May 18, 2022

12:38 pm

As ZeroHedge mentioned, liquidity coming out of stocks is pushing the 10-year T-Note yield down beneath the Cycle Top support at 29.16.  The 10-year yield may go considerably lower over the next three weeks.

 

12:28 pm

This decline is beginning to show its legs as the last two days’ lows have been taken out.   The next level of support may be at the 2-hour Cycle bottom at 3870.86.   Should it be exceeded, the May 12 low at 3858.87 is the next candidate.  The bear market in the SPX begins at 3855.00.  Good luck with that.  The possibility of a retest of yesterday’s high remains until support is taken out…

ZeroHedge advises, “Remember the rally yesterday and how great that felt… “is the bottom in?” etc… yadadadada… Well… it’s gone…

US equity futures are tanking after the cash markets open, taking out yesterday’s lows…

As Nomura’s Charlie McElligott notes, it appears this is the potential unwind of the “TINA” phenomenon, as, thanks to the repricing of the risk-free rate – then pushing into yields on spread-product – “there is an alternative” to equities once again.”

 

8;10 am

Good Morning!

NDX futures hit a morning low of 12407.00 and appears to remain near the bottom.  The current Master Cycle is not due until the end of the month.  Today’s action may determine whether that is a new low or not.  this may be a minor Wave 2 retracement and may be smaller in size and duration.  If so, the correction may be complete and a panic decline may be in the works.

ZeroHedge remarks, “One month after the April Fund Manager Survey was downright “apocalyptic” with the majority seeing a bear market and stagflation – yet nobody rushing to sell – and with optimism plunging to levels right before Lehman, today Bank of America published the latest, May FMS (available to pro subscribers in the usual place) in which the bank’s doom-and-gloomy Chief Investment Strategist Michael Hartnett (who most recently warned that the bear market will end when the S&P hits 3,000 in October) found that his view is shared by a growing number of even more apocalyptic Wall Street professionals, because the survey which polled 331 panelists managing $986 billion in AUM, revealed global growth expectations plunged even more compared to last month, and dropped to fresh all-time lows (net -72%) …

… with profit expectations slumping past the COVID lows to net -66% (from 63%), the weakest since Oct’08, smack in the middle of the Global Financial Crisis. (note lows in global profit expectations consistent with other crisis moments such as LTCM, Dotcom bubble burst, Lehman bankruptcy, and COVID)…”

 

SPX futures touched 4097.50 after the close, then hit a low of 4053.10 this morning as the reversal appears to be underway.  From a technical point of view, the Lip of the Cup with Handle near 4015.00 was due to be retested.  In addition, from a Cyclical point of view, the Cycle bottom must also be retested before proceeding to much lower levels.  This may be the beginning of a panic Cycle that everyone has been fearing.  today is day 258 of the Master Cycle.  The two choices are (1) the MC was made last Thursday or (2) it may be made in the next 4.3 days.  A panic decline here will undoubtedly move the MC low to next Tuesday.

In today’s expiring options, the Max Pain level is 4090.00.  Calls dominate above 4100.00, but only by a thin margin.  In other words, long gamma is nowhere to be seen.  Short gamma appears at 4000.00, but the lack of calls may cause a slippery slope at a higher level.

ZeroHedge reports, “The brief bear market rally in US stocks was set to end with a whimper following Tuesday’s strong dead cat bounce, after Fed Chair Jerome Powell gave his most hawkish remarks to date. Hope that China lockdowns would soon end turned to skepticism, as the yuan slumped after its biggest gain since October, while dismal guidance from Target – which warned that inflation was crushing margins – confirmed what Walmart said yesterday, namely that the US consumer is running on fumes. An 11% plunge in the latest weekly mortgage applications only reaffirmed that a hard-landing is inevitable and just a matter of time. Nasdaq 100 futures dropped 1%, while S&P 500 futures slipped 0.7% after US stocks surged on Tuesday. Treasury yields hit session highs, rising back to 3.0%, and the dollar snapped a three-day losing streak. Bitcoin got hammered again, sliding back under $30k.”

 

 

VIX futures rallied above the 50-day Moving Average, hitting a morning high of 26.97 thus far.  Once the VIX exceeds the Neckline of the Head & Shoulder formation, a reasonable target may be 55.00 for Wave 3 of (3).  Wave 5 usually follows quickly on the heels of Wave 3, so an MC high in the VIX may occur in early June.

 

TNX futures spiked to 3.015 before pulling back beneath 3.000 this morning.  What follows may be a powerful drawdown, as Wave 4 may decline as far as the top of Wave 1.  the Cycles Model suggests that this may happen between now and the end of the month.  This may be the last month to lock in a favorable mortgage rate as rates go down before the final push higher this summer.

ZeroHedge comments, “Following March’s modest rise in Housing Starts and Permits, analysts expected reality to catch up with the homebuilder market in April (just as we saw in the NAHB sentiment survey slumping to 2 year lows). Housing Starts and Building Permits both dropped in April but the picture was mixed with Starts falling just 0.2% MoM (against -2.1% MoM exp), but that was due to a huge downward revision in March Starts from +0.3% to -2.8% MoM?!

Building Permits tumbled 3.2% MoM (more than the expedcted 3.0% MoM drop) with only minimal revisions to March.”

 

USD futures consolidates in the overnight market as they approach the Cycle Top support.  That may soon be broken as the USD is due for a decline through the middle of June.

 

 

 

 

 

 

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One Response to May 18, 2022

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