November 3, 2021

10:50 am

Crude Oil futures slipped beneath the Cycle Top support at 81.93 this morning.  This would be considered an aggressive sell signal.   The Cyclse Model projects a possible low occurring the week after options expiration.

ZeroHedge reports, “Oil prices have plunged overight after a bigger than expected crude build reported by API and further pressure from The White House on OPEC+ to start spewing more deadly, poisonous, existentially-threatening fossil fuels into the world to bring down gas prices for Americans.

Despite the pressure from the U.S. and other importers, the cartel is expected to stick to a plan to raise output by a modest 400,000 barrels a day at its meeting.

“OPEC+ staying the course is largely baked in, but the market will watch out for surprises,” said Vandana Hari, founder of energy consultancy Vanda Insights.

Oil is likely weaker today ahead of The Fed’s anticipated policy-tightening today.”

8:38 am

Good Morning!

SPX peaked precisely at the 21.5-market-day marker, possibly completing a Minor Cycle A.  SPX futures are flat near the high.  The Model suggests a possible 13-day decline into the week of November 15.  The anticipated decline is likely to stay above the lower trendline currently at 4360.00.  The September 2 high had all the signs of a major top, but was superceded by the continued liquidity flush through the system.  The next major Cyclical turning point may be between mid-January and early February.

ZeroHedge reports, “US stock futures were flat ahead of today’s Fed meeting, where the central bank is widely expected to announce the reduction of asset purchases with a majority of analysts expecting the Fed reducing its monthly purchases of Treasuries by $10 billion and mortgage- backed securities by $5 billion. Nasdaq 100 futures climbed 0.1% while S&P 500 and Dow Jones futures were little changed. Oil fell as the U.S. ramped up pressure on OPEC+ to boost supplies (which will bear zero results). The two-year Treasury yield was steady, while the 30-year rate shed two basis points. European stocks struggled for direction and the dollar fell less than 0.1%.

Despite turmoil in the bond market which sent the MOVE (or bond VIX) index to post-covid highs…

… stocks remain complacent and are likely not under stress “because we all think we know what will come out from today’s meeting: a gradual start of the tapering of the bond purchases program,” said Ipek Ozkardeskaya, senior analyst at Swissquote. A “taper announcement will likely be seamless, what may be less seamless is the rate discussion,” she wrote in a note.”

VIX futures remain range-bound as investors wait for the taper announcement.  A rally above 19.00 will clear all of the resistance points overhead.

ZeroHedge remarks, “Key Macro Week – Equity Vol Ignoring Rates Vol

As we have been pointing out lately, the MOVE vs VIX gap continues to trade very wide levels. BofA shows that the divergence is trading at unusual levels vs history:

“…equity vol and rates vol have decoupled recently is without precedent over the past 10 years”.

Will equity people, as they have so many times, chase VIX post the Fed?”

TNX futures challenged the revious low, but the cash market does not reflect it.  There is a possibility of a lower low today as the Cycles Model indicates a possible Trading Cycle low in the making.  However, the reversal to higher yelds is just around the corner.  This has all the earmarks of a classic short squeeze that may erupt into a breakout by mid-month.

ZeroHedge observes, “Heading into today’s Treasury refunding announcement, consensus expected Janet Yellen to trim the size of the coming quarterly debt sale by roughly $2 billion per tenor, the first such cut in long-term debt sales since Feb 2016. And, with the Fed set to announce a taper later today, its joint-venture partner in Helicopter Money, the US Treasury did precisely as expected (and precisely as one would expect in a time of tapering), when it said it would sell $120 billion of long-term securities at auctions next week, down $6 billion from the record $126 billion level seen over the past three so-called quarterly refundings, as it plans to reduce coupon auction sizes across all maturities.

Specifically, the Treasury will sell:

• $56BN of 3-year notes on Nov. 8, down from $58BN
• $39BN of 10-year notes on Nov. 9, down from $41BN
• $25BN of 30-year bonds on Nov. 10, down frrom $27BN.

The Treasury said the auctions will raise about $44.1BN in new cash.”

USD futures are edging higher this morning as the Master Cycle may run hot into new high next week.