Liquidity is leaving equities quickly as BKX indicates today. It crossed the neckline on Friday and is now on its way to a minimum 20% decline from the neckline. The 2-year Ending Diagonal formation and the Orthodox Broadening Top both suggest s probable target nearer to 50.00 by June.
NDX is beneath its 2-hour Cycle Bottom at 13496.13 and SPX is beneath its Cycle Bottom at 4220.00, increasing the probability of a melt-down going into options expiration today. SPX breaks at 4200.00, its Lip/Neckline.
ZeroHedge observes, “One look at today’s absolutely bananas explosion in LME Nickel prices which soared 82% in one day to a record $52,700…
… shows that commodities inflation panic was in full-swing earlier overnight, where war-related price-shocks are trading through what Nomura’s Charlie McElligott writes was “escape velocity” on likely stop-outs from “Shorts” (think commodity producers and traders who were short futures to hedge prices, similar to the margin call experienced by Peabody), and with the market seemingly realizing there is little that CB monetary policy can do to control it.”
Last Friday I suggested taking early profits as GKX stumbled after appearing to have completed its rally. That was day 253. Today is day 256. I don’t have anything to add, other than the possibility of reaching 600.00 in the next couple of days. A correction here is likely to take GKX down to its mid-Cycle support at 504.69.
ZeroHedge reports, “The condition of China’s winter wheat crop could be the “worst in history,” the agriculture minister said on Saturday according to Reuters, raising concerns about grain supplies in the world’s biggest wheat consumer. Speaking to reporters on the sidelines of the Chinese regime’s annual political meetings, Minister of Agriculture and Rural Affairs Tang Renjian said that heavy rainfall last year delayed the planting of about one-third of the normal wheat acreage.
A survey of the winter wheat crop taken before the start of winter found that the amount of first- and second-grade crop was down by more than 20 percentage points, Tang said.
“Not long ago we went to the grassroots to do a survey and many farming experts and technicians told us that crop conditions this year could be the worst in history,” he said. “This year’s grain production indeed faces huge difficulties.”
SPX may be primed for a bounce off the 2-hour Cycle Bottom at 4220.00 and the Lip of the Cup with Handle at 4200.00. The bounce may last until tomorrow’s open. The only visible resistance is Short-term resistance at 4341.16. The SPX is in short gamma beneath 4250.00. Should it continue to decline beneath the trendline, we may see a panic decline that may last up to a week.
ZeroHedge remarks, “Unlike the Trump Administration, where even the smallest dip in stocks was met with a furious barrage from the now-banned presidential twitter account urging Americans to BTFD, the Biden administration has been silent on the recent tumble in risk assets, which is understandable since it is far more preoccupied with containing soaring inflation. However that changed today, when Nellie Liang, Under Secretary for Domestic Finance, delivered remarks to the Institute of International Bankers’ Annual Washington Conference, in which among broad remarks about the state of the US financial system including stablecoins and climate change, and she touched upon the growing strain in the financial system, to wit:
- markets showing some signs of strain
- investors are meeting elevated margin calls without delay
- investors are showing little concern about solvency or liquidity stresses at domestic financial institutions”
SPX futures declined to a low of 4240.80 before bouncing on news of a possible cease-fire in the Ukraine. It has rallied above 4300.00 where there are 4404 put contracts expiring today.
ZeroHedge reports, “ot much has changed since our market update last night which saw all risk assets collapse and in many cases set to open in bear markets, amid a soaring panic that the US will impose a unilateral oil embargo on Russia leading to an energy supply shock and global stagflation, while safe havens such as gold, treasuries, and the dollar are exploding higher not to mention crude which was last trading at $125 after briefly rising above $139 at the start of the session. Commodities from grains, metals have also surged on concerns of chaos in raw-material flows due to the invasion and sanctions on Russia that are turning the resources powerhouse into a global pariah. Commodity-linked currencies strengthened.
S&P 500 e-mini futures were down as much as 2.1% earlier before trading 1% lower 7am in New York after a faint glimmer of hope of de-escalation when the following headlines hit Reuters:
- KREMLIN SPOKESMAN SAYS UKRAINE MUST AMEND CONSTITUTION AND REJECT CLAIMS TO ENTER ANY BLOC
- UKRAINE MUST RECOGNISE CRIMEA AS RUSSIAN, AND DONETSK AND LUGANSK AS INDEPENDENT STATES
- IF THESE CONDITIONS ARE MET, THEN RUSSIAN MILITARY ACTION WILL ‘STOP IN A MOMENT’ – SPOKESMAN
And now we wait for the latest Ukranian refusal of these conditions. Meanwhile Nasdaq futures retreated 1.7%. Brent oil was up as much as 18% today, trading around $125 a barrel as the Biden administration is considering whether to prohibit Russian oil imports into the U.S. without participation of allies in Europe, at least initially, according to a Bloomberg report.
Update: ZeroHedge reports, “Belarusian state TV has said the Russian delegation has arrived at the location where on Monday at about 14:00GMT/09:00EST the third round of talks with the Ukrainian side are set to begin. So far the ongoing talks have been focused on establishing and maintaining humanitarian corridors for the safe evacuation of civilians still trapped in cities under siege by Russian forces. But these have been erected and collapsed in various locations with limited effectiveness, given Kiev has accused Russia of breaking the temporary ceasefire pauses through the resumption of shelling, something which Russia’s military has rejected.
Just ahead of the meeting, the Kremlin issued a list of demands to be accomplished if Ukraine wants the Russian invasion to be halted immediately. These includes, according to the Kremlin spokesman, the recognition of Crimea as part of sovereign Russian territory, as well as Donetsk and Lugansk as independent states. ”
VIX futures rose to a high of 36.52 this morning before scaling back on the latest Ukrainian development. The Cycles Model shows growing trending strength this week with a possible Master Cycle peak next week.
ZeroHedge comments, “When VIX at 35 looks tiny…
Our long term take of Europe being the “always sucker” remains intact. You don’t need much explanations, but when VIX at 35 looks “tiny” compared to Eurostoxx 50 “VIX”, V2X, you know things are not fine. V2X at 57.5 as of writing is very extreme. Sure we are far from the corona panic highs, but back then the world was ending. This is pure panic. The question is: “enough blood on the streets here”?”
TNX futures have risen to a morning high of 17.97 this morning and threaten higher levels as trending strength returns. It has exceeded the 50-day Moving Average at 17.88 and is on a buy signal.
NDX futures declined to 13532.60 this morning before bouncing back above the Cycle Bottom support at 13763.00. The bounce may be fully resolved in the next 24 hours as the decline resumes.
ZeroHedge observes, “Last week, some on Wall Street were quietly gloating when the “Lehman Weekend” consequences predicted by repo guru Zoltan Pozsar failed to materialize and central banks did not flood global markets with a torrent of liquidity, in a repeat of what happened in September 2008.
In his latest not published late on Friday, the Credit Suisse strategist admits that “Yes, we got central banks’ need to step in to calm funding market pressures this week wrong (still no need yet)” but he counters that “we got the direction of spreads right – on February 24th we warned about an imminent sentiment shift in funding markets. There was no premium last week but there is some funding premium now, and it feels that things can get worse still.” So net-net, he concludes, “our call was absolutely right.”
USD futures hit a new high at 99.42 this morning before easing back. The Cycles Model calls for a week of consolidation before moving higher. The next Master Cycle pivot (high) may be due the week of March 21. The final target may be the weekly Cycle Top at 100.47.
WTIC futures are coming down from a weekend high at 130.33 as tensions over the Ukraine ease. The Cycles Model suggests a week-long consolidation with a probable Master Cycle top during the week of March 21. The Possible target may be as high at 150.00
ZeroHedge reports, “One day after we reported that Germany had warned against a ban on energy imports from Russia, quoting Germany’s Economy Minister Robert Habeck who said “I would not advocate an embargo on Russian imports of fossil fuels. I would even oppose it,” adding that “we need these energy supplies to maintain the price stability and energy security in Germany,” and warning that “a shortage in supply could threaten social cohesion in Germany”, moments ago Bloomberg reported that Germany now openly opposes the push to stop Russian oil, gas imports.
“I’m not ruling out anything for the further development of this year,” German Finance Minister Christian Lindner tells reporters in Berlin when asked about the next steps against Russia. “At the current time, however, there is no new decision to be made.”
“The government insists that we do not take the initiative to end our imports of oil, gas and coal to Germany”