January 19, 2022

4:05 pm

Is this time different?

Wishfully thinking, ZeroHedge comments, “It’s crunch time for the buy-the-dip crowd.

The S&P 500 is threatening to close below its 100-day average — having already slipped below that measure intraday Tuesday for the first time in more than three months.

Drops through moving averages can be seen as concerning because they may signal a change in momentum — but in this case, buying the next day has been an almost sure-fire winner for the past 19 months.

Since June 2020, the benchmark has closed below its 100-day average eight times, data compiled by Bloomberg show. Three of those instances, it never traded lower after that, even intraday, and three times there was never a lower close after. One of the occurrences there was one lower close — by 0.03% — before it headed higher, and the worst time was one close 0.16% lower before it recovered, the data show.”


1:06 pm

This is the hour the Cycle was meant to turn.  It appears that SPX could not get above the options “logjam” at 4600.00.  That leave SPX in a short gamma position…about to resume its decline.  If my hourly Cycle calculations are correct, this Wave 3 decline may last through the open on Monday.  The final low for this Master Cycle may be late on Wednesday, day 259, or Thursday next week.  It’s time for the longs to panic.

ZeroHedge comments, “US equity markets just cannot catch a bid and are puking below critical support levels this morning:

The Russell 2000 is now down 4% on YoY basis (its first YoY drop since July 2020)…

And these shifts are starting to shake the unwavering bullish foundation that so many have stuck to in recent years as TINA is dead (bonds are now trading at their ‘cheapest’ to stocks in three years)…


11:55 am

VIX has finally broken above its previous high and emerged from a massive short gamma zone.  Gamma turns positive above 25.00.  This may create a self-reinforcing panic rally in VIX.  However, it is due for a pullback that may last through the end of the day.  It may revisit the Max Pain zone at 22.00 by the end of the day (monthly options expiration).


11:05 am

SPX aborted its rally in just an hour.  The hourly Cycle may have also been cut short.  It is possible that short gamma for today’s options expiration was simply too much to overcome.  SPX has also crossed the 100-day Moving Average at 4577.00.  My instinct and observations suggest the next 7 days may be a panic (literally).  Hang on!  This could be very exciting.

ZeroHedge observes, “US equity markets have given up all their overnight ramp gains with Small Caps back at the overnight lows (down 1% on the day). The Dow, S&P, and Nasdaq are back to unchanged…

This has pushed all the majors back to or below key technical support levels…

The S&P and The Dow have both broken back below their 100DMA, Nasdaq is pushing further below its 200DMA”


7:30 am

Good Morning!

NDX futures dove deeply to the mid-Cycle support at 15077.00, then bounced.  Should it retrace, the 50% level is at 15540.00.  It may go as high as the trendline in a retest near 15600.00.  The hourly Cycles allow about 4 hours to complete the retrace/retest.  In today’s options expiration, gamma is sort beneath 15400.00 and options turn positive at 15500.00.  For Friday’s (monthly) options expiration calls prevail above 15600.00.  The calls are thinning.  For QQQ (370.55) today’s Max Pain level is 372.00 while gamma turns positive at 378.00.  Friday’s monthly options expiration carries a Max Pain at 373.00.  There are a lot of long options at 375.00 and higher, as investors have bought out-of-the-money calls as long as a year ago.

The NDX Hi-Lo Index closed at -728.00 yesterday.

ZeroHedge remarks, “NASDAQ – welcome to must hold levels

NASDAQ futs are trading close to the huge 15k level. We are well below the 100 day moving average, sentiment is horrible, but 15k is basically the longer term make or break level. Note the 200 day around those levels.



SPX futures made an overnight low at 4544.10, having declined through the 100-day Moving Average at 4576.00.   Futures are positive as I write and expect to bounce for the morning session.  A most likely retracement would be to the top of Wave (iv) at 4655.13, not far from the 50% retracement level at 4659.16.

Today’s expiring options favor puts beneath 4650.00 while calls dominate at 4660.00 and above.  Max Pain appears be hover near 4655.00.  In Friday’s monthly options expiration, there is a massive logjam of both puts and calls at 4600.00.

ZeroHedge reports, “After what earlier looked like another assured overnight rout, especially after 10Y yields hit 1.90% and Brent rose as high as $89/bbl, US equity futures reversed earlier losses to trade higher as earnings optimism outweighed concerns over soaring bond yields and a 50bps March rate hike.  As of 7:00am ET, emini S&P futures were up 14 points ot 0.3% to 4,585, Nasdaq futures were up 65 points or 0.44% and Dow futures were also in the green by 89 points or 0.25%. The dollar slumped after several days of sharp gains, the 10Y yield traded at 1.8826%, down from the session’s highest levels, and Brent was at $88.23.


The NYSE Hi-Lo Index closed at -202.00 yesterday, the lowest reading thus far in 2022.  What that means is that the bounce in the SPX may only be a short squeeze.  Once the powder runs out, the panic begins.


VIX futures have declined to 21.89 as the retracement takes hold.  Today is monthly options and futures expiration.  Max Pain is near 22.00 while long gamma takes hold at 25.00 and above.  That may have been the reason for suppressing the VIX until after today’s options expiration.

ZeroHedge offers something to watch, “As SpotGamma details below, this Friday, January 21st, deep in the money calls worth billions of dollars are set to expire.

Deep in the money calls are unique, because they are valued as being essentially equivalent to shares of stock (referred to as a Delta 1 position). Most of these calls were purchased in 2021 and have participated in the massive stock rally over the last year (S&P500 +24% since 1/1/21).”


TNX is taking a brief rest from its surge this week.  However, the rally is not over.  The Cycles Model points out a double dose of strength over the weekend.  This suggests that TNX may be approaching 20.00 by the end of the month.  This may make the reluctant Fed raise the rate by .5% or more in March.

ZeroHedge remarks, “It all started with another silly forecast from Jamie “Bitcoin is worthless” Dimon who predicted “six or seven” rate hikes, and a tweet from Bill Ackman (who apparently had read the latest Michael Hartnett “Flow Show” in which the BofA strategist said that “Joe [Biden] needs 50bps from Jerome at Jan FOMC” but won’t get it) in which the billioniare hedge fund manager best known for talking his book – in this case being very short bonds –  said that “the @federalreserve  could work to restore its credibility with an initial 50 bps surprise move to shock and awe the market, which would demonstrate its resolve on inflation.”


USD futures challenged the 50-day Moving Average at 95.80 yesterday and have pulled back to 95.49 this morning.  The Cycles Model suggests a continued rise through mid-February.  The potential target for this move appears to be 98.30.


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2 Responses to January 19, 2022

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