December 9, 2021

8:30 am

Good Morning!

SPX futures are in decline, approaching the aggressive sell level at 4675.00 (sound familiar?)  Confirmation may come at the Short-term and mid-Cycle supports at 4642.56.  Apparently a 3-day short-covering rally does not sho on the Cycles Model for the SPX, nor does it register on the VIX Model.  The Cycles appear to be telling us that the decline may resume.

ZeroHedge reports, ” After three days of torrid gains, US futures and European markets fell as concerns about economic risks from restrictions to control the new variant outweighed optimism about the efficacy of vaccines after a study from Japan found that the omicron variant is 4.2 times more transmissible (as largely expected) in its early stage than delta. Both S&P 500 and Nasdaq futures dropped around -0.4% as traders awaited earnings from Broadcom, Oracle and Costco after the market close and tomorrow’s key CPI print, while European equities drifted lower in quiet trade with little fresh news flow to drive price action.

Uncertainty about monetary policy could keep stocks “significantly volatile,” according to Pierre Veyret, a technical analyst at ActivTrades in London. “Investors are likely to remain cautious and keep on monitoring the macro outlook, especially today’s U.S. initial jobless claims, in order to gather more clues on what and when could be the Fed’s next move,” said Veyret.”


VIX futures rose to an overnight high of 20.81, thus far.  The Cycles Model calls for the next interval to be in the last week of December.  Should the Wave structure be correct, Minor Wave 3 may be 3-5 times the size of Wave 1!  We’ll discuss actual targets as this rally unfolds.  VIX Guy may have made the same error that I had, referring to the lower 5-month”Head & Shoulders” at 28.79.  It faked both of us out.  However, the Cycles Model pointed to Friday’s high at 35.32, since necklines usually fall at the top or bottom of Wave 1, giving us an 11-month formation, which is ignored by many technicians.

ZeroHedge remarks, “VIX guy continues nailing it

NASDAQ futs unch, SPX futs unch. What is the vol of that? As a reminder, this is what our favorite VIX (inverse) indicator told us a week ago (here):

“His main idea was to buy VIX here. Needless to say we are starting to sell volatility here. One way to play it is via put spreads in VIX. After all, volatility is mean reverting and our VIX guy has continued holding the perfect 100% inverse track record. Will he nail it again?”

Here we are with the VIX having crashed and it continues moving lower today. Dealers are in long gamma, and unless this moves asap, they will add to vol selling as well as funds getting involved in overwriting stuff post the squeeze move. Chart showing the VIX as well as the 2/8 months spread imploding.


The NYSE Hi-Lo closed between the 50-day Moving Average at 54.36 and mid-Cycle resistance at 77.03.  Monday would have given a Hi-Lo buy signal, having crossed above the Cycle Bottom at -116.00, but I had looked at the absolute below zero reading and failed to point that out.   My error.  Compounding this, neither the SPX nor the VIX Models gave a buy signal.


TNX is testing the mid-Cycle support at 14.85.  It may decline further as it is due for a minute retracement.  Should it decline beneath that level, the 100-day Moving Average at 14.30 may hold.  Today would be day 253 of the (early) Master Cycle which was registered last Friday.  I am not expecting further lows. but the window for another low has not slammed shut yet.

ZeroHedge observes, “If you asked your bank manager for a loan, the rate you will be offered will vary proportionally with not only how much you borrow, but also how long you borrow for. That, of course, is a no-brainer since the longer the bank is willing to lend to an individual, the greater the risk of something going wrong. Mainly, they encompass credit and inflation risks, and in the case of institutional investments, liquidity as well.

Yet, in the market for Treasuries and several other major developed markets, investors have recently become indifferent to the risk surrounding the longevity of their loans to governments. In other words, they are essentially saying, there is no more inflation risk in lending to Uncle Sam over, say, 10 years than there is when lending for a far shorter period. That is a massive irony against a backdrop where inflation is Le probleme du jour.



USD futures have bounce back above the Cycle Top support at 96.02.  It appears that USD may continue to ride the Cycle Top support higher with increasing strength towards the end of December.


The Shanghai Composite Index may be making an early Master Cycle high at 3688.40 today (day 245).  The Cycles have been punctuated with some dramatic moves this past year, evidence of a “managed” economy.  Plastering over the rot with more liquidity only makes the economy more unstable.  Having challenged the Cycle Top resistance, the new Master Cycle can only decline to the Cycle Bottom or lower by the end of Janusry, the next Master Cycle interval.

ZeroHedge remarks, “This is the way Evergrande ends: not with a bang but a whimper.

Three months after an initial shockwave of fear that China’s largest and most indebted property developer was set to default, roiled global markets only to see the company repeatedly kick the can on several occasions even as the final default was always just a matter of when not if (due to billions in interest payments and tens of billions in upcoming debt maturities), overnight ratings agency Fitch (with Moodys and S&P set to follow shortly) officially downgraded insolvent property developers China Evergrande Group and Kaisa Group, saying they had defaulted on offshore bonds.

The downgrades to so-called “restricted default” status came days after the companies failed to make an offshore bond interest payment, even though Evergrande and Kaisa have not officially announced defaults that will result in drawn-out debt restructuring processes and potentially nationalization.”


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