You may recall that I had suggested a “normal” retracement may go back to 4300.00. Well, SPX appears to have formed a Triangle this morning at a minute scale that suggests the retracement to 4300.00 may indeed happen. Or not. “Someone” may try to ignite a short-covering spree that may go above long gamma at 4250.00. Then we may see 4300.00. However, should it fail beneath 4250.00, the decline begins immediately afterward. A decline beneath 4150.00, where short gamma begins, may propel the SPX into a panic decline.
NDX futures rose this morning, but did not exceed yesterday’s high at 13178.74. That may the high for this segment of the decline since it occurred exactly on day 34.4 of the potential 51.6-day decline. By the way, day 17.2 occurred on good Friday, thus the low was at the Holy Thursday close. Today’s expiring options turn positive at 13100.00 while long gamma appears at 13200.00. Options turn short at 13050.00 and short gamma kicks in at 13000.00.
QQQ expiring options (close: 318.82) turn long above 319.00 and long gamma begins at 321.00 while options favor puts at 317.00 and short gamma begins at 317.00. These are very tight parameters for a day that lends itself to high volatility and tight liquidity.
SPX futures also did not break through yesterday’s high at the 34.4-day pivot of a probable 51.6 -day decline. This allows 17 calendar days of decline from here. Should the Cup with Handle formation be accurate, that would give us a probable 40% decline in that period.
Today’s expiring options turn long at 4205.00 and short at 4200.00. Long gamma begins at 4250.00 and short gamma starts at 4150.00. These also are very tight parameters for a high volatility day.
ZeroHedge reports, “May the 4th is here, and US futures are up slightly ahead of a key Federal Reserve meeting in which the Fed is widely expected to raise rates by 50bps, the biggest hike since the dot com bubble burst in May 2000, and to release plans for balance-sheet normalization; Chair Powell’s post-meeting press conference will provide guidance on potential for bigger rate hikes at subsequent meetings and policy makers’ assessment of the neutral rate. As DB’s Jim Reid puts it, “if you’re under 43, did 3 years at university and then joined financial markets then you won’t have worked in an era of 50bps Fed rate hikes. This will very likely change tonight as the Fed are a near certainty to raise rates by 50bps. In fact it’ll be the first time the Fed have hiked at consecutive meetings since 2006. So we enter a new era that won’t be familiar to many.”
VIX futures made a new low at 28.86 and bounced, but remains beneath yesterday’s close. Today is day 30 from the April 4 low, a half trading Cycle is being made. While the VIX is a rough inverse of the SPX, they do not run on identical Cycles. The Cycles Model suggests a possible Master Cycle high at or soon after the monthly options expiration on May 20. There are indications that the high may be stretched until early June.
TNX is hovering just beneath Monday’s Master Cycle high. The Cycles Model now calls for a probable 30-day decline to the end of May. A likely target seems to be the 50-day Moving Average at 23.94. This may be due primarily from the knee-jerk reaction of money fleeing from declining stocks.
Zerohedge reports, “The US Treasury said on Wednesday, just hours before the Fed unveils its balance sheet-busting Quantitative Tightening, that it trimmed its quarterly sale of longer-term debt for a third straight quarter (with the largest cuts coming in the seven-year and 20-year maturities) and also warned that it may make further reductions, citing “strong” federal tax revenues.
The Treasury said it was trimming issuance by smaller increments than in previous quarters based on projected funding needs that include strong tax receipts and potential redemptions of Treasury securities as par tof the Fed’s QT.”
ZeroHedge (Bill Blain) emotes, ““Who’s more foolish: the fool or the fool who follows him?
Central Banks have one real job: avoid inflation! It’s here, and the consequences will be devasting as conventional rate-hiking wisdom is used to fight a wholly exogenous supply side shock. There may be alternatives, but “credibility” is everything to Central Banks.
May the Fourth be with you! It’s Star Wars Day!
Which is kind of apt as the global economy feels like it’s about to do a Death Star impression: exploding in a fireball of incandescent fury… all because someone skimped on the design of a monetary policy exhaust vent… You know the rest…”
USD futures continue to trade inside yesterday’s range as the reversal evolves. The final bit of strength may have been wrung out of the rally. The next Master Cycle (low) may occur in mid-June.
Crude oil jumped to a high of 107.39 this morning, giving a buy signal. The Cycles Model suggests a rally to the week of June 20. Confirmation comes as it rallies above the Cycle Top, a reliable indicator of a strong Primary Wave .
Zerohedge estimates, “With earnings season underway, America’s shale producers are expected, almost across the board, to report stellar earnings, but as Bloomberg reports, they’ll also be taking huge losses from hedging against falling oil prices.
In total, BloombergNEF estimates that through next year, U.S. shale companies will face $42 billion in oil and gas hedging losses, based on 2021 data. That means that while balance sheets might remain intact, companies will spend big to exit positions. ”