December 13, 2021

1:48 pm

NDX is challenging mid-Cycle support at 16132.39, potentially confirming its sell signal a second time this month.  Last Monday’s 5.6% rally deflated the shorts, but this time the decline may be much more convincing.  The NDX Hi-Lo Index is at -171.00.

ZeroHedge observes, “Is the reality of a tightening Fed really starting to sink in?

The market has priced a full rate-hike in for June 2022 (which means the taper is expected to accelerate from the current pace)…

‘Bubble’ markets are tanking…

 

11:09 am

BKX, our liquidity proxy, is testing its mid-Cycle support at 129.24 this morning.  A breakdown here would add fuel to the flames of the sinking equities market.  It reversed from its Cycle Top resistance on November 20 and declined under its 50-day Moving Averae on November 25.  It has gone sideways for nearly three weeks, so there is only a minimal interest in shorts the banking index.  Inflation is no friend of the banks.

ZeroHedge remarks, “According to The New York Fed’s latest survey, the public’s short-term expectations for inflation surged to 6% – a new record high.

Interestingly, longer-run expectations for inflation eased a bit in November (for the first time since June).”

 

10:50 am

VIX did not linger near Friday’s low this morning.  In fact, VIX is back on the buy signal with a monstrous Wave 3 of (C) of [3] underway.  That combination of third Waves (C is considered a third Wave, as well), may double the Wave 3 of (C) of [1].  Remember, Wave three is never the smallest Wave and often a multiple of Wave one.  Since its predecessor Wave 3 was over 40 points, this Wave 3 may be as much as 80 points.  It may make a target of 100.00 a possibility by the end of December.

RealInvestmentAdvice observes, “Multiple waves of uncertainty have swept over Wall Street in the past month: concerns about rising wages and inflation, Federal Reserve turning more hawkish, and the Omicron variant becoming widespread.  These increasing waves of uncertainty drive rising implied volatility (VIX).  The following chart shows the 200-week moving average of VVIX (Volatility of VIX) has slowly moved upward since the March 2020 correction.

liquidity crunch, A Liquidity Crunch & Volatility Surge is Coming in 2022

Source: Patrick Hill – 12/7/21

Note how the Bollinger Bands (pink and tan) for 2 and 3 standard deviations have dramatically expanded in the last few weeks.  We expect with all the uncertainty heading into 2022 that high volatility will be the new normal for markets.

 

10:45 am

SPX broke through the Ending Diagonal trendline at 4685.00.  Last week it was estimated at 4665.00 to 4675.00.  The inference is that SPX may now decline beneath 4500.00, where the correction began.

ZeroHedge remarks, “All of a sudden, things went just a little bit turbo since BoJo warned of a “tidal wave” of Omicron cases

As US equity cash markets open, stocks were pummelled lower…

AAPL – the market’s very foundation – was unable to get to $3 trillion in the pre-market, and is falling back to unch…”

 

8:45 am

Good Morning!

SPX futures are making new highs this morning, having closed above 4700.00 on Friday. SPX still appears to be dominated by the options market, although its hold may be waning.  Today’s options expiration show positive gamma above 4725.00, neutral gamma between 4675.00 and 4725.00 and  negative gamma under 4675.00.  A Fibonacci resistance lies at 4730.00.  Should that resistance be overtaken, the Cyclical resistance lies at 4750.00-4755.00.   The Cycles Model shows today as being a day of strength.  Should it not propel the SPX to a new all-time high, then the trend is down through the last week of January.  Everything appears to be hinged on today’s action.

ZeroHedge reports, “U.S. futures rose again, starting the Santa rally predicted over the weekend by Goldman, after the underlying index surged to a record on Friday with risk appetite returning ahead of this week’s barrage of central bank meetings including the Fed on Wednesday, followed by the Bank of England and ECB. Nasdaq 100 futures climbed 0.4% as major technology and internet stocks rose in premarket trading with Apple inching closer to a $3 trillion market valuation; S&P 500 futures rose 11 points or 0.2%; with Dow Jones futures also rising 0.2%.”

 

VIX futures bounced above the 50-day Moving Average at 19.26 in what may be up to three weeks of growing strength into the last week of the year.  Should the neckline be overcome at 35.32, we may see the VIX probe to 65.00 by the end of the year.   This formation clearly foretells that equities may be in the downtrend discussed above.

 

The NYSE Hi-Lo Index struggled for traction the entire day on Friday, closing below zero and on a sell signal.  This indicator tells us there is only a thin layer of mega-caps keeping the market from breaking through the ice into the abyss.  It appears that, although today’s equities may go higher, the house is being built on shifting sands.

ZeroHedge remarks, “The S&P 500 Index is the ‘most concentrated’ since 1969.

Source: Bianco

Concentration Nirvana

Did you know that 64% of 23% YTD gain in Nasdaq (3780 stocks) is attributable to 5 stocks only. Mighty Microsoft/Google/Apple/Nvidia/Tesla must not fall…

 

TNX may be declining toward the 100-day Moving Average at 14.34, near the 50% Fibonacci retracement level at 14.40.  The 61.8% Fibonacci retracement lies at 14.17.  This action may be indication that liquidity  may be migrating out of stocks and into Treasuries.

 

 

 

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