March 28, 2022

2:12 pm

I reported last week that the March 17 low in GKX may have been ins Master Cycle low on day 251.  Today is day 262 and no new lows have been made.  It appears that the mid-Cycle support at 556.58 may be preventing a new low from being made.  While the rally off the low seems insignificant, it is impulsive (5 Waves), suggesting the new Master cycle has begun.

 

1:58 pm

BKX, our liquidity proxy is declining from the trading channel trendline an the 200-day Moving Average at 131.75 after challenging it last Friday.  This is likely to be our sell signal with a near-term target at the Cycle Bottom by the first week in April.  It appears that the decline may speed up as the Ukraine crisis heats up.  There is another consideration appearing today   See below.

ArmstrongEconomics writes, “I reported on the Private Blog that I had a copy of the legislation and I was told it would be introduced today – Monday 28th. That info was correct. Well, here it is!. Reps. Stephen Lynch (D-Mass.), Jesús Chuy Garcia (D-Ill.), Ayanna Pressley (D-Mass.), and Rashida Tlaib (D-Mich.), all Democrats, have introduced the “Electronic Currency And Secure Hardware Act” (ECASH Act) that does far more than just creating a digital currency. This Act cleverly strips the Federal Reserve of its authority to create the money. ”

 

1:37 pm

SPX has fulfilled all the requirements for a 61.8% retracement of Wave (1) at 4550.00.  The NYSE Hi-Lo has declined to -39.00 today, showing internal weakness.  However, Wave twos may retrace all the way back to the origination of Wave one (4818.62).  In addition, Wednesday (day 255) shows trending strength, making it the more likely daily peak to finish off the first quarter.  Should the rally continue, the next resistance is the 2-hour Cycle Top at 4587.43.  While there is no overt sell signal, it would be wise to start accumulating hedges at this time.

 

10:00 am

Some people go to Florida for Spring Break.  Others head north for the steelhead run.  That’s me, fly fishing in a catch-and-release section of the Pere Marquette.  The temperature was 22 degrees.  But the steelies were running.

 

8:20 am

Good Morning!

After a weekend decline to 4520.60, SPX futures rose above the 100-day Moving Average at 4546.00 to a peak near 4550.00, its 61.8% Fibonacci retracement value.  Today’s expiring options become positive above 4525.00 and gamma turns positive at 4550.00.  Based on the layout of today’s expiring options, SPX may remain flat to lower to minimize the payout (Max Pain).  In addition, there is pressure to put a positive spin on the markets through the end of the quarter.  Today is day 252 of the current Master Cycle, so there is room to go sideways or higher.  However, the turn may take investors by surprise.  Be prepared.

ZeroHedge reports, “After initially sliding lower, US equity futures reversed and erased earlier declines, climbing 0.2% along with Nasdaq futures as Stoxx Europe 600 extends gains to 1.1%, a move that found added inertia after Tesla, one of the world’s biggest companies, soared 6% after hinting it too would pursue a stock split weeks after Amazon did the same. Most Asian shares lost ground earlier, with Chinese stocks falling as a virus flareup led to a lockdown in financial hub Shanghai, and raised worries over fresh supply chain disruptions while even higher yields led to growing recession fears. Cryptocurrency-exposed stocks gains as Bitcoin turned positive for 2022; gold and oil retreated.”

 

 

VIX futures surged to 22.19 over the weekend before pulling back, still above the mid- Cycle support at 20.99.  It is normally the mid-Cycle support/resistance that gives the locus for the turn in Wave two.  In addition, Friday was day 269.00 of the Master Cycle and the final Wave structure now appears complete.

ZeroHedge warns, ““They Turned the Machines Back On” shouted the man on CNBC. When you are in the middle of a significant secular shift in investor psychology one of historic proportions, there will always be those moments where market participants still believe “the dream is still alive.” It’s NOT today, “it´s still yesterday” is the thinking.

The “buy the dip” crowd rushes back into a short covering bonanza and stocks make an extremely unhealthy vertical move higher. That is NOT how real bottoms are formed. Think of Apple – AAPL equity just experienced its largest 9 day move higher in at least ten years up close to 17%. With the S&P 500 up nearly 10% in nine days we file this under Q2 2000 action .

The index closed at 4543 on Friday – right on the ominous 61.8% retracement of the recent decline. With HEAVY resistance at 4600 and wheel barrels full of supply – the “get me even and get me out” crowd is lurking.”

 

TNX may be taking a rest after a 48.8% rally in the month of March!  The Cycles Model suggests a 1-2 week retracement, most likely to test the Cycle Top at 21.54 before moving higher in strength to the week after options expiration.

ZeroHedge comments, “Plus Ça Change

A strong economy, high inflation, and then an oil price shock…even if history does not repeat itself, it may rhyme. While we do not think the 1970s provide the map for the road ahead, it is always worth taking stock of the lessons of the past. The orthodoxy of monetary policy will be tested with the Russian invasion of Ukraine and the stagflationary shock. Let’s consider the implications for the Fed and the ECB.

After the inflation of the 1970s had been tamed, the views of central bankers in developed markets on commodity price shocks evolved. Inflation expectations became anchored near – indeed at times below –target inflation rates, and the received wisdom was that either cost shocks should be ignored, because the inflationary effects would be transitory, or that policy should ease, because the drag on the real economy was a bigger threat. That stance became the textbook response. Will central banks now throw the textbook out of the window?”

 

USD futures have risen to 99.32 as it makes its last probe toward 100.00.  Today is day 264 in the Master Cycle, so once the prior high is exceeded, one must prepare for an imminent reversal.

ZeroHedge observes, “Update(9:01ET)Russia on Monday has issued a firm and unyielding response to G-7 ministers who had dismissed as “unacceptable” its plan to only accept ruble payments for Russian gas going to “unfriendly” nations.

Earlier Monday German Economy Minister Robert Habeck said from Berlin that the Kremlin demand for natural gas contracts to be paid in rubles is a “one-sided and clear breach of contracts” – saying the contracts must be honored under prior conditions, according to Bloomberg“That means that a payment in rubles is not acceptable and we urge the relevant companies not to comply with Putin’s demand,” Habeck said. “Putin’s effort to drive a wedge between us is obvious but you can see that we won’t allow ourselves to be divided and the answer from the G-7 is clear: the contracts will be honored.”

The Kremlin’s quick shooting down of the German economy minister’s comments and the G-7’s stance on the ruble came Monday via a Russian lawmaker to state-run RIA Novosti: “Russian lawmaker Abramov says G7’s refusal to pay in Russian roubles for gas will definitely lead to a halt in supplies.”

 

West Texas Crude made a low this morning of 106.42 as it moved away from Thursday’s Master Cycle high.  The supports to watch are the Cycle Top support at 104.88 and the Broadening Wedge trendline and Intermediate-term support at 101.27.  A cross beneath either  may bring a sell signal with a decline stretching to the April options expiration, or shortly thereafter.

ZeroHedge observes, “After Friday’s oil price surge, catalyzed by a Houthi attack on Saudi Aramco oil facilities in Jeddah, on Monday oil retreated as China’s worsening virus resurgence raised concerns about demand in the world’s biggest crude importer, while rebels in Yemen announced a three-day temporary pause in hostilities against Saudi Arabia.

WTI and Brent futures fell more than 4% each after authorities in Shanghai said they will lock down half of the city in turns for mass Covid-19 testing. Growth risks from inflation and tightening monetary policy also hit sentiments, pushing down sovereign bonds and equity markets were mixed.”

 

 

Gold futures declined to 1924.60, crossing beneath the Cycle Top support and giving a potential sell signal.  The Cycles Model suggest s decline to the week of April 25 in the current Master Cycle.  The target may be mid-Cycle support at 1819.73 or the trendline near 1810.00.

OilPrice.com advises, “The latest round of sanctions imposed on Moscow by the West is drawing some mixed reactions from experts.

  • The U.S. announcement to block gold transactions was done alongside Group of Seven and European Union allies that will also impose the gold reserve ban.
  • “Any sanctions on Russia’s gold reserves would do little more than reveal the degree to which government bureaucrats don’t understand gold.”

Following Russia’s invasion of Ukraine about a month ago, the U.S. and its western allies swiftly imposed a raft of economic and trade sanctions on Russia, notably on buying oil, a partial SWIFT ban and against billionaire oligarchs seen as close to President Vladimir Putin. Russia hit back by imposing export bans including telecoms, medical, vehicle, agricultural, and electrical equipment, as well as some forestry products such as timber.

But it’s the latest round of sanctions that has been drawing mixed reactions across the board: the U.S. ban on gold transactions with Russia.”

 

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