While SPX navigates the neutral gamma zone, NDX is challenging its 2-month trendline at 14800.00 for a possible aggressive sell signal. Additional confirmation lies at Short-term support at 14607.00. While the NYSE Hi-Lo is above 70.00, the NDX Hi-Lo is on a sell signal at -66.00, down from an open at -14.00. I suspect that further negative movement in the NDX may trigger the VIX 50-day MA as well. at 17.94 where it is at present. Look for the VIX to rise above 18.00 to confirm.
ZeroHedge reports, “Last month, stocks tumbled in the days immediately following the Fed’s unexpectedly hawkish tilt, a move that was exacerbated by June’s Quad witching option expiration which followed just two days after the FOMC, and which we warned at the time would spike volatility due to a substantial rolloff in existing market gamma. It’s time to brace for another vol spike.
But first, a quick look at the market’s technical positioning courtesy of SpotGamma, which in its morning note today writes that while the S&P is falling into typical pre-OPEX lull, there is an interesting “tilt” to the QQQ position. As shown below, the SPX vanna model has a right skew which according to SG infers that there is resistance above “not surprising given the high gamma in the 4350-4400 area. However the QQQ has a subtle left skew which shows less resistance at higher prices but that also means heavier selling if markets decline. This is something that we saw back in March when there were large QQQ put positions in place.”
SpotGamma also note the accelerating weakness in the RUT/IWM landscape, which, along with tumbling meme stocks, has been hit hard as of late. There are likely macro-based reasons for this divergence, but regardless its something to flag (similar to the QQQ skew above).”
SPX futures declined to test Short–term support at 4331.75 this morning. This does not give us a chart sell signal, as we await the VIX and Hi-Lo Index to give further guidance. Friday options are positive all the way down to 4250.00, so gamma remains net positive for now. An aggressive sell signal lies at the mid-Cycle support at 4268.44. A confirmed chart sell signal lies at the trendline at 4250.00, with the 50-day Moving Average at 4230.21, unless otherwise noted by the combination VIX and Hi-Lo.
ZeroHedge reports, “S&P futures dropped, trading near session lows and sliding along Europe shares and Treasury yields, as investors assessed a growth slowdown in China and dovish comments from Federal Reserve Chair Jerome Powell. The drop in yields helped push the Nasdaq higher with mega-cap technology stocks leading gains ahead of today’s initial unemployment claims report that will allow investors to gauge the strength of the labor market. At 7:00 a.m. ET, Dow e-minis were down 189 points, or 0.54% and S&P 500 e-minis were down 141.00 points, or 0.32%, and Nasdaq 100 e-minis were up 12.5 points, or 0.08%, with FAAMG heavyweights all gaining between 0.1% and 0.4%. The dollar weakened against haven currencies and bitcoin slumped back under $32,000; the British pound rose after a Bank of England policy maker said withdrawing stimulus may be appropriate soon.”
NDX futures remain positive this morning, but beneath Tuesday’s high at 15002.30. A chart sell signal lies at the trendline at 14800.00.
DJIA futures are down this morning, but no sell signal after having made a secondary high at 35069.18 at yesterday’s open. The all-time high remains on May 10 at 35091.56. This market is too easy to misread. The fact is, unless the INDU cracks that high, this is a most bearish setup..
VIX futures challenged the 50-day Moving Average this morning at 17.98, but settled back beneath it. As you can see, a signal may be imminent.. However, due to the low 50-day, we will wait for the Hi-Lo for additional confirmation.
The NYSE Hi-Lo Index closed at 70.00 yesterday, showing poor breadth in the market action. However, it does not yet constitute a sell signal. A close beneath 0.00 would confirm the sell signal, since that would be our breakdown point.
China’s Shanghai Composite rose to 3565.03 this morning, testing Intermediate-term resistance at 3568.72. A Head & Shoulder neckline awaits at 3485.00 which confirms our sell signal. It remains on an aggressive sell signal beneath Intermediate-term resistance. The tech-heavy index offers a strong influence on the NDX, which is still positive.
ZeroHedge observes, “Following Q1’s record-breaking surge in China’s YoY GDP (thanks to base-effect malarkey and a massive credit impulse), tonight’s Q2 GDP was expected to slow drastically (especially given the crackdown on investment/real estate deleveraging and the collapse in the credit impulse)…
The question is how much? Consensus estimates called for an 8.0% YoY GDP rise, but whisper numbers were notably lower with Bloomberg Economics’ Shu noting that various early indicators are consistent in pointing to some weakening in consumption in June.
“On balance, these indicators suggest production growth – after base effects are taken into account – may have slowed, but only a touch.”
The official services PMI fell to 52.3 in June from 54.3 in May, while its Caixin counterpart showed a much steeper slide from a strong reading to just slightly above 50 – the line between expansion and contraction.
The headline GDP growth figure printed a very slightly disappointing +7.9% YoY”
BKX remains on a sell signal beneath the 50-day Moving Average at 127.35, but frustrates the bears by remaining above the Head & Shoulders neckline at 118.70. After a respectable second quarter, banks face a bleak future.
ZeroHedge reports, “Morgan Stanley shares dropped as much as 2% after the bank – which otherwise reported a solid set of numbers beating on the top and bottom line – became the latest to report disappointing second-quarter fixed-income trading revenue of $1.7 billion came in below analyst expectations for $1.9 billion, and tumbled 45% from a year ago even as the bank’s dealmakers generated the second-most profitable quarter ever thanks to $2.38 billion in investment banking revenue.
TNX may be retesting mid-Cycle support at 12.97 today as it declined to 13.20. This retest offers an aggressive buy signal (sell signal for UST) as it may regain its strength through the weekend.