Today is day 246 of the current Master Cycle. This may be an early Master Cycle top for three reasons; First, the VIX has made a Master Cycle low today and the NYSE Hi-Lo Index (a leading indicator) has made a Master Cycle high yesterday. Second, the Wave (1) decline took 51 (51.6)days while the rally took 26 days (25.8), leaving a 56.7% retracement. Finally, the mid-Cycle resistance at 4492.00 is a common resistance for a Wave (2).
RealInvestmentAdvice is a bit befuddled by it all. Looking ahead, should this be the top, the next Master Cycle decline may also take 50+ days, indicating a potential bottom during the third week of May.
The Ag Index is in a correction phase that may have a few days left to go to a probable Master Cycle low. There is still a likelihood that he correction may extend down to Intermediate term support at 518.12 by the end of the week or early next week. The most powerful advance is yet to be made.
Michael Snyder at ZeroHedge comments, “Food prices in the U.S. have already been soaring, and now we are on track for an absolutely horrible winter wheat harvest. Of course this comes at a time when the war on the other side of the globe is going to greatly reduce wheat exports from Russia and Ukraine. Over the last 12 months, the price of wheat has already risen 69 percent, and now this crisis threatens to go to an entirely new level. In all my years of writing, I have never seen anything like this, and I am deeply concerned about what the months ahead will bring.”
To make matters worse, strikes are hobbling the transportation system. ZeroHedge observes, “The North American agricultural sector could be in for a major shock if Canadian Pacific Railway Ltd’s (CP Rail) work stoppage is not resolved in a timely manner because it could spark a shortage of fertilizer and other shipments critical for the spring growing season, according to AP News.
AP News reports more than 3,000 CP Rail conductors, engineers, train, and yard workers represented by the Teamsters Canada Rail Conference stepped off the job Sunday as the union and CP Rail couldn’t strike a deal.”
Just when things cannot get worse, they will. ZeroHedge reports, “Everyone needs to start paying attention to this crisis, because America’s rapidly growing bird flu pandemic is going to deeply affect all of us at the grocery store. This pandemic began on February 8th when a confirmed case of HPAI was confirmed in a domestic flock, and on March 9th I published an article that discussed the fact that nearly 2.8 million birds (mostly chickens and turkeys) had already died. If the pandemic had fizzled out after that first month, it wouldn’t have ultimately been a major deal. But instead, this pandemic has escalated dramatically here in the second month. If cases continue to spread like wildfire, we will soon be facing a nightmare of absolutely epic proportions.”
The Shanghai Composite Index has stalled beneath the Lip of the Cup with Handle formation. SSEC has been on a sideways consolidation from 2015 until the breakdown in March. It and the NDX have similar characteristics due to the overweight of technology.
ZeroHedge reports, “Nearly a week after China’s top financial policy body vowed to ensure stability in equity markets and support oversea stock listings, more fuel was added to the rally on Tuesday when Alibaba Group upsized its share buyback program to $25 billion from $15 billion, sending Alibaba shares in Hong Kong as much as 5.4% higher. The move indicates a multi-year crackdown on technology companies by Beijing is waning.
Shares of Chinese-listed stocks in the US were lifted as well. Alibaba jumped 8.9%, Baidu +4.8%, JD.com +5.5%, Pinduoduo +5.9%, ride-hailing giant Didi +5.8%. ”
NDX futures are hitting resistance at the 50-day Moving Average at 14465.08. It has also made a 38.2% Fibonacci retracement of its decline from its November peak. The peak to (today’s) peak elapsed time is 120 days. The next 60 days may be the most intense decline seen in a lifetime.
The conflict in Ukraine is having a strong effect on technology since the Ukraine provides many components for the microchip and EV industry. The green revolution is about to implode.
ZeroHedge reports, “Tesla has hiked the price for its large-scale rechargeable lithium-ion battery product, otherwise known as the “Tesla Megapack,” following a massive jump in industrial metal prices due to the Russian invasion of Ukraine.
EV website Electrek reports the price of the Megapack jumped nearly 24.5% since last year. In 2021, a single Megapack was priced around $1.2 million. Now the price is much higher, starting at $1,537,910.”
SPX futures have been bumping against the mid-Cycle resistance at 4480.78, a common stopping place for Waves twos. Wave (3) may take up to 60 days and may offer an unprecedented intensity to its decline. Be prepared for a sudden change in trend.
ZeroHedge reports, “US equity futures reversed earlier losses and European stock markets rose as a sharp rally in crude oil stalled, even as a selloff in bonds deepened Tuesday after Fed Chair Powell signaled a stronger commitment to clamp down on inflation.
Futures on the S&P 500 and Nasdaq 100 flipped to gains from losses, the former trading 0.3% higher or 14 points to 4,466 while the latter was 0.25% in the green. The Stoxx Europe 600 Index marched 0.4% higher, led by banks and cyclical stocks like automakers, while the Hang Seng led gains in Asia, closing up 3.15% after Ali Baba raised its stock buyback by $10 billion. Treasury yields continued their ascent after short-dated rates posted one of the biggest daily climbs of the past decade on Monday.”
VIX futures made a low at 23.16 this morning after yesterday’s Master cycle low at 22.99. This is a great time to accumulate the VIX ETFs and options.
SeekingAlpha explains, “Volatility-based ETFs and ETNs subside once again in early market trading as the S&P 500 VIX Index (VIX) dropped down to the 23 handle, after it touched 37.8 the day Russia attacked Ukraine. Additionally, the index now sits right on top of its 100-day moving average.
As volatility in the market subsides, investors are approaching the financial space with more of a risk-on approach, forcing specific volatility funds to decline.”
TNX appears to have completed a Minute Wave [i] in its journey to its Cup with handle target. It may consolidate to its cycle Top support at 20.79 before resuming its upward trajectory. The Cycles Model suggest another five weeks of rally ahead before a more severe correction.
ZeroHedge notes, “As the Russian invasion into Ukraine continues into its 3rd week, despite the world’s hopes for resolution, uncertainty continues to grow.
- What will the geopolitical situation look like after a cease-fire is declared? (IF one is declared)
- How badly will the trade disruptions with Russia worsen inflation, given Russia’s role as a top exporter for many key commodities?
- Are we weakening the US dollar’s role as the global reserve currency by giving other nations cause to accelerate their efforts to de-dollarize?
Meanwhile, the cost of capital is increasing as interest rates are on the rise — right as we anticipate the Federal Reserve will kick off a new era of Quantitative Tightening at its meeting this week.
Are a further correction in the markets and possibly a recession now more likely as a result?
Money manager Peter Boockvar concludes “yes”.