June 29, 2022

3:23 pm

VIX has been straddling the 50-day Moving Average and buy signal at 28.85 today.  The Triangle formation has been in a big stall since late January.  That is precisely what a Triangle is meant to do…buy time.  However, it simply delays the outcome and keeps the investor public unaware of the danger lurking at the breakout.

ZeroHedge remarks, “One of the most frequent questions tossed around Wall Street trading desks (and strip clubs), and which was duly covered by Bloomberg recently in “Fear Has Gone Missing in Wall Street’s Slow-Motion Bear Market“, is why despite the crushing bear market and the coming recession, does the VIX refuse to rise sustainably above 30, or in other words, why is the VIX so low?

As Goldman’s Rocky Fishman wrote in a recent note “Option Markets Take the SPX Bear Market in Stride” (available to professional subs), “one of the most popular questions we have received is why the VIX hasn’t surpassed its March peak (36) despite the SPX being lower than it was in March and realized vol being higher than it was in March.”


3:14 pm

SPX has been avoiding short gamma beneath 3800.00 by bouncing twice at that level.  It may succeed in maintaining that elevation until after the close.  However, a decline beneath that level may be inevitable after the close.  It appears that trending strength may take a dive by the weekend.


7:50 am

Good Morning!

NDX futures declined further in the overnight session to 11583.50 before a bounce bringing it back near the flat line.  Should it bounce at the open, overhead resistance is at 11894.62, near the 50% retracement value.  Lower support is at 11429.51, its Cycle Bottom.  There are two possible scenarios for this decline.  It may be an extension of the old Master Cycle currently shown on June 17.  Today is day 268, which is a bit stretched, but hot unusual.  Or it may be the beginning of at new Master Cycle decline.  I am beginning to think the second option is the more viable.

In today’s op-ex, options are positive above 11650.00 and negative beneath 11500.00.  Both puts and calls are so light that it is difficult to tell where long or short gamma begin.  The QQQ (closing price: 283.54) options expiration are much more bearish, with Max Pain near 294.00.  Short gamma lies at 290.00 – 293.00.  This is a sticky wicket for the dealers and hedge funds.


SPX futures tested support at 3810.00 and bounced.  The daily Cycle Bottom lies at 3853.39 and Short-term resistance lies at 3876.39, very near the 50% retracement level.  In Today’s op-ex, calls dominate above 3850.00 an Max Pain is at 3840.00.  Short gamma may begin at 3800.00 in a lightly populated options market. I am modeling the Waves to show the SPX entering Wave 3 of (3) of [3] of I in this decline, very bearish combination.

ZeroHedge reports, “One day after futures ramped overnight (if only to crater during the regular session) on hopes China was easing its highly politicized  Zero Covid policy after it cut the time of quarantine lockdowns, this morning futures slumped early on after China’s President Xi Jinping made clear that Covid Zero isn’t going anywhere and remains the most “economic and effective” policy for China during a symbolic visit to the virus ground zero in Wuhan, in which he cast the strategy as proof of the superiority of the country’s political system. That coupled with renewed recession worries (market is again pricing in a rate cut in Q1 2023) even as monetary policy tightens in much of the world to fight supply-side inflation, sent US futures and global markets lower. S&P futures dropped 0.2% and Nasdaq 100 futures were down 0.4% after the underlying index slumped on 3.1% on Tuesday. The dollar was steady after rising the most in over a week while WTI crude climbed above $112 a barrel, set for a fourth session of gains. In cryptocurrencies, Bitcoin dipped below the closely watched $20,000 level on news crypto hedge fund 3 Arrows Capital was ordered to liquidate.

The Nasdaq’s Tuesday’s slump added to what was already one of the worst years in terms of big daily selloffs in US stocks. The S&P 500 Index has fallen 2% or more on 14 occasions, putting 2022 in the top 10 list, according to Bloomberg data.”


VIX futures have clambered back above the 50-day Moving Average at 28.44, making a new high at 28.96 thus far.  To the causal observer, the VIX has a “mild fever’ but nothing to worry about.  However, the coiling action of the Triangle formation denotes a building energy that may soon explode higher.  If my Wave identification is correct, the rally higher may have just begun.  The Wave E of a Triangle is often a rogue Wave, leaving the formation appearing either unfinished or overdone.  The only way we know for sure is when Wave 1 breaks above the prior high.


TNX may have begun its final decline to mid-Cycle support.  It may have a little more than a week to accomplish this task.  The sell-of in yields may indicate a migration from equities.

Yesterday ZeroHedge reported, “After one ugly 2Y auction and one catastrophic 5Y sale on Monday, today the week’s truncated auction schedule saw the last coupon issuance for the week when the Treasury sold $40BN in 7Y paper. And while the auction was not as bad as the infamous Feb 21 “failed” 7Y auction but it sure was ugly.

The high yield of 3.280% was just over 50bps higher compared to the 2.777% in the May auction. and was the highest since Feb 2010 when the auction printed at 3.37%. More importantly, the auction also tailed the When Issued 3.259% by 2.1bps, the biggest tail of 2022 (Dec 2021 was 2.3bps).

The bid to cover dropped from 2.690 to 2.481, the lowest since April, but was above the six-auction average of 2.41.”



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