BKX, our liquidity proxy, is proof that liquidity is being drained from the markets. the Cycles Model suggests the new Master Cycle may decline through the last week of June.
ZeroHedge observes, “As three of America’s largest banks kicked off the US financial industry’s annual gatherings this week, conservative activist investors are pummeling them over “woke” Marxist agendas, as corporate boards have become swept up in “stakeholder capitalism” – the World Economic Forum–endorsed concept that companies shouldn’t just serve their shareholders, but society at large.”
SPX may have reached a Minute Wave [iv] this afternoon at the 4300.00 resistance level. With all the short covering done, there is little energy to go higher. Money flow is negative, as the NYSE Hi-Lo Index is at -362.00. Once the dealers and hedge funds realize there is no new cash coming into the market (in fact, money is exiting), they will begin to gamma hedge. In fact, it may begin this afternoon.
Some analysts are calling this rally bullish, However, the retracement was less than 42% of the decline from 4512.94.
The SPX futures roller coaster continues as they ranged from a low of 4205.0 to a high of 4263.00. The cash market is poised to open at the 61.8% retracement of the decline from 4300.00 at 4245.45. The Cycles Model does not anticipate reaching 4300.00. Instead, the decline may resume to cross the Lip of the Cup with Handle near 4125.00.
Dealers are struggling to get SPX to close at Max Pain today above 4300.00 for tomorrow’s options expiration. However, the problem is that speculators/hedgers have gotten smarter and have bought large put positions all the way up to 4300.00, while calls are lackluster beneath 4300.00.
ZeroHedge reports, “U.S. index futures, European bourses and Asian markets all rose as “good enough (if hardly stellar)” earnings reports from Facebook parent Meta Platforms and Qualcomm boosted sentiment (just don’t look at the collapse in Teladoc). As we hit the peak of earnings season, with Apple, Amazon and Twitter set to report earnings today, S&P futures jumped 1.5%, while he Nasdaq futs jumped 2.2%, fuelled by a nearly 20% surge in Meta, which would be its biggest post-earnings jump since 2013. Investors were happy after Facebook added more users than projected in the first quarter, even if revenue growth slowed to just 7%, the lowest since the IPO. The dollar continued its relentless ascent, boosted by a plunge in the yen (more here) rising to the highest level in more than five years thanks to nominal US yields which are the highest in developed markets. WTI futures traded at around $102 a barrel. The 10-year Treasury yield was down some 2 basis points to 2.8147%. Bitcoin climbed, trading just below $40,000.
VIX futures declined to an overnight low of 29.35, but have bounced back above 30.00 this morning. This appears to be a consolidation that may still test the 50-day Moving Average at 25.96 before moving higher. The panic buying on Tuesday must be worked off for another day or two.
Options expiration shows Max Pain in the May 4 expiration is at 26.00, so the move back down (at least temporarily) to the 50-day makes sense. However, the Cycles Model shows VIX “heating up” in the month of May.
The NYSE Hi-Lo closed at -574.00 yesterday. Despite the mechanical short-covering rallies, the NYSE is decidedly weaker.
TNX is tracking higher this morning and the Cycles Model shows a surge in trending strength through the weekend. We may se TNX hit 30.00 over the next week before moving back down through the end of May. This may be a fake-out catching some off-guard.
ZeroHedge (TME) comments, “Rates reversing?
The move lower in yields continues getting very little attention. So far the move is relatively small, but we are about to close below the steep short term trend line. 21 day is at 2.66% and 50 day is at 2.3%! Note the negative RSI divergence.
US 5 year – breaking below the trend?
A close here or lower in the 5 year (yield) and the steep trend line is broken. First support is the 21 day at 2.71. 50 day is all the way down at 2.3%. The negative RSI divergence is of concern for those looking at yields moving higher in the short term.
USD futures made an overnight high of 103.95, nearly breaking out above the March 2020 high, as seen in the weekly chart. Today is day 272 in a rather stretched Master Cycle. Should it exceed the 2020 high, the next target may be the April 2001 high at 121.21.
I may have mistakenly marked the March 2020 top as a completed Cycle Wave II. However, the latest moves may make that high as Primary Wave [A] of Cycle Wave II. Primary Wave [C] of Cycle Wave II may not be complete until March 2023. The 61.8% retracement of the USD decline is 126.87.