On a periodic basis I check the 2-hour, daily, weekly and monthly charts for consistency. One of the problems with hourly and even daily charts is “drift,” where trendlines, formation outlines and even labels tend to become out of sync with their appropriate positions. Today was one of those times where I found that the daily chart shows the 20-month trendline from March 2020 at 4510.00, where the bounce occurred. I have remedied that error in the 2-hour chart.
This tells us to prepare for a potential bounce tomorrow morning. If not, all the better, but SPX is in negative gamma territory all the way up to 4620.00. The 61.8% Fibonacci retracement is at 4598.47, which still leaves it under the influence of negative gamma.
SPX bounced off the 50-day Moving average at 4531.70. It may save the move lower for the overnight session. The NYSE Hi-Lo Index is at -131.00. In addition, the SPX is in negative gamma territory (dominated by puts) beneath 4620.00.
ZeroHedge observes, “Update (1420ET): Reports that the Omicron variant has arrived in the US sent stocks and bond yields legging further down…
The Dow and Nasdaq just joined Small Caps in the red for the day…
And 30Y Yields are down 8bps from their intraday highs, back at yesterday’s lows…”
VIX broke through the neckline of the Head & Shoulders formation. Should start rocking over night.
SPX rose above mid-Cycle resistance at 4627.00 due to a large call option position at 4640.00. However, it appears that the “pull up” may not be strong enough to sustain the bounce. Once the mid-Cycle support goes, the 50-day Moving Average at 4531.52 may be the next test.
VIX is now rising from its Cycle Top at 23.17 and the Hi-Lo Index, which opened at 5.00 is now at -17.00. There seems to be no confidence in this rally.
ZeroHedge explains, “As expected, yesterday’s bearish month-end rebalancing which saw over $8 billion in MOC for sale orders has given way to the traditional strong December equity inflows, sending futures sharply higher.
So now that reflexive fund flows have reversed and the narrative is quickly changing to one where both the bearish Omicron and Powell developments have been mitigated, at least according to today’s price action, the question is what comes next.”
SPX futures bounced back to test Intermediate-term resistance at 4622.75as it establishes new support and resistance boundaries. The decline thus far has been a stair-step affair with overlapping Waves. Two nearby supports have yet to be challenged, the 50-day and the 20-month trendline. The current Cycle has another 8 days to go, and the decline may be starting its panic phase, despite the steep retracements.
ZeroHedge reports, “Heading into yesterday’s painful close to one of the ugliest months since March 2020, which saw a huge forced liquidation rebalance with more than $8 billion in Market on Close orders, we said that while we are seeing “forced selling dump into the close today” this would be followed by “forced Dec 1 buying frontrunning after the close.”
And just as expected, despite yesterday’s dramatic hawkish pivot by Powell, who said it was time to retire the word transitory in describing the inflation outlook (the same word the Fed used hundreds of times earlier in 2021 sparking relentless mockery from this website for being clueless as usual) while also saying the U.S. central bank would consider bringing forward plans for tapering its bond buying program at its next meeting in two weeks, the frontrunning of new monthly inflows is in full force with S&P futures rising over 1.2%, Nasdaq futures up 1.3%, and Dow futures up 0.9%, recovering almost all of Tuesday’s decline.”
VIX futures declined to a low of 23.47, remaining above Cycle Top support at 23.14 as it prepares to vault above the Head & Shoulder neckline. The current Master cycle may run to the end of December, so there is time for a breakout above the Head & Shoulders neckline.
CharlesHughSmith relates, “ne of the most famous examples of smart people being sucked into a bubble and losing a packet as a result is Isaac Newton’s forays in and out of the 1720 South Sea Bubble that is estimated to have sucked in 80–90% of the entire pool of investors in England.
Some have claimed that Newton did not buy early in 1711, sell in April 1720 for a nice profit and then sink the majority of his substantial fortune in the bubble as it peaked in summer, then suffering heavy losses as the bubble popped in September, but evidence supports this chain of events.
Newton “bought the dip” on the way up and then added to his position as the mania rolled over, making his final fatal purchase as a “buy the dip” just before the “last chance to exit” spike — which is precisely the point the current bubble has finally reached, when everyone is all in and “buying the dip” to increase the profits that everyone agrees are essentially guaranteed because the Fed.”
The NYSE Hi-Lo Index opened in the negative and became more so throughout the day yesterday. The story being told here is that shares of a lot of companies are being distributed to eager speculators willing to buy the dip. The Cycles Model suggests the Hi-Lo may see a bottom next week, which implies a bounce during options week. However, there appears to be no corresponding Master cycle low in the stock indices or in the VIX.
TNX futures surged to 15.06 this morning, challenging the mid-Cycle resistance at 14.92 before puling back at the open. It has begun an Intermediate Wave (C), which, by any standards, is coming on strong and fast. The Cycles Model suggests a cotiued rally through the week of January 15.
USD futures consolidated above Cycle Top support at 95.64 in the overnight session. By staying above that support, the uptrend is preserved. The Cycles Model suggests a continued uptrend to mid-January.
BKX broke through its 13-month trendline yesterday, strengthening the sell signal already confirmed beneath the 50-day Moving Average. The implication is that the entire rally from March 2020 is in danger of being retraced. It is in day 224 of the 258-day Master Cycle, leaving more than a month to go for the next low.
Gold futures bounced this morning to test the 50-day Moving Average at 1790.26. The decline is still underway with a Master Cycle low anticipated during the week of December 13. The Broadening Wedge trendline at 1760.00 is is under consideration to be broken with a possible support at the Head & Shoulders neckline at 1680.00 for the next Master Cycle low.