November 5, 2021

10:00 am

The GSCI Ag Index is in a pullback, which is counter-intuitive while equities are melting up.  The 43-week Moving Average at 410.55 puts a baseline under the uptrend, limiting potential pullbacks.  The 50-day Moving Average is at 417.17, giving intermediate-term support.  The chart is telling us that we could see food prices doubling in the next year.

ZeroHedge remarks, “In October, global food prices continued climbing higher for the third straight month, hitting fresh decade highs, led by vegetable oils and cereals. Higher food costs contribute to more inflationary pressures for the working poor, central banks, and governments.

The UN’s Food and Agriculture Organization’s food price index, which tracks a basket of food commodities, averaged 133.2 in October, up 3.9 points (3%) from September and 31.8 points (31.3%) from October 2020. The index has risen three consecutive months and is now at a new decade high (could hit record highs in 2022).

World vegetable oil and cereal prices were the two biggest movers in the index. Edible oils jumped 9.6% on the month to set a record high. Cereal prices rose 3.2%, within the basket, wheat jumped 5%. ”

 

9:40 am

BKX, our liquidity proxy, is also in its final stage of Primary Wave [5].  The Cycle Top is at 147.33 which may be reached imminently.  In the daily chart, it will have the appearance of a throw-over, a final panic rally for those who have waited for the “sure thing.”

 

8:30 am

Good MOrning!

Sometimes the big picture is helpful in determining where we really are in the markets.  The Weekly chart shows several items.  First, we are now within reach of the weekly Cycle Top at 4736.00.  One of the Cycle rules is that the index always reaches for the Cycle Top in its final probe.  The daily chart shows a throw-over due to the steep final rally, so I went to the weekly chart to gain perspective.  Second, the weekly chart illustrates the magnitude of the rally.  This is a Primary Wave [5] that can only fit on a weekly chart.  Third, the Orthodox Broadening Top formation shows that the markets have a long way to decline.

SPX futures reached a morning high of 4703.40.  Keep in mind the weekly Cycle Top should you be tempted to go long this morning.  Today is day 246 in the current Master Cycle.  A bit early but within the parameters of a reversal.

ZeroHedge reports, “US index futures continued their relentless meltup on the last day of the week, before today’s jobs report which is expected to bounce strongly from last month’s disappointing print (exp. 450K, up from 194K), and could set the pace for the Fed’s taper into 2022 if it is too much of an outlier in either direction. At 730am, e-mini S&P futures were up 8.25 or 0.18% to 4,681.5, a new all time high; Nasdaq futures rose 48 points or 0.29% and Dow futures were up 35 or 0.1%. 10Y yields were flat at 1.53% and the dollar index jumped, while Brent traded just above $80 after yesterday’s rout.”

 

 

VIX futures remained range-bound just above its three-year trendline.  A back-of-the-napkin calculation shows that it may go to the vicinity of 14.50 before reversing.  An Intermediate Wave (C) of a Primary Wave [3] will be a powerful Wave that may reach as high as 175.00 in the next 4-6 months.  Your eyes aren’t deceiving you…175.00.  At that point, the powers that be are likely to declare the VIX broken.  The VIX isn’t broken.  The system is.

 

TNX is now challenging Intermediate-term resistance at 15.43.  Today it is capable of a breakout to new highs as we begin the final two weeks of its Master Cycle.  It is noteworthy that I mentioned that this retracement should approach the October 11 low at 15.07.  Although the treasury shorts have had their weaker hands taken out, those that remain may be vindicated.  The current Master Cycle runs through November options expiration.

ZeroHedge observes, “After two months of dismal job reports, the BLS finally redeemed itself when moments ago it reported that in October the US gained some 531K jobs, well above the 450K consensus exp and above the 500K whisper number. The gain in payrolls was also bigger than all but 10 of the 75 forecasts in Bloomberg’s survey.

Remarkably, the private payrolls print was a stellar 604K, with government jobs shrinking by 73K in October. Just as importantly, the Sept print was revised solidly higher, from 194K to 312K, as was August, up from 366K to 483K. With these revisions, employment in August and September combined is 235,000 higher than previously reported.”

 

USD futures ran up to 94.64 this morning, just short of a second breakout above the Cycle Top.  This is the mark of a Wave 3.  The current Master Cycle has a week to go and may show unusual strength.

 

 

 

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