SPX made the 61.8% retracement level, but may not be finished. SPX futures are mildly positive, but no breakout above yesterday’s futures high at 4224.88. Friday’s low appears to be the bottom of Wave 1. Yesterday’s rally may only be Wave (a) of 2, leaving Waves (b) and (c) to go. Should that be the case, we may see a pullback to the mid-Cycle support at 4193.45 [Wave (b)], then another attempt at a retracement. The maximum retracement may be as high as 4238.00. Keep in mind that this market is an accident waiting to happen. I am only giving the standard version of the Elliott Wave process.
ZeroHedge reports, “U.S. stock-index futures were little changed, trading just 1% below their all time high, while global shares extended their recovery on Tuesday from four week lows, as investors focused on prospects for post-pandemic economic growth, putting fears of a hawkish Fed in the rearview mirror even as they awaited Fed Chair Jerome Powell’s testimony before Congress. Nasdaq 100 futures extend increase to as much as 0.3%, the highest for Tuesday’s session, with contracts on the S&P 500 rising 0.1% as of 7:15am in New York.”
NDX futures made an overnight high of 14177.88. Last Thursday’s high at 14205.40 is too close for comfort to call yet. Should NDX go higher, resistance may be the Cycle Top at 14244.10. The key here is investor confidence, which is waning.
ZeroHedge comments, “Traders of a certain age may recall that back in 2013, around the time the Fed’s “Taper Tantrum” sparked a surge in yields and led to a risk asset selloff, a big (if entirely artificial) debate emerged within financial media, where the Fed muppets and their media puppets would argue that “tapering is not tightening” while anyone with half a brain realized knew that this was total BS.
Fast forward to today when Morgan Stanley’s Michael Wilson opens up an old wound for clueless Fed apologists, saying in his latest Weekly Warm Up note that “Tapering is Tightening”… but then adds that contrary to the market’s shocked reaction to last week’s Fed meeting, tightening actually began months ago.”
VIX futures sagged beneath the 50-day Moving Average at 18.29 as investors mistake a normal retracement as a possible relenting of the Fed. A 61.8% retracement would drop to 17.33, which is what appears to be happening this morning.
TNX is on the rise as it approaches the 100-day Moving Average at 15.25. Intermediate-term resistance and the 50-day both reside at 15.74 to 1584. The Cycles Model projects rapidly rising strength yet this week which may encourage a breakout (i.e. an “accident”).
ZeroHedge remarks, “Merrie Melodies
Just like that, all was well with the world again: bond yields up; equities up; commodities mainly up; and the dollar mainly down. What a merry market melody! This was despite a confusing barrage of Fed-speak which, as the headlines initially came in, had me thinking of ‘Elmer Fed’, and a silly little man in a deerstalker hat with a shotgun saying: “Be vewy, vewy quiet. I’m hunting 2% infwation and wo unempwoyment with high asset pwices and wo ineqwality. Huh-uh-uh-uh-uh-uh-uh-uh.”
USD futures are still consolidating within the last two days’ trading range. The rally may not be over yet. The Cycles Model suggests about two more weeks of growing strength into the next Master Cycle peak.