2:27 pm
I made a statement in error this morning. I claimed that there was no Master Cyce terminus in the next two weeks. I was wrong. I tagged the November 5 high as the end of the Master Cycle on day 246. However, today is day 256 and the targeted date of a possible low is too near options expiration for comfort. It is possible that the decline to the trendline from March 2020 may be tested on Wednesday November 17 or breached on or near day 262 or 263, early in the week after options expiration. This implies massive pain for the bullish options punters and a possible $2.6 trillion of “low hanging fruit” for Wall Street. If you are a trader, you may wish to go aggressively short until Wednesday and see how deep this decline may take us.
Another short seller bites the dust as ZeroHedge comments, “Up until now, “the big short” Michael Burry was best known for periodically and inexplicably nuking his twitter account before promptly restoring it. Now, we can also his investment portfolio to the list of things the famous subprime shorter tends to nuke every now and then.”
8:15 am
Good Morning!
SPX futures have risen to 4699.00 this morning as it completed its corrective phase of the decline. The hourly Cycles Model suggests a reversal in the first hour of the day. Otherwise, the SPX may rise to a new all-time high. Today’s and Wednesday’s options expiration are light, but Friday’s opex is massive, with over 30,000 SPX call contracts at 4700.00. In all, there are $2.6 trillion maturing calls by Friday, which Wall Street does not want to pay. This suggests a Wave B decline down to the trendline at 4425.00, or possibly lower duirng and shortly after options expiration. There is no Master Cycle terminus in the next two weeks, suggesting that the uptrend may be maintained.
ZeroHedge reports, “US equity futures resumed their upward climb (after Goldman quadrupled down on its call for a massive, year-end meltup driven by $15BN in inflows every single day) as major technology stocks advanced, and as investors awaited a slew of retail earnings and economic data this week to gauge the health of consumer spending while keeping an eye on runaway inflation. Better-than-estimated profit growth has led to a rally in markets, helping ease recent concerns over the hottest U.S. inflation in 30 years. At 730 a.m. ET, Dow e-minis were up 94 points, or 0.26%. S&P 500 e-minis were up 9 points, or 0.20% and about 20 points from their all time high around 4,711; while Nasdaq 100 e-minis were up 30.5 points, or 0.19%.”
VIX futures are rising, suggesting a possible turn may be at hand. All three overhead resistance levels appear to be converging at 18.85. A breakout here would propel the VIX up to, and possibly above the Head & Shoulders neckline. Despite the lack of an SPX Master Cycle, the VIX proposes a possible Master Cycle terminus early next week. This introduces the idea of a recurring volmageddon, as described below.
CharlesHughSmith observes, “It makes perfect financial sense to crash the market and no sense to reward the retail options marks by pushing it higher.
An extraordinary opportunity to scoop up mega-millions in profits has arisen, and grabbing all this free money makes perfect financial sense. Now the question is: will those who have the means to grab the dough have the guts to do so?
Here’s the opportunity: retail punters have gone wild for call options, churning $2.6 trillion in mostly short-term calls–bets on gains now, not later. This expansion of retail options exposure is unprecedented not just in its volume but in its concentration in short-term bets (options that expire in a few days) and in mega-cap tech companies that are commanding rich premiums for options.”
TNX rose above its Intermediate-term support at 15.59. However, the Cycles Model shows no strength until the end of the month. That indicates either a modest rally or a possible further pullback to the 50-day Moving Average at 14.89 before resuming its rally.
ZeroHedge opines, “Un-Orthodoxy
“Rising inflation and growing government debt may not seem like the natural ingredients to lower longer-term real yields,” explained Marcel, our Head of Research, our investment team thinking through the opportunities that arise when the vast majority of people dismiss perplexing market movements as being illogical when in fact, they may reflect a paradigm shift. “Yet here we are – longer-term real yields set a historic low last week. It is not that the market has given up the idea of orthodoxy. To the contrary, inflation is imposing orthodoxy on people’s behavior. Despite low interest rates, high asset prices, and record job openings, consumers believe it is the worst time to buy a car ever and the least attractive time to purchase a home since 1982. Demand is strong. Supply is constrained. Prices gains are required to ration demand. This is orthodoxy, just not the variety we are accustomed to.”