SPX may be ready for a sudden reversal as 47.3 hours have elapsed from the beginning of the downdraft on July 14. A 12.9 day crash scenario consists of a total of 90.3 market hours, leaving 43 hours to go, should this scenario play out. It will be totally unexpected. Tomorrow’s options expiration shows a mixed bag above 4300, but there are over 9000 net SPX puts at 4300.00. This may provide the power for a slingshot decline below point 6.
ZeroHedge informs us about how option gamma may provide this result. Watch the video .
““Gamma Squeeze” has been the word of the year so far for many freshly-minted equity-trading gurus (as they watched their AMC, GME, and other meme stocks momentum ignited “to the moon” time and again in the first half of 2021), but there is lot more to comprehending and using “Gamma” than simply understanding the chance for a squeeze (higher or lower).
Last June, long before anyone had heard of SoftBank’s public stock trading group, had seen the unbelievable and perhaps illegal gamma meltup in Tesla, and before even retail traders became experts in sparking gamma squeezes across illiquid names, we published what was arguably the best primers on gamma, op-ex and option-driven equity flows, straight from Goldman’s derivatives strategy team. Those who missed it can read it here, although there is certainly a bit of a learning curve.
Still since the topic of Greeks, Gamma, and option-driven flows will become increasingly important, we urge everyone to at least watch the following brief video, courtesy of our friends at SpotGamma, which provides an introductory overview of using Gamma to forecast market movements intraday.”
US 30 futures rose to 34789.00 in the overnight session before trailing off. The retracement may be complete, or nearly so as the DJIA approaches resistance for a third time. On May 10 the DJIA made its all-time intraday high at 35091.56, with a closing high the Friday before at 34777.76. On July 16, the Dow 30 made a secondary intraday high at 35090.01, with a closing high at 34987.02 the day prior. Do we go with closing or intraday?
The Elliott Wave structure claims the move since May 10 was Waves 1 and 2 and points to the near-miss on July 16 as confirmation. The Cycles Model observes that the July 16 high was too early to be a Master Cycle high. In fact, the end of the current Master Cycle may be still ahead, possibly in the next two weeks. Today is day 255 of the current Master Cycle. Should the turn occur today without making a new high, the SPX may be due for a very sharp, if short, decline.
SPX futures topped out at 4361.38 this morning before it rolled over. It is currently in the red, but no one seems to notice. This Cycle pattern has consumed 43 hours (6.14 days) as of 10:00 am. The standard time for a crash is 12.9 market days, so we may be at the half-way point (time-wise) of that potential Cycle. The minimum decline is targeted to point 6. This is known as a slingshot move.
ZeroHedge reports, “US futures, European bourses and Asian markets extended on recent sharp gains on Thursday, the 10Y yields rose above 1.30% after hitting 1.13% just two days earlier and oil held onto sharp gains as investors seemed to set aside virus jitters for now and looked ahead to the European Central Bank for reassurance that policy support will continue; the dollar was steady. Japanese markets were closed for a holiday. At 7:15 a.m. ET, Dow e-minis were up 71 points, or 0.20%, S&P 500 e-minis were up 8 points, or 0.19%, and Nasdaq 100 e-minis were up 24.50 points, or 0.16%. Futures traded less than 1% from their record highs, completing a definitive V-shaped recovery from the recent slide.
The turnaround from the Monday selloff shows “corporations have been very resilient through all this,” David Mazza, Direxion head of product, said on Bloomberg Television. “Earnings estimates are quite remarkable, probably some of the best on record. Even through all this, we have central-bank liquidity remaining very abundant, economic growth being robust.”
VIX futures have come off their overnight low at 17.52 and are approaching the50-day Moving Average at 17.91. The NYSE Hi-Lo Index is cautionary this morning, closing at 95.00 yesterday.
ZeroHedge observes, “In a stark reversal to its bullish sentiment at the start of the month, when the bank first noted – correctly – that the S&P was entering its best 2-week seasonal period of the year which it did between July 1 and 15 when it posted a series of new all time highs (before dumping on the 16th and the 19th)…
… followed by a lengthy rationalization why “the shorts will have to cover“, Goldman has been turning surprisingly bearish in recent days, and two days after Goldman flow trader John Flood urged Goldman clients “not to buy this dip” on Monday (spoiler alert: they did) his trading desk colleague Scott Rubner has published a report previewing why he anticipates a correction in the coming days and continuing through the Jackson Hole symposium at the end of August.”
TNX continues challenging the mid-Cycle resistance at 13.09 as futures reached 13.17 overnight. While I have tagged Tuesday’s low as the end of the Master Cycle, it may not be over, yet. We may see a very fast rally to 20.00 in the next two weeks in what is known as a “slingshot” move.
ZeroHedge reports, “Initial jobless claims jumped significantly last week as 419,000 Americans filed for jobless benefits for the first time (well above the prior week’s 368k and expectations of a 350k print)…
Michigan and Texas saw the biggest jump in claims while New York and Oklahoma saw the best improvement…”
USD futures appear to be consolidating in the overnight market. It appears to be terminating its current Master Cycle in the next week or two with the highest probability of a low at the cluster of supports between 91.10 and 91.74. However, there is the possibility of a runaway dollar as TNX blasts higher.