3:05 pm
Waves (1) and (2) took 21.5 days. This afternoon’s high marks 8.6 days from the secondary high at 4595.31. The Hi-Lo Index is at -75.00. It may close near the Max Pain zone at 4465.00 for tomorrow’s options expiration. the 50% retracement value is 4477.36. There may be an attempt to hold SPX steady through tomorrow’s expiration, but any bad news may set off a panic.
11:10 am
SPX may be approaching a Cyclical Pivot point at 1:00 pm. Should it remain under 4500.00 and preferably Short-term resistance at 4487.09 in the next two hours, we may have a reversal down. Technicians are concerned that the bearish gamma may lead to a melt-up just to clear the decks of all the bearish players. However, bad news may also bring short gamma into play with a potential panic melt-down.
ZeroHedge remarks, “Hopeful signs of a lowering in tensions on the border of Ukraine have sparked a ‘risk-on’ push higher in markets, which will now likely prompt significant Equities “squeeze” flows from the Options space and covering from dynamic hedgers.
Add to the news that Putin is pulling back the fact that China injected a net 100B Yuan into the banking system via the MLF, sending CSI 300 +1.1%, as a further signal of liquidity- and credit- pumping after January’s already all-time record $626B of new Yuan loans offered showed the extent that which Chinese authorities are willing to go to stifle the economic- and market- crunch in the country.
All this combined to a strong session as cash-trading begins and as Nomura’s Charlie McElligott warns, “virtuous” second-order Greeks look set to take-over and further accelerate the spot rally / vol compression into expiration.”
7:45 am
Good Morning!
NDX futures have risen overnight to a high of 14585.90, over 2% higher than the close. There is a potential Cyclical pivot this morning that may allow it to resume its decline. However, there are indicators that suggest the bounce may go higher. The pattern indicates a possible rally to 16000.00 to retest the bottom of the old trading channel. Wave C equals A at 15592.00. In addition, the next two days show trending strength. Tomorrow’s options expiration show calls dominating above 14400.00 and possible long gamma at 14500.00, so be prepared for more positive activity.
SPX futures rose to an overnight high of 4474.40, just beneath the mid-Cycle resistance at 4477.09 and Short-term resistance at 4485.22. Should the bounce stop near there this morning, the decline may resume. However, there are indicators that the bounce may extend to test the trendline of the old trading channel near 4750.00. In this case, Wave C equals Wave A at 4738.00.
Tomorrow’s expiring options show Max Pain at 4465.00, while options turn positive at 4475.00. Long gamma begins at 4500.00.
ZeroHedge reports, “With less than 24 hours to go until the Feb 16 CNN and CIA-leaked Putin “invasion day” – because if you are Russia you always leak to the US intel agencies when you are going to invade a sovereign nation – this morning markets got a welcome surprise when just after 3am ET, Interfax reported and Russia’s Defense Ministry later confirmed that some troops are starting to return to their regular bases after completing drills. Markets welcomed the positive signals from Moscow, which included Russia’s top diplomat saying that diplomacy with the West could succeed, as US equity futures surged, bond yields were lifted and and oil, gold and other safe havens were slammed amid continued optimism that geopolitical tensions in Ukraine may be easing.
As of 715am, emini S&P futures were 1.6%, or 72 points higher, and trading at 4,464 while Nasdaq futures rose 2.2% and Dow futures were 1.2% higher. 10Y Treasury yields bounced above 2.02% after dropping as low as 1.90% yesterday after the US deep state sparked fresh groundless panic about an imminent invasion. The dollar, oil and gold tumbled while cryptos jumped. Meanwhile, iron ore tumbled as China ramped up a campaign to stop prices from overheating.
VIX futures challenged the Cycle Top with a decline to 25.82 this morning. Additionally, it may test the 50-day Moving Average at 22.30. The Cycles Model indicates the VIX may resume trending strength on Wednesday or Thursday.
The NYSE Hi-Lo Index closed at -462.00 yesterday. Should it remain below -300.00, the decline is likely to resume. I am amazed that SPX did not decline even more yesterday under these conditions.
TNX moved higher this morning, as US PPI ran hotter than expected. The Cycles Model suggests the Master Cycle may be complete at the end of next week. In the meantime, TNX may fall back for a very short time, before running higher (in strength) next week.
ZeroHedge remarks, “anuary saw US producer prices rise 1.0% MoM (twice the expected 0.5% jump) and is the 21st straight month of MoM rises. This sent prices up 9.7% YoY (record highs and well above the expected +9.1% YoY)…
Source: Bloomberg
Goods costs are accelerating faster than Services still with Energy and Food prices the biggest drivers…
USD futures tested support at the the 50-day Moving Average at 96.01. It appears to be consolidating prior to another strong run-up later this week.
Crude Oil futures are down over 4% this morning and on a provisional sell signal. The Signal is confirmed beneath the Cycle Top support at 88.96. I had warned last week and again yesterday that the top was very near. In fact, the reversal was late. Yesterday was day 272. Last week had a double dose of trending strength which delayed the reversal.
Gold is another commodity that reversed down yesterday precisely on day 258 of its Master Cycle. Gold futures declined to a low of 1845.55 before a small bounce. Gold ma go into a two-month decline according to the Cycles Model.