It originally appeared that the SPX at 4500.00 met all the requirements for the rally. But the Fed will not allow a sell-off before Jackson Hole. The revised target is now 4520.00 (+/-). Today is day 261 in te Master Cycle.
SPX futures tested Short-term support at 4464.98 by declining to 4466.90 in the overnight session. It has bounced from that support to 4487.40, an approximate 61.8% retracement. Of course, the SPX may bounce higher, but it may have fulfilled its retracement requirements.
ZeroHedge reports, “US equity futures are trading where they were on Monday evening, having flatlined in a narrow, boring 20-points range on either side of 4480 for the past week, as virtually nobody wanted to take on any major new positions ahead of Jackson Hole. Well, the good news is that in less than 3 hours, J-Powell’s much overhyped speech at J-Hole where he will barely – if at all – mention the taper is almost behind us which hopefully should unlock some volatility in markets. At 700am, S&P futures were up 12.50 or 0.3% to 4479, Dow futures were up 80 to 0.22% and Nasdaq futures were up 50 or 0.33%. Treasury yields dipped, the dollar was flat and bitcoin was flat around $47,500.”
VIX futures declined to a low of 17.66 (an approximate 58% retracement) before bouncing back toward 18.00. Volatility may be about to be set loose as Powell’s speech disappoints.
ZeroHedge advises, “It appears the investment world is starting to wake up to a message that we have been screaming from rooftops for more than 10 years : the Fed has boxed itself into the largest asset bubble in history.
And there’s no obvious way out.
Since 2009 we have been raising critical questions about how long the Fed would be able to kick the can down the road with its monetary policy, but even we could have never predicted the size and scope that QE would eventually mutate into.
With our Central Bank just casually doubling its balance sheet (and nearly the money supply) in the course of under two years, all markets – housing, bonds, stocks, consumer pricing – have screamed to new highs with no signs of stopping.
As each day goes by, it’ll slowly become more apparent to the public, the investment world and yes, even the rocket surgeons at the Fed, that the notion of bringing the economy in for a “soft landing” from this bubble is going to be far more difficult than ever imagined (assuming the Fed actually ever pondered the situation, which it likely hasn’t). That is to say, it could even be downright impossible.”
TNX sits atop its 50-day Moving Average at 13.35, waiting for the spike that will boost it above the remainder of its resistance zone. It may drift lower until investors begin to realize that the Fed’s power over rates is overrated, if not non-existent. The Cycles Model suggests that the 10-year yield may reach 20.00 by late September. An alternate date may be mid-October.
USD futures appear to be consolidating in range this morning. There may be a furhter pullback while it appears to be due for a trading Cycle low. The Cycles zmodel suggests that strength may come back next week and last through options week.
West Texas Intermediate Crude rose to 69.05 this morning as it retraces to 50-day resistance at 70.68. Today may be a show of strength with another two weeks of possible rally before a reversal, according to the Cycle Model. The ensuing decline may last through the end of November.