31 and overhead resistance at the 50-day Moving Average at 90.79. The Cycles Model suggests a brief probe to the 50-day, then a possible pullback. Cyclical strength may reappear toward the end of the month with a particularly strong push into a Master Cycle high in early July.
TNX still hovers beneath its 100-day Moving Average at 15.00 this morning. The Cycles Model suggests a period of strength may be imminent.
ZeroHedge remarks, “FOMC Preview – Taper to be discussed but quickly dismissed
- Tapering very likely to be discussed and dismissed, unlikely to be mentioned in the statement
- UST market unlikely to see major moves; ongoing absence of 2023 hike in dots may be read as dovish
- Soft recent data discourages a hawkish signal until the FOMC has more clarity on growth and inflation