SPX futures are mildly positive this morning. As of Friday’s low the SPX Cycle has gone 8.6 days from the January 11 peak at 4818.62. It is now at a major crossroads. The chart above shows the bullish view, showing the SPX rising to 4920.00 or higher by the end of the month in a Broadening Wedge formation. Last week’s decline did not make a new low, raising the probability that this may be the outcome.
Tomorrow’s options expiration may guide us. SPX options are negative beneath 4675.00 with negative gamma at 4625.00 and below. Max Pain is at 4680.00. Options turn positive abruptly at 4685.00 with positive gamma at 4700.00 and above. The 50-day Moving Average is at 4679.65, which may be the demarcation guide for tomorrow’s outlook.
NDX futures remain flat this morning. NDX also did not make a new low on Friday, although the options are clearly in negative territory beneath 16000.00. Should NDX remain beneath the trendline at 15600.00 and make a new low tomorrow, it may pull the other indices substantially lower. NDX appears to have made its Master Cycle low on January 10 (day 253). This is out of sync with the SPX, which is ending its current Master Cycle next week. However, the two indices appear to sync back up at the end of February.
TNX futures rose to 17.93, above the Cycle Top support/resistance at 17.64 and threatening the January 10 high. Note that the NDX Master Cycle low occurred also on January 10. Should we see a breakout in the next few days, the path for equities will become clear, as well. Everything is interconnected. Unfortunately, most analysts don’t see the whole picture.
ZeroHedge comments, “The Devil Is in the Details
The first two weeks of the year have reinforced the key message from our 2022 Strategy Outlook – the policy training wheels are indeed coming off, and fast! The hawkish shift in the minutes of the FOMC’s December meeting, reinforced by the rhetoric from a number of Fed officials, signals policy tightening through more hikes. They are coming sooner than expected, and the timeline between the first rate hike and the beginning of balance sheet runoff will be compressed. Our economists now expect the Fed to deliver four 25bp hikes this year, at its March, June, September,and December meetings, in addition to an August start for the balance sheet runoff announced last July. Market pricing already reflects this hawkish shift, with the March liftoff nearly fully priced in along with 3-4 hikes in the subsequent 12 months.