February 25, 2022

3:25 pm

GKX may be having an early Master Cycle high on day 245 of its Master Cycle.  However, a correction in this environment may extend the Cycle to a more normal time.  The correction may last until the week of March 21, so there is time for an extension.  These are interesting times, indeed.

ZeroHedge reports, “Star Tribune reports a vessel chartered by Cargill Inc., a Minnesota-based agribusiness giant, was hit in a missile attack after leaving a deep-sea port on the outskirts of Odessa on Thursday.

“Right now, our priority is the safety of our people in the region. This is a rapidly evolving situation with a great deal of uncertainty,” said April Nelson, a Cargill spokeswoman, in an e-mail. “We are currently gathering information and assessing potential impacts to Cargill and our customers.”

Cargill said that the crew was safe, and the vessel was rerouted to Romania to undergo a damage report.

Cargill has a majority stake at a port in the Odessa port, exporting grains and oils worldwide. The company didn’t name the vessel. ”

 

3:00 pm

Gold may have had its Master Cycle high yesterday on day 268 of the Cycle.  Today it is testing Cycle Top support at 1882.27.  Once beneath it produces a sell signal.  The Cycles Model suggests that gold may go into decline for the next two months.

MarketWatch comments, “Gold futures fell on Friday, ending the week with a loss for the first time in four weeks. “What we’ve seen this year is a bid for gold put in early on,” especially through the month of February as the threat of invasion ramped up, said Adam Koos, president at Libertas Wealth Management Group. Now that the Russian invasion of Ukraine has taken place, “we have a ‘buy the news, sell the invasion’ theme playing out in the metals market.” April gold GCJ22, -1.70% fell $38.70, or 2%, to settle at $1,887.60 an ounce. Prices based on the most-active contract lost 0.6% for the week, according to FactSet data.”

 

11:45 am

Earlier this week I had warned that Wave [iv] may go to 4300.00.  I had underestimated the strength of resolve by the dealers to avoid pain at options expiration.  Wave [iv] may be fully extended and may reverse at any time, now that Wave (v) of [iv] equals Wave (i) of [iv] at 4374.00.  That gives Wave [v] at least 4.3 days of decline to complete C of (3).  Enough for a surprising and massive crash.  This move eliminates the Head & Shoulders formation, since they generally do not allow a re-emergence above the neckline.  Cup with Handle formations often have “soft” trendlines.

 

7:52 am

Good Morning!

SPX futures declined to 4233.00 in the early morning, but then rose to 4300.00, the lasts stronghold for the puts (5346 of them) expiring at the close.  Gamma turns positive at 4325.00.  This is evidence of dealer sponsored short-covering yesterday, to avoid a knock-out at the open when Index options expire.  As for the ETF options expiration,   SPY 430.00 puts and calls both have 14,500 contracts expiring  at the close, while 435.00 puts and calls both have over 19,000 contracts expiring at the end of day.  Long gamma appears above 435.00 and short gamma takes over at 425.00.  SPY is likely to walk a tightrope at 430.00 to avoid a melt-up or melt-down.

The Hi-Lo Index closed at -770.00, leaving the SPX as weak as it was on January 24.  This time, however, the Cycles Model still has 5 market days to go to the Master Cycle low.

ZeroHedge reports, “After yesterday’s furious gamma-squeeze rally, U.S. stock futures were slightly lower on the day, although near the overnight session highs as the ongoing Ukraine conflict and impact of Western sanctions continue to drive risk; sentiment was boosted after the Kremlin said that Ukraine’s neutrality offer is a move “toward positive” and following reports that China’s president Xi held a phone call with Putin who said Russia is willing to conduct high-level negotiations with Ukraine. S&P futures were down 10 points to 0.25% at 7:30am, after paring earlier declines of more than 1%, with Nasdaq futures down -0.15% and Dow futures down 0.4%. Europe’s Stoxx Europe 600 was in the green, and oil was steady after Bloomberg reported that oil importers in China are briefly pausing new seaborne purchases as they assess the potential implications of handling the shipments following the Ukraine invasion. Gold was steady, while Brent crude reached $100 a barrel and Treasuries rose.

 

 

VIX futures made a morning low at 29.26 thus far, just beneath yesterday’s trading range.  While it may still subside to the Cycle Top support at 27.77, the likelihood is that it may resume its uptrend.  The reason I say that is 28.00 is the beginning of long gamma in the VIX.  A VIX above 28.00 could be the tail wagging the dog during options expiration.

ZeroHedge comments, “As we noted earlier, today’s stunning rebound in stocks (most notably Nasdaq, which swung from down 4% overnight to close up 3%)…

…was the biggest intraday rebound since The Fed ‘saved the world’ in March 2020.

The reversal began at the US cash market open, stalled a little, then exploded higher after President Biden’s sanctions speech was not as harsh as feared.

The question is – WTF Happened!!!”

 

TNX has risen to 20.16 this morning, not wasting any time re-establishing its upward trend.  The Cycles Model suggests a double dose of strength beginning this weekend, with the new Master Cycle extending for up to two months.  Many analysts see yields going down with the SPX.  However, the Cycles have changed and are no longer in sync with stocks.

ZeroHedge reports, “After two stellar coupon auctions this week, when both the 2Y and 5Y saw record low dealer awards, moments ago the week’s auction cycle concluded with the sale of $50 billion in 7 Year paper in another stellar auction.

The high yield of today’s just concluded auction stopped at 1.905%, stopping through the When Issued 1.915% by 1 basis point. And while this was sharply higher compared to last month’s 1.769%, and the highest yield for the tenor since July 2019, it priced in a day when there has been a lot of market chaos, which helped boost demand for the safe haven.

The bid to cover of 2.364 was also solid, the highest since November, and well above the six-auction average of 2.304%.

 

Dollar Index futures pulled back to a morning low of 96.77 after a breakout of the Cycle Top at 97.65.  The Cycles Model suggests that USD may continue it uptrend until the week of March 21.  The 61.8% Fib retracement of the 2020 decline lies at 98.30, which provides a target for this rally.