SPX is fast approaching its mid-Cycle support at 4660.00 where a sell signal may be made. The experience of the past two weeks can be called a shake-out, where weak players make a hasty exit as the are caught wrong-sided. There are some very smart analysts that are now in the red.
ZeroHedge observes, “Update (1330ET): Well that de-escalated quickly… Nasdaq and Small Caps have now erased all of yesterday’s post-Powell gains…
2:00pm: AAPL Erases Post-Powell Ramp
ZeroHedge observes, “Update (1300ET): AAPL has erased all of its post-FOMC gains…
And is dragging the rest of the market – led by Nasdaq – down with it…”
NDX appears to have started its decline ahead of the SPX. It has already crossed beneath Intermediate-term support at 16170.44 to give an aggressive sell signal. Confirmation lies at the crossing of the 50-day Moving Average at 15821.13. While the generals appear to have played a part in the rally, the NDX Hi-Lo is stalled at 20.00. It could easily go negative should the NDX continue its descent.
ZeroHedge explains, “Well, as STIRs spiked and the yield curve and the dollar screamed policy mistake imminent, stocks soared yesterday. It appears the hangover has finally kicked in this morning as stocks dump the gains back in a hurry…
And it is worst at the single-name level – just look at AAPL…
Crucially, Nomura’s Charlie McElligott notes that yesterday’s euphoria was almost entirely due to the Vol space and flows driven by Dealer hedging of their exposures.”
The Cycles Model does not call for a new all-time high here. I have said that a number of times already. This is one of the strangest formations that I have seen. The reason is that there are multiple possibilities for interpretation. This one agrees with the Cycles Model. Elliott Wave rules also suggest that Wave two may rise to, but not exceed the beginning of Wave one. While the VIX and Hi-Lo have both given up their signals this morning, that would not be unusual for this pattern. I have no other explanation that fits all of my Models. This morning’s high hit an hourly Cycle pivot, but we may see another possible attempt at a new high this afternoon around 2:00 pm to complete Wave [v] of C. That may bring precision to the Cycle, giving us 8.6 days of decline and 8.6 days of rally.
SPX futures made a new all-time high at 4752.00 this morning, changing the perceived structure of the Elliott Wave, which has been problematic for the past three weeks. However, the new outlook resolves several issues I have had with it. For example, the decline in Wave B was overlapping and difficult to ascertain. This version allows that structure. The Wave Structure allows the SPX to rally to the top trendline of the Ending Diagonal at 5000.00, possibly higher in the next two months. Possibly the biggest Santa Rally ever has just begun.
ZeroHedge reports, “One day before what everyone knew would be a hawkish pivot by the Fed, the mood was dour with tech names tumbling and futures hanging one for dear life. One day after, Jerome Powell confirmed he would go full Jean-Claude Trichet as the Fed would not only turbo-taper into a sharply slowing economy, ending its QE program by March but then proceed with hiking rates as many as 3 times in 2022 (more than the 2 hike consensus), with the BOE shocking markets moments ago with a surprise rate hike and even the ECB trimming its turbo QE, and futures are…. at all time highs. That’s right – eminis are higher by 140 points in 24 hours because the Fed was more hawkish than consensus expected. At 8:00 a.m. ET, Dow e-minis were up 215 points, or 0.61%, S&P 500 e-minis were up 27.25 points, or 0.57%, and Nasdaq 100 e-minis were up 100 points, or 0.61%.”
VIX futures fell, challenging the 50-day Moving Average at 19.18 and the mid-Cycle support at 18.52, before bouncing. It appears that the next support may be the upper trendline of the Ending Diagonal near 17.00.
The amazing thing is that the NYSE Hi-Lo made a new low yesterday. Since the buyback programs are winding down, it must be that investors and hedge funds have agreed to continue chasing the top5 “generals.” The rest of the market appears to be on its back.
TNX is consolidating beneath the 100-day Moving Average at 14.39. It comes as a surprise that TNX doesn’t know what to do with the Fed announcement.
ZeroHedge may have the answer, ” After the U.S. Federal Reserve’s expected hawkish pivot last night, it’s now down to the European Central Bank and the Bank of England to address surging inflation. Their decisions will have a big impact on banking stocks, which have strongly outperformed in 2021.
Banks have gained almost 30% this year, vying with technology stocks as the top sector, amid strong results and as stickier-than-expected inflation has fueled rate-hike expectations. A hawkish tilt in monetary policy heading into 2022 is what the sector needs to keep its rally going.
“Banks are the key play on potentially rising yields and on the re-steepening of the yield curve next year,” say JPMorgan strategists led by Mislav Matejka.”
USD futures made a new low at 95.81 tin the overnight session, prolonging the corrective pattern. A possible target for this decline may by the Intermediate-term support at 95.48.