June 22, 2022

11:40 am

Crude oil futures remain on a sell signal, having made a new low today at 101.58.  The Cycles  Model suggests a continued decline to the last week of July.  There may be a bounce at mid-Cycle support at 92.25.  However, the Broadening Wedge formation shows a potential target near 50.00 later in the fall.

ZeroHedge gives advice best to avoid, “While stocks are dumping (if regaining some ground as Powell fails to surprise, just as we predicted), the biggest change overnight according to JPM’s trading desk is the sell-off within the commodity complex, which the bank’s commodity traders say they would use as an opportunity to buy (despite oil remaining sticky high in comparison to the recent drop in 5Y breakevens).”

 

10:20 am

Course correction.  It appears that the current Cycle may be a top-to-top Cycle.  Wave [a] of B is completing now.  Wave [b] may go down to the Cycle Bottom at 3686.46 (or lower) where you may exit short positions.  Wave [c] of B may take the SPX to the 50-day Moving Average currently at 3800.00 on or around June 30.  From  there we may see another 37-day decline, where SPX, Hi-Lo and VIX Cycles line up again.  This is like piloting a tanker through the shoals.  The market may not like what Powell has to say.  Use it to your advantage.

ZeroHedge comments, “After an ugly night in the futures markets, US equity markets went into full ramp mode shortly after 0900ET and all the majors are back in the green for the day now…

It’s truly anyone’s guess why but three main triggers are being discussed across trading desks:

1) Federal Reserve Bank of Philadelphia President Patrick Harker said this morning that it’s possible the U.S. economy might see a modest contraction in growth but he expects the job market to remain strong.

 

8:20 am

Good Morning!

NDX stalled beneath the Cycle Bottom resistance at 11651.77, a dangerous place to close.  This morning’s NDX futures plummeted to 11285.10 followed by a small bounce.  This is very bearish, especially since today’s op-ex is short beneath 11475.00 and possibly at short gamma beneath 11400.00.  The options are still in play, although not as populated as last Friday.  This Friday’s op-ex is in short gamma beneath 11500.00!

ZeroHedge observes, “The most common question among investors these days is when to buy the dip.

Very few market participants seem to be worried about a crisis or deep recession, let alone a nuclear threat.

However, those three scenarios are not unimaginable.

In its Global Data Watch of June 17, JP Morgan says that its internal model only shows a 25% chance of recession in the next year. Furthermore, they clarify that the likelihood would rise to 40% if credit conditions were updated.

Still low, right? We must remember that in January 2008 Reuters reported that “expectations for the weakest consumer spending performance in 17 years during 2008 kept the odds of a recession at nearly 40 percent”.

 

SPX futures declined to a low of 3690.80 this morning before a small bounce.  In today’s op-ex, Max Pain is at 3750.00.  Beneath that options turn short with short gamma possibly starting at 3700.00.  Most certainly at 3650.00.

I have voiced my puzzlement over the lack of agreement among the Cycles, especially at this time.  After much review, I believe I have the answer, and it isn’t pretty.  First, what have we noticed thus far?  The decline in Wave (1) was 51 days.  The decline in Wave (3) was 52 days.  A very close comparison.  What may surprise you is that each decline took exactly 37 market days.  What is the significance?  I had made a statement that impulsive declines take place in units of 4.3 days.  That would give us 30.1, 34.4 or 38.7 days in an impulse.  However, the declines since January 4 are not impulsive.  They are corrective in a Leading diagonal decline.  

What I have discovered is that corrective moves often happen in units divisible by 18.5 (4.3 squared).  Yesterday was day 12, leaving us with 6.5 more market days of decline, at a minimum.  That makes the probable bottom on June 30.  My warnings of 10% down days are still valid.

Here is what may happen should Wave (5) make a 37+ market day decline.  This illustrates the Orthodox Broadening Top, where the next target may be Point 6.

ZeroHedge reports, “Tuesday’s euphoric market mood has U-turned into sheer despair with most of yesterday’s gains gone overnight as attention turns to the coming US recession (now made official by Bill “The Fed Should Crush Donald Trump” Dudley who just published an Op-Ed “The US Economy Is Headed for a Hard Landing“) and as traders await Jerome Powell before Senate testimony. S&P 500 futures declined 1.2%, down 45 points to 3,722 while Nasdaq 100 futures were down 1.5% by 715 a.m. in New York, indicating more declines for heavyweight technology stocks, which have already been hammered by rising rates.  Treasury yields and oil both slumped while the broader commodity sector tipped back toward pre-war levels, as traders increasingly price in a recession.

 

VIX futures rose to a morning high of 31.57 before easing  down to 31.00.  The above explanation of the SPX may clear up why VIX has not exceeded its Head & Shoulders neckline.  The next Master Cycle (high) appears during the week of August 22.

 

 

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