3:05 pm
You may recall that in early September when the SPX finished its 5th Wave, I noted that it was missing in the DJIA. Well, here it is. The SPX, while very close, has not made a new high. This created an interesting divergence. The Wave structure now agrees that both indices may go down in unison.
8:15 am
Good Morning!
SPX futures are flat on day 264 of the Master Cycle. In today’s expiring options, calls dominate above 4500.00. Puts gain ascendance at 4475.00 and lower. Max Pain lies somewhere between those two points. This is where either the bulls take over and make new highs or an “accident” happens that causes a panic over the next week. The 1987 crash happened in 4.3 days.
ZeroHedge reports, “US index futures were little changed as investors weighed the start of the earnings season against growing stagflation, tightening, energy crisis, China property and supply risks. S&P 500 futures were flat after the cash index edged closer to a record on Tuesday, rising above 4,500. Contracts on the Nasdaq 100 were also unchanged after the main index rallied for the past five days. At 7:30 a.m. ET, Dow e-minis were down 8 points, or 0.02%, S&P 500 e-minis were down 1 point, or 0.03%, and Nasdaq 100 e-minis were up 5 points, or 0.03%. Oil was down and the dollar steadied. Bitcoin traded just shy of its all time high overnight, and was last seen around $64,000.”
VIX futures made a morning low of 15.60, not breaking yesteray’s low. Today is day 252 of the VIX Master Cycle. Should it repeat the pattern of 8.6 months ago, a slingshot move may be in the making.
The NYSE HiLo Index closed at 104.00 yesterday after reaching a high of 183.00. Although it closed 10 points higher than the day before, the trend is lower.
ZeroHedge warns, “He just called us…
Yesterday, before the market closed, our “VIX guy” called us explaining the case for a continuation of the VIX collapse.
Arguments are basically that everything is awesome and no risks can affect this market as strong seasonality is upon us.
We agree on the seasonality factor, but when the VIX guy calls us explaining why VIX should go even lower post this last volatility reset we get “uneasy”. He continues to hold a 100% inverse track record.
It is probably time to look at some cheap protection trades.”
TNX appears to be in a short-term decline, perhaps to the mid-Cycle support at 14.55 in the next few days. The reason? Should equities sell off, the knee-jerk reaction would be to buy treasuries. The Cycles Model suports that thesis with a triple dose of strength roaring back early next week.
ZeroHedge observes, “t a time when the Wall Street banks are scratching their heads for credible explanations why they are keeping (or raising) their year-end S&P targets at a time when economic growth is in freefall and inflation is soaring (read: stagflation), an unexpected source of honesty has emerged – the Atlanta Fed, which now sees the US on the verge of contraction.
In its latest GDPNow forecast published moments ago, the Atlanta Fed slashed its estimate for real GDP growth in the third quarter of 2021 to just 0.5%, down from 1.2% on October 15, from 6% about two months ago, and down from 14% back in May.
Remarkably, the GDPNow tracker is about to turn negative even as the average “blue chip” Wall Street baank has a Q3 GDP forecast of just below 4%.”
USD futures appear to be re-testing yesterday’s low which may have completed the correction to the rally. This may be suported by the Cycles Model which suggests strength building over the weekend and coming into full bloom by mid-November.
WTIC futures appear to be coming down from Monday’s high, an unusually long Master Cycle of 278 days. The call for $100.00 oil or even $200.00 oil may be a bit premature. While shortages of oil derivatives (propane) are appearing and gasoline prices have exceeed their 2018 highs, there is a possibility of a slowdown large enough to correct the current trend.
ZeroHedge observes, “US macroeconomic data has been broadly disappointing for months…
Source: Bloomberg
And that has driven forecasts for GDP growth into the floor. Just yesterday, The Atlanta Fed’s GDPNOW model adjusted to forecast just 0.5% GDP growth…
Source: Bloomberg
And at the same time, the market is pricing in an increasingly hawkish trajectory for taper and rate-hikes from The Fed…”