May 10, 2022

9:45 am

The Ag Index may have made its Master Cycle Low yesterday on day 270.  That leave an irregular correction wit a resumption of the rally through the end of May.  The Head & Shoulder formation offers a significant target for the index that may take it through mid-August.  The bumblers in Washington don’t have a handle on it at all.

ZeroHedge remarks, “Samantha Power: ‘Never let a crisis go to waste.’ Do the World Economic Forum and China agree?

“Fertilizer shortages are real now.”

Uttered by USAID’s Samantha Power in a May 1 ABC interview with former Democratic advisor George Stephanopoulos, the words briefly drowned out the din of the news cycle.

They were not unexpected to some.

Power, who served as U.N. ambassador under Obama, mentioned fertilizer shortages after weeks of hints from the Biden administration.

White House Press Secretary Jen Psaki repeatedly alluded to challenges obtaining fertilizer in recent press briefings. So did President Joe Biden himself in a joint statement with EU President Ursula von der Leyen.

“We are deeply concerned by how Putin’s war in Ukraine has caused major disruptions to international food and agriculture supply chains, and the threat it poses to global food security. We recognize that many countries around the world have relied on imported food staples and fertilizer inputs from Ukraine and Russia, with Putin’s aggression disrupting that trade,” the leaders stated.”


8:20 am

Good Morning!

NDX futures declined further to 12104.70 before a bounce to 12415.20.   NDX is deep into short gamma territory with little energy to shake off the bears until options expiration on May 20, when a massive amount of puts fall off the books.  That agrees with the ending of the current Master Cycle in equities.  In other words, there is more downside to come.

ZeroHedge observes, “Good luck reshuffling big books

Nothing new really, but liquidity is horrible. You don’t need much size in order for this market to move. Add short gamma to the mix and pain is huge.

Source: GS

Source: GS

Welcome to “max” destabilizing territory

QQQ and SPY short gamma are basically at “max” levels. Frustrated dealers are absolutely smoked after FOMC. First we had the squeeze higher immediately post Fed where short gamma dealers had to chase deltas desperately higher. The market reversed abruptly and dealers had to sell everything they had bought much lower, plus all the additional deltas they have been desperately selling as short gamma has made them longer and longer deltas the lower we have moved (for the 1 min explanation of gamma see here). Expect the destabilizing effect to continue working. Don’t forget it works both ways as gamma does not care about direction…”


This morning ZeroHedge reveals, “After tumbling as low as 3960 a few hours earlier, the lowest since April 2021, futures have reversed and are spiking higher not just due to the sporadic dip buying attempts discussed earlier but because CNBC’s Jim Cramer reported moments ago that hedge fund legend David Tepper, whose “Balls to the Wall” comment 12 year ago sent stocks soaring higher, has covered his Nasdaq – and more importantly – Treasury (which is just another long duration proxy) shorts.”


SPX futures bottomed at 3967.40 last night, then bounced above 4000.00.  There are few calls below 4000.00, meaning there is no “fuel” for a bounce, much less a significant rally.  On the contrary, at 50-point intervals where calls exist, puts outnumber them by 10X.  You may note that Tuesday options expiration has begun this week, intensifying the battle for directional supremacy.  Frankly, having daily options expiration raises the probability of a blow-up.

ZeroHedge reports, “The relentless rout that erased $3.4 trillion from the Nasdaq 100 in the past month paused on Turnaround Tuesday as battered tech names including marquee “generals” attracted scattered dip buyers, but nothing (yet) like the full-throttled BTFD buyfest observed in months gone by. Futures on the tech-heavy index rose as much 1.4% as bargain hunters returned after the Nasdaq 100 slumped to the lowest since November 2020 on Monday, capping three days of bonebreaking losses. S&P 500 futures were 0.7% higher to 4,016 after rising as much as 1.2% earlier but also after plunging to as low as 3,961.”



VIX futures rose to 34.75 in the overnight session until short covering marred its luster.  It is possible that, once  Wednesday options expiration are done, the ability to rise above the neckline will increase exponentially.  The Cycles Model suggests the next Master Cycle high in early June.

ZeroHedge comments, “Update (1700ET): As SpotGamma warned earlierS&P’s 4,000 level was in play as a serious threat to any downside and while S&P closed around 4,120 on Friday, few believed we would get there today, but we did… and closed below it…

Interestingly, while stocks puked their guts out, VIX underwhelmed in its spike-higher-ness, closing below last week’s highs (as stocks closed below corresponding lows)…

Here is SpotGamma to explain why and suggest how today’s close below 4,000 may trigger a capitulation that leads to a new VIX high…



The NYSE Hi-Lo Index fell beneath 1000.00 for the first time since March 2020.  This is not capitulation…yet.  That may come in August.  In the meantime, selling may intensify through the balance of the month.  The Cycles Model suggests a low in early June.


TNX gapped down in a clear reversal this morning after making a new (not a Master Cycle) high.  This reversal ma lead to a decline to the 50-day Moving Average at 24.77 by the end of the month.  What is significant about yesterday’s high is that it may have broken the downtrend since October 1981. 


USD futures appear to be consolidating beneath yesterday’s (not a Master Cycle) high.  The Cycles Model suggests a decline through mid-June as it completes a correction that may decline to the lower trendline of the Broadening Wedge at 97.00.


Crude oil made a new low overnight at 100.47 before a bounce brought it back near yesterday’s close.  It is likely to test the 50-day Moving Average at 104.43 before resuming its decline through late June (Wave 3).    The likely target may be the lower trendline of the Broadening Wedge.


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