4501.08…That’s all it needs, folks!
SPX has now exceeded its EW target of 4495.00. It is very likely that it may rise to 4500.00 or higher. We are very close to a reversal. It’s time – day 259.
ZeroHedge comments, “Research analysts publish dozens of complex charts that illustrate the bubble of everything continues to inflate away as central banks expand their balance sheets at record paces. These monetary wonks have distorted traditional indicators and made fundamentals obsolete, leading markets into a dangerous melt-up on a post-COVID basis. In our minds, and what we want to convey to readers: simple is better, and that’s why we’re focusing on margin debt.
Margin debt – the amount that individuals and institutions borrow against their stock holdings as tracked by Financial Industry Regulatory Authority (FINRA) – has soared to record levels since the COVID lows of 2020. It’s a simple indicator of stock market leverage. Turning points in markets develop when leverage is unwound, and Bank of America’s Stephen Suttmeier has spotted “potentially a bearish peak for margin debt in June 2021.”
“Rising leverage tends to confirm US equity rallies. It is not new record highs for margin debt that we worry about. We get concerned when margin debt stops rising to suggest that investors have begun to reduce leverage,” Suttmeier said. “
NDX futures appear to have made another all-time high at 15393.40 in the early hours of the day, but appears to have sold off to 15338.40 at this time. Today is day 259 in the current Master Cycle, so we may be seeing NDX lead a probable bearish reversal after Monday’s panic rally. Make no mistake, this is topping action at its best. The market must have investors’ maximum exposure on the wrong side before taking them down.
ZeroHedge observes, “In his latest note on markets, Goldman’s head of hedge fund sales, Tony Pasquariello, muses on the dog days of summer where “market volumes have receded to their lowest levels of the year and 1-month realized volatility on S&P has leaked into single digits.” And given the lack of tactical action – i.e., the Goldman flow desk is dry as a bone – Pasquariello, takes a “step back to think bigger picture on where the markets are headed.”
To do that, the Goldman trader writes that “at the risk of severe over-reduction, here’s one of the most bullish scenarios that I can sketch out for the next year or so … and, one of the most bearish…”
SPX futures are clenched in one of the most narrow trading ranges between 4480.40 and 4491.40. The break may be sudden and dramatic. However, in the absence of another catalyst, we may see the markets creep along at these levels until after the Jackson Hole Symposium.
ZeroHedge reports, “US equity futures traded flat near all-time highs in a muted session as traders prepared for the Fed’s annual Jackson Hole symposium with little action across markets. The dollar was steady, while Treasurys and bitcoin fell and oil reversed losses. Contracts on the Nasdaq 100 and S&P 500 were fractionally lower after trading in the green for much of the session. Their underlying indexes closed at a record as strong corporate earnings and a rally in commodity prices outweighed lingering concerns about the threat of Covid-19 to the global economy.”
VIX futures rose to 17.49, challenging the 50-day Moving Average at 17.41 before falling back beneath it. The stage may be set for a lift-off which may begin in anticipation of the Jackson Hole outcome.
USD futures appear to be consolidating within yesterday’s trading range. The Cycles indicate no directional movementuntil next week, where trending strength may return.
TNX is on the rise again, having risen above Intermediate-term resistance at 12.77. This puts TNX on a buy signal with confirmation above the double resistance at 13.41 to 13.61. This sets the stage for a 3-4 week rally that may approach 20.00.
ZeroHedge notes, “Three weeks ago, moments after the Treasury released its latest Treasury issuance Sources and Uses report which virtually nobody on Wall Street pays attention to, we confirmed something we first observed months earlier: stealth QE – which as we explained early this year is how the Treasury injected $1.5 trillion of liquidity into the market in the past 12 months bypassing the Fed entirely – was not only over but was about to go into reverse as the US Treasury was set to unleash several hundred billion of quantitative tightening.
The reason: after dropping to a post-covid low of $450 billion, the Treasury’s cash balance would first drop to $300 billion, and then continue declining for the duration of the debt ceiling negotiations (which will conclude successfully at some point in the next 2 months despite days of theatrical posturing as the US will not default) before surging to $800 billion by year end.”