8:00 am
Good Morning!
SPX futures have declined to a morning low of 4670.80. It has already tested overhead (Short-term) resistance at 4689.02 and has since reversed. Should investors attempt to hold the line at 4652.66, there may be another attempt at Short-term resistance. Few commentators are worried, although SPX made its closing high on November 18 (day 259) and it’s all-time intraday high on November 22. From Monday’s high virtually all equities indices made a key reversal, also indicating a probable top. The Cycles Model indicate a probable 2-month decline into the last week of January.
ZeroHedge reports, “For the third day in a row, US equity futures have been weighed down by rising (real) rates even as traders moderated their expectations for monetary-policy tightening after New Zealand’s measured approach to rate hikes where the central banks hiked rates but not as much as some had expected. Traders also braced for an epic data dump in the US, which includes is an epic data dump which includes an update to Q3 GDP, advance trade balance, initial jobless claims, wholesale and retail inventories, durable goods, personal income and spending, UMich consumer sentiment, new home sales, and the FOMC Minutes The two-year U.S. yield shed two basis points. The dollar extended its rising streak against a basket of peers to a fourth day. At 730am, S&P 500 e-mini futures dropped 0.3%, just off session lows, while Nasdaq futures dropping 0.34%.”
The NYSE Hi-Lo Index made a new low not seen since March 2020. The Orthodox Broadening Top formation is now being activated to decline to Point 8. Its average target indicated as many as 80% of all NYSE stocks may make a new 52-week low, possibly by the end of January. The Cycles Model shows a potentially complex decline with a possible Master Cycle low near December 8. A potential Christmas rally into options expiration on December 17 is also indicated. The SPX Cycles do not confirm the Master Cycle low in December, but both agree on the second Master Cycle low in the last week of January.
VIX futures consolidated inside yesterday’s trading range, with a positive result. VIX peaked 13 (12.9) days from the Master Cycle low and may be due for a pullback to retest resistance (turning to support) at 18.37. VIX is on a buy signal.
TNX beat yesterday’s high at 16.69 by a point, but may decline for the rest of the week. We may see TNX revisit the 50-day Moving Average at 15.30 before marching higher next week.
ZeroHedge reports, “After two ugly auctions to start the holiday-shortened week on Monday, when both the 2Y and 5Y auctions tailed badly amid overall poor demand, traders were understandably nervous about the outcome of today’s $59BN sale of 7 year paper: after all, it was the catastrophic 7Y auction back in February that started a cross-asset rout in both bonds and stocks which lasted for weeks and led to billions in losses across various macro investors.
In retrospect, there was no reason to be nervous because moments ago the Treasury announced that the 7Y auction priced at a respectable 1.588%, which while the highest since Dec 2020 as expected, stopped through the When Issued 1.598% by 1 basis point – this was the first stop through since June, and followed four consecutive tailing auctions.
The Bid to Cover was just as solid, rising from 2.245 in Oct to 2.424, the highest since August 2020, and well above the recent average of 2.305.”
USD futures made a new high at 96.88 in the overnight session. There may be a brief revisit of the Cycle Top support at 95.34 by the weekend as activity takes a breather in the markets. However, new strength emerges new week that may last to the middle of January.
The GSCI Ag Index continues its rise toward its April high at 474.12. A breakout is likely, as the Master Cycle may continue higher until mid-December. A possible minor pullback over the next few days may be indicated. However, strength may return in early December through the end of the Master Cycle.
ZeroHedge observes, “The real trouble will start when this year’s energy crisis morphs into next year’s food inflation problem.
We’ve all become armchair inflation experts. And why not? It’s almost impossible for anyone to keep getting it as systematically incorrect as professional economists have done this year.
It’s time for the conversation to move beyond the current obsession with eye-catching headline numbers. That we’re in a global inflation regime of a kind not seen for decades, is beyond doubt.
Interest in supply chains is at a 17-year high, according to Google Trends, but it has become a red herring when it comes to forecasting the persistence of inflation.”
Gold futures are taking a breather after two days of nastiness. We may see a retest of the 50-day Moving Average at 1793.61, or possibly Intermediate-term resistance at 1805.01. However, a reaction to this decline may arrive on Friday that will indicate whether a change in sentiment is due, or will the bear continue? The Cycles Model indicates that the trend may continue until the first week of January.