BKX, our liquidity proxy, has fallen beneath its Cycle Top at 139.91, putting it on an aggressive sell signal. The tightening trading bands suggest a strong move down should the Cycle Top resistance hold. This is the one indicator that supports the everything bubble.
ZeroHedge gives us a potential catalyst for a liquidity drain, “Last night we noted the Czechs had the dubious honor of suffering the first yield curve inversion of this cycle…
Then overnight saw the stress spread to Australia’s bond market, as a massive move higher in 2Y Yields undoubtedly triggered chaos in risk control departments.
And that VaR shock is now spreading to the US, where for the first time ever the yield on the 30Y UST is below the yield on the 20Y UST…”
ZeroHedge remarks further, “What a day on so many fronts! Let’s start with the staid world of bond markets. The last 24 hours have seen huge swings in yield curves: in Australia, due to a slight overshoot in two of three official CPI measures (all the way to 2.1% y/y!); then the UK, due to the Budget, more on which later; then Canada, due to the BOC winding down QE and talking about a rate hike; and then the US, on further filleting of the Biden fiscal proposal: at this stage, so much has been taken out of the “$3.5 trillion” package we are no longer sure what is in it.
Short yields up, long down sharply, and curves flattening like a pancake is a reminder that raising rates against a structural inflation supply-shock and high energy prices, and without fiscal support in the US, is not a good idea. At least not for an asset-based, financialized ‘economy’. (Indeed, Q3 US GDP today is expected at only 2.6% q/q annualised.) You can make a valid argument it’s time to raise rates: just not do that and prop up our current idiotic system. As such, expect further market swings on a scale that are capable of wiping out those with strong, levered views on matters. And wait until we see a real central bank surprise!”
Crude oil futures dropped to a low of 80.67 this morning, crossing beneath the Cycle Top support at 81.01 and giving an aggressive sell signal.
TheEpochTimes reports, “The White House on Tuesday promised to put pressure on members of the Organization of the Petroleum Exporting Countries (OPEC) to increase production amid declining supplies and rising energy prices.
Press secretary Jen Psaki told reports at a press briefing that the president is “mindful” of the increased prices consumers are facing when it comes to their energy bills and that he “reserves a range of options,” to combat the situation.”
The GSCI Ag Index is beginning to show strength as it lifts off its cluster of supports. This weekend shows a triple whammy on GKX, suggesting a huge rush to stockpile ag products. I have no idea what the catalyst may be. Perhaps the following news release may shed some light.
OilPrice.com observes, “Oil and gas prices have risen dramatically this year as a result of underinvestment and recovering demand.
- Higher fuel prices are weighing on global food supply chains, with transportation and farming costs continuing to climb.
- The hardest hit will, once again, be those living in developing economies that are still struggling to recover from the impact of the pandemic.
The potential for a knock-on effect of rising fuel prices to be felt by other industries is becoming more likely, as oil and gas prices continue to rise to an all-time high, companies are finding it hard to maintain their costs and may have to shift this burden to the consumer any day now. ”
SPX futures made an overnight high at 4570.60 before easing down. Tuesday’s high at day 270 remains the topof the Master Cycle . The potential closing of the window for a new high is likely to be Friday (day273). Friday’s options expiration remains modeately bullish above 4530.00, but turns negative quickly beneath it. We have an aggressive sell signal beneath the Cycle Top resistance.
ZeroHedge reports, “US equity futures rebounded from yesterday’s late-day selloff when a collapsing yield curve sent recessionary/policy-error shockwaves across market, as investors pointed to solid earnings to indicate that a slowdown is nowhere near. Nasdaq 100 futures led gains among other key U.S. gauges after setting an intraday record on Wednesday. Dow Jones and S&P 500 futures gained too. The 10-year Treasury rate was flat, while the two-year yield added five basis points. Oil was lower and the dollar was steady, while Bitcoin rebounded after the liquidity-draining Shiba Ina meltup finally cracked overnight.”
NDX futures made an overnight high at 15702.00 before easing down, leaving yesterday’s high as the Master Cycle top.
Charles Hugh Smith remarks, “While Corporate America is focusing on preserving its precious profits, its customers and workforce are rebelling by walking away.
We all see shrinkflation on a daily basis: the 16 ounce container is now 13 ounces, the breakfast cereal box is now so narrow it topples over, and so on.
More subtly, the quality of ingredients is also diminishing: sharp-eyed consumers note that salt, sugar and “artificial flavors” are increasingly used to mask the decline of quality as producers scrape the bottom of the barrel to eke out a profit.
A recent NPR article proposes another form of untracked inflation: Skimpflation, the decline of services as prices march higher. Meet Skimpflation: A Reason Inflation Is Worse Than The Government Says It Is (via C.A.).”
VIX futures consolidated at the upper range of yesterday’s highs and lows. A buy signal may be generated at the confluence of the mid-Cycle resistance at the 50-day Moving Average at 18.97. Hedge funds are buying protection despite the high elevaion of stocks.
The NYSE Hi-Lo index closed at 43.00 yesterday, beneath the 50-day Moving Averagae at 69.18. We await a decline beneath 0.00 to produce a sell signal in equities.
TNX began its first day of stength by rebounding from yesterday’s Trading Cycle low. However, there may be antoehr short squeeze at today’s 7-year note auction. This market is getting shook up by sudden reversals. Who or what is generaing these short squeezes in highly suspect, as there is a larger than usual treasury note auction today.
USD futures declined benath Intermediate-term support at 93.64 this morning, possibly touching the 50-day Moving Average at 93.35. Once this move is accomplished, we may see strength return as it is due for a Master Cycle high during the second week of November.