2:50 pm
SPX is testing its 61.8% Fibonacci retracement level at 3983.61 and may have exhausted its short squeeze for the day. Max Pain is at 3950.00, but it may not hold at the close. Short gamma begins at 3900.00. Some analysts are catching on to the “Head & Shoulders” formation with a target of 3400.00. However the new Master Cycle decline has just begun. What happens when it goes lower? The first Master Cycle decline went 704.00 points from top to bottom in 51 days. The last Master Cycle decline went 779.00 points in 44 days. If the Cycles Model is accurate, the next Master Cycle decline may be 34.4 days long with a potential decline near 1550.00 points.
ZeroHedge explains, “A curious trend has emerged in Bank of America’s monthly Fund Manager Survey: with every passing month, as the S&P grinds lower and lower until it finally briefly dipped into a bear market on Friday, the prevailing consensus among Wall Street investors for where the “Fed put” is has also declined with every passing month…
… and is currently at just 3529, down from 36347 in April, and from 3698 in February.”
7:45 am
Tomorrow morning will be the last day of blogging this week. I have a commitment to attend a state-wide convention on Wednesday through Friday and a memorial service for my deceased mother on Saturday, followed by an extended family gathering. A very busy week, indeed.
Good Morning!
NDX futures have rebounded over the weekend to a high of 12042.33, very near the 50% retracement value at 12036.00, but short of the Thursday retracement high of 12066.90. Friday’s action appears to be an expanded correction and not a recovery. The decline (crash) is due to resume shortly. Whether there is more to the correction is to be determined. A further rally above 12066.90 is possible, but not anticipated at this time. The 61.8% retracement value is at 12164.00.
Today’s expiring options in NDX show Max Pain at 12100.00. While positive above that level, calls are sparse and positive gamma is not evident. Today’s expiration favors puts at 12050.00, while short gamma starts at 11750.00.
ZeroHedge comments, “Citing estimates from JPMorgan, over the weekend Bloomberg wrote that courtesy of a Biden administration terrified of what soaring inflation will mean for the Democrats in the midterms, and a Fed that is determine to do anything – even crash the market and spark a recession – to do Joe Biden’s “kill inflation” bidding, the US faces a new scary threat: a plunge in wealth which JPM estimates at least $5 trillion, and could reach $9 trillion by year-end.
In short, the world’s richest nation is waking up to an unpleasant and unfamiliar sensation: It’s getting poorer… and worst of all, it’s getting poorer at the behest of its own leaders.
Since the start of the year, the S&P 500 Index is down 18%, the Nasdaq 100 has lost 27% and a Bloomberg index of cryptocurrencies has plunged 48%. That all amounts to “a wealth shock that is set to drag on growth in the coming year,” JPMorgan economists led by Michael Feroli wrote in a note Friday.”
SPX futures hit a weekend high of 3957.30, but has receded back beneath Thursday’s high of 3945.96. The bounce may be complete, leaving an expanded flat correction. The 50% retracement level is at 3950.52. This leaves a trap for the unwary, since the decline may resume imminently. We may find ourselves is a “no bid” environment.
Today’s options expirations show Max Pain at 3950.00. Options turn positive at 4000.00. Short gamma begins at 3875.00-3900.00.
ZeroHedge reports, “S stock futures advanced for a second day after staging a furious rally late on Friday having slumped into a bear market just hours earlier, after President Joe Biden said China tariffs imposed by the Trump administration were under consideration, although concerns about hawkish central banks and record Covid cases in Beijing continued to weigh on the sentiment. Contracts on the S&P 500 were up 1% by 7:15 a.m. in New York, trimming earlier gains of as much as 1.4% following remarks from Christine Lagarde that the European Central Bank is likely to start raising interest rates in July and exit sub-zero territory by the end of September which sent the euro sharply higher and hit the USD. Meanwhile, Beijing and Tianjin continue to ramp up Covid restrictions as cases climbed. Nasdaq futures also jumped, rising 1.1%. Europe rose 0.6% while Asian stocks closed mostly in the green, with Nikkei +1% and Hang Seng -1.2%. The dollar and Treasuries retreated, while bitcoin jumped to $30,500 as the crypto rout appears over.”
VIX futures are consolidating within Friday’s trading range, suggesting little appetite for risk-on behavior. Trending strength may begin as early as tomorrow, while it may build exponentially after the Memorial day holiday.
In the May 25 expiring options, Max Pain is at 29.00. Calls are heavily favored at 30.00 and above, while long gamma begins at 37.50.
TNX is on a reflexive bounce to retest Intermediate-term resistance at 28.58 before moving lower. A resumption of the decline, with strength, may begin as early as today or tomorrow. The next Master Cycle low may come in next week.
USd declined beneath its Cycle Top support at 102.97, confirming its well signal. The Cycles Model suggests the decline may continue to mid-june. The probable target appears to be the lower trendline of the Broadening Wedge formation at 97.00.