8:00 am
Good Morning!
SPX futures dipped to a weekend low of 4631.00 before bouncing back. Some of the buying is coming from the European Markets, but the bounce may be primarily from dealers and hedge funds trying to elevate the SPX above the short gamma zone at 4400.00. The 38.2% retracement value is 4475.49 while the 50% retracement is at 4495.72. The mid-Cycle resistance is at 4475.76. Today’s expiring options are predominantly short all the way to 4475.00. Call volume is lackluster up to 4500.00.
This is a market that requires one to sell the bounce. The current Master Cycle anticipates a low on or near March 4. The Cycles Model currently anticipates a retracement to one of the levels mentioned above. However, bad news may have stocks testing new lows.
ZeroHedge reports, “Having sunk near session lows ahead of the US open, futures suddenly spike higher, pulling 10Y yields and the Russian ruble alone for the ride, when comments from Russian foreign minister Sergey Lavrov who was addressing the press alongside Putin, eased investor nerves for an “imminent” – in the words of the US deep state – invasion.
Speaking across what may be the longest table in the world…”
VIX futures rose to a weekend high of 32.04 before settling back, still in positive territory. Wednesday’s options expiration shows Max Pain at 25.00. Long gamma kicks in at 30.00, although call buyers predominate above 25.00.
The NYSE Hi-Lo Index closed Friday at -308.00.
ZeroHedge comments, “The panic in credit protection – SPX edition
Credit protection continues moving one way, higher. CDX IG has taken out new recent highs, while SPX remains above the lows we saw in late January. The CDX IG (inverted) vs SPX chart needs little commenting. Credit protection is priced in a rather fearful way at the moment and the “pairs” trade vs SPX looks interesting.
Source: Refinitiv
The panic in credit protection – what about VIX?
VIX is trying to catch up to CDX IG, but VIX is still below the late January levels (although it is up 10% in early Monday trading). Both credit and equity protection are now pricing in a lot of fear. Unless you believe in a full blown world war and Fed hikes killing the economy, protection here is getting expensive.
NDX futures made a weekend low of 14039.50 before bouncing back. It is deep in short gamma territory and may have difficulty pulling itself out of the hole. Short gamma begins at 14100.00. An inability to climb above that level condemns the NDX to a possible limit down day very soon. True capitulation in a Wave (3) or (C) may only happen after multiple limit down days.
ZeroHedge advises, “With many expecting/hoping for the usual ‘walk-back’ by St,Louis Fed’s Jim Bullard this morning – after unleashing some chaos with his reality check on inflation fighting last week – his interview with CNBC this morning did anything but, rather reiterating the need for quick aggressive action to raise rates and his efforts to persuade the rest of the committee of the need to act decisively and soon.
- *BULLARD: FED MUST REASSURE PEOPLE IT WILL DEFEND INFLATION TGT
- *BULLARD: INITIAL RATE HIKES, BAL-SHEET RUNOFF RELATIVELY CHEAP
- *BULLARD: HAVE BEEN PUSHING CMTE TO MOVE FASTER SINCE SUMMER
- *BULLARD: COULD HAVE MOVED ASSET BUYS UP FASTER IN RETROSPECT
- *BULLARD: I’M A LITTLE MORE WORRIED WE’RE NOT MOVING FAST ENOUGH
- *BULLARD: HAVE A LONG WAYS TO GO IF WE WANT TO BE RESTRICTIVE
- *BULLARD: WOULD WANT TO START PASSIVE BAL-SHEET RUNOFF IN 2Q
Stocks sank back after the rebound on Russia comments…
ZeroHedge further observes, “I’ve got a feeling that a limit down capitulation style morning is still on its way, as I first asserted about a week ago – here’s why.
Last week’s CPI number coming in at 7.5% ratchets up the temperature not only for the Fed to not change course, but also to act sooner and more decisively.
As I have written about, inflation is the kryptonite that won’t let the Fed off the hook easy anymore. There can’t be anymore Powell pivot, because the inflation numbers absolutely have to be addressed.
Make no mistake about it, the Fed has stuck their foot into the shit. The days of inflation being a “mystery” that somehow magically fixes itself are over.
We are in a situation unlike any situation we have been in over the last 25 years.
TNX pulled back this morning, but not to new lows. Instead, it appears to be riding the uptrend pretty aggressively. The Current Master Cycle ends in the last week of February, so there are another two weeks to possibly reach the Cup with Handle target shown in the chart.
USD futures have reached a weekend high of 96.34 and is on a buy signal above the 50-day Moving Average at 96.01. The new Master Cycle appears to have another six weeks to completion with the 61.8% Fibonacci level at 98.30. As a Primary Wave [2], it may reach 100.00 in that time period.
Gold has ben bid to 1869.55 over the weekend, but it is fast approaching the completion of its Master Cycle. Today is day 258 of its current Master Cycle. Those who are long should consider consider hedging/taking profits. Tomorrow may be the last possible day of strength in this rally.
West Texas Intermediate Crude hit a Friday high at 94.66 and may have completed its Master Cycle on day 262. The weekend high in the futures hit 93.62, so it appears that oil may be pulling back. A decline beneath the Cycle Top support at 88.56 may give an aggressive sell signal.
ZeroHedge reports, “A bout of profit-taking ensued last week as seven-year highs in crude oil and middle distillates prices intensified concerns about inflation and the possibility of countermeasures from central banks.
Rapidly escalating prices for oil and other commodities have become a central problem for macroeconomic policymakers in advanced economies. Unless inflation in oil and other commodities starts to decelerate on its own, the U.S. Federal Reserve and other central banks will be forced to raise interest rates to slow growth and bring prices back under control.”
