On day 257 we may see a reversal within 24 hours. Draw your own conclusion.
A very frustrated NorthmanTrader reiterates, “Following all time highs last week markets actually also got to within an inch of a complete breakdown. Again. And again they were saved in the nick of time with the predictable Fed cave on tapering to unfold this week during Jackson Hole and looking to make new highs again this week. 10 weeks in a row. 10 months in a row. If markets seem to have a programmed consistency about them it is because they do. The rally has gotten to persistent and steep that failure is not an option. Indeed markets MUST make new highs every week or risk the break of the trend.
Failure is not an option.”
SPX futures rose over the weekenf to a high of 4458.50, testing the short-term trading channel trendline near 4460.00. The retracement had already reached a 61.8% retracement by mid-afternoon when a panic bid hit the tape in the final hour. Of course, being monthly options expiration, it took on a life of its own as gamma pressure is self-reinforcing. This may have caused the dealers to buy in the weekend futures to pay for options that settled on Saturday morning. Today is payoff time (T+2). We may see the panic bid reverse after the open as a possible top-to-top 4.3-day Cycle completes in hour 2 of the cash market.
The NYSE Hi-Lo Index closed at -17.00 on Friday, clearly on a sell signal. It would take a lot to reverse that signal.
ZeroHedge reports, ” US stock-index futures gained along with global equities as concerns about China’s crackdown faded and as investors sought to take advantage of last week’s market weakness after Dallas Federal Reserve President Robert Kaplan said on Friday he’s open to adjusting his view that the central bank should start tapering its asset-purchase program sooner rather than later if the delta variant persists and hurts economic progress. Bond yields rose as demand for havens eased. Commodities also rallied after China announced no new cases suggesting the Delta scare is ending; The dollar was weaker and Bitcoin surged above $50,000, the highest level since mid-May. At 7am ET, Emini S&P futs were up 15 points or 0.34% to 4,452; Dow futures rose 158 points or 0.45% and Nasdaq futures were 40 points higher or 0.27%.
NDX futures hit a weekend high of 15155.40, less than 30 points away from its all-time high. Should it go higher, it may reach its Cycle Top at 15253.92 sometime today. Today would be day 257 of the current Master Cycle, so my comment about a possible Cycle Top early this week may have been prescient. This fits the Cycles Model calrendar for a Master Cycle low in late October.
The NDX Hi-Lo Index closed at -195 on Friday. neverthless, the NDX itself may still rise due to a handful of mega-tech companies.
ZeroHedge warns, “US firms and Wall Street understand that today’s market conditions of easy money, low bond yields, and euphoric Wall Street Bets traders buying anything under the sun is the perfect time to ramp up equity issuance. In fact, stock issuance has just surpassed Dot-Com levels to record-highs.
Country western star Kenny Rogers, famous for singing the “The Gambler,” one said:
You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
And know when to run
A new client note from Grantham Mayo Van Otterloo & Co. LLC (GMO) investment advisors outlines that US main equity indexes are screaming to new highs, and an inconvenient truth has just emerged for bulls:
“Stock issuance in 2021 is also setting a new record, blowing away the last high set in the run-up to the Tech Bubble. This is a dubious item to celebrate if history is any guide.”
VIX futures have held steady with a low of 18.51 over the weekend. The 61.8% Fibonacci retracement value is at 18.34.
ZeroHedge remarks, “Back in late 2017, Bank of America’s derivatives strategists made a remarkable, if hardly original, observation – the bank said what everyone knew but was afraid to voice namely, that “In Every Market Shock Since 2013 Central Banks Have Stepped In To Protect Markets.”
Since then, the market’s Pavlovian response to unconditional central bank intervention has gotten so embedded in the collective trader psyche that neither fundamentals, nor adverse news matter any more as everyone is convinced that central banks will step in the moment there is another dip in risk assets. In fact, on Friday another BofA strategist, Michael Hartnett, wrote that in the past 18 months “the Fed has bought $4 trillion bonds, twice the amount the US spent on War in Afghanistan past 20 years as it, and other global central banks, have spent $834 million every hour buying bonds since COVID.” Add to this that the US government has spent $875 million every hour in ’21 and one gets a staggering number of $1.7 billion spent between central banks and the US government to prevent even a modest market correction.
As Hartnett put it, “little wonder everyone believes in TINA & BTD.”
TNX is holding steady beneath Intermediate-term resistance at 12.78. The Cycles Model suggests strength returning tomorrow and possibly lasting for the next week or so. This may be one of the leading indicators of a falling stock market.
USD futures are in a pullback from its new breakout high. USD is due for a short-term low this week before regaining its strength in September.