2:50 pm
TNX has broken above its straight line resistance at 16.93 and appears to be challenging Cycle Top resistance at 17.39. It has been on a buy signal (UST sell signal) since it crossed above the 50-day Moving Average. The bond bust may be moving faster than anticipated.
ZeroHedge observes, ” The FOMC Minutes are considerably more hawkish than expected in terms of both the timing of the liftoff of rates and the pace of normalization of the balance sheet.
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Since December 15th’s FOMC statement, bonds have been battered, the dollar is down modestly while stocks and gold are up strongly….
Source: Bloomberg
The short-end of the yield curve has risen dramatically, pricing in the new hawkish dot-plot offered by The Fed (for 2022) with a 73% chance of Fed hikes by March 2022 now ((from 40% pre-FOMC)…
2:42 pm
NDX has declined beneath its 50-day Moving Average and is heading for its Cycle Bottom at 15657.15. The Scenario I mentioned this morning appears to be coming about. I am hesitant to call for a sell signal since the potential Wave (2) is incomplete. In addition, the potential Master Cycle is more than a week away. The Cycle Bottom is near the Ending Diagonal trendline originating from March 2020, so I will err on the careful side. and wait for further developments.
7:45 am
Good Morning!
NDX futures are performing poorly as they bounce overnight at Short-term support at 16176.00. Wave B may develop further, declining down to the Cycle Bottom support at 15664.21 before a last pile-on of BTFDers to rise to the Cycle Top resistance at 16748.42…and still not make a new high. The NDX Hi-Lo Index closed at 2.00.
Today’s QQQ (396.47) options are bearish beneath 400.00 with a downward pull should Short-term support break. Friday’s options expiration remains bearish beneath 399.00.
ZeroHedge reports, “After futures rose to a new all time high during the Tuesday overnight session, the mood has been decided more muted after yesterday’s sharp rates-driven tech selloff, and on Wednesday U.S. futures were mixed and Nasdaq contracts slumped as investors once again contemplated the effect of expected rate hikes on tech stocks with lofty valuations while waiting for the release of Federal Reserve minutes at 2pm today. At 730am, Nasdaq 100 futures traded 0.3% lower amid caution over the impact of higher yields on equity valuations, S&P 500 Index futures were down 0.1%, while Europe’s Stoxx 600 gauge traded near a record high. The dollar weakened, as did bitcoin, while Brent crude rose back over $80.
“The sharp rise in U.S. yields this week has sparked a move from growth to value,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. “Wall Street went looking for the winners in an inflationary environment and as a result, loaded up on the Dow Jones at the expense of the Nasdaq.”
SPX futures remained flat in the overnight session. While it made a nominal new high, the SPX may still decline further in Wave B. Depending on the depth of the decline, if any, the preliminary target of 5000.00 may come off the table. Traditional pensions, defined contribution plans and profit sharing plans all must make their annual contribution by January 15, or file an extension. This may be the last hurrah for money flows into equities for some time.
ZeroHedge remarks, “The consensus narrative for stocks this year seems to be clear: Watch inflation and central banks’ reaction to it amid slowing global economic growth. But that means a lot of moving parts and when the seasonal strength in January ebbs, the path to further gains this year might not be so easy.”
VIX futures rose in the overnight session, still rangebound beneath mid-Cycle resistance at 18.56. Above that level may be considered an aggressive buy, while above the 50-day may confirm that signal. Note that the VIX has back-tested the Ending Diagonal trendline at its Master Cycle low yesterday (day 265).
TNX has also consolidated in place as the next Trading Cycle low may be due this weekend. The uptrend is not being challenged by this minor Cycle. However, the breakout may be delayed until next week as trending strength returns.
USD futures pulled back to 96.00 as it consolidates after two days of gains. The uptrend ay remain intact through the second week of February. A likely target for this upsurge appears to be the 61.8% retracement of the 2020 decline at 98.30.
Crude oil futures rose to 77.82 in the overnight session, topping out the potential last day of strength in this bounce. The Cycles Model calls for a decline into the last day of January as it completes the correction.
ZeroHedge observes, “Oil prices rallied today with WTI erasing all of the post-Omicron losses after OPEC+ agreed to revive more halted production as the outlook for global oil markets improved, with demand largely withstanding the new coronavirus variant.
Global fuel consumption continues to recover from 2020’s collapse. There’s rising traffic and factory activity across key Asian consuming countries and dwindling crude inventories in the U.S., buoying oil prices to nearly $80 a barrel in London.”