July 11, 2022
SPX retraced most of its decline from the top on June 28, but stopped at Intermediate-term resistance at 3918.11. The weekend SPX futures remained beneath 3900.00 and this morning are at a loss. There is a possibility of an attempt at overhead resistance again this morning, but the initial Cycle of this decline starting June 28 may be over in a matter of a couple hours, if not already finished.
In today’s expiring options, Max Pain is at 3885.00 with calls being favored above 3900.00 and puts dominating beneath 3875.00. Long gamma rests above 3950.00 while short gamma kicks in beneath 3850.00.
ZeroHedge reports, “US equity futures and global markets started the second week of the 3rd quarter on the back foot, with spoos sliding on Monday morning as traders were spooked by fears that Covid may be making a return to China leading to more virus restrictions sending Chinese stocks tumbling the most in a month, amid growing concern about an ugly second-quarter earnings season which begins this week. A closely watched CPI print on Wednesday which is expected to rise again, will also keep markets on edge.
Contracts on the S&P 500 and Nasdaq 100 traded 0.7% lower, suggesting last week’s rally in US stocks my stall as concerns about China’s Covid resurgence weigh on risk appetite. The dollar jumped, reversing two weeks of losses and trading around the highest level since 2020 while Treasuries gained. Bitcoin dropped, oil declined and iron ore extended losses on concern about the demand outlook in China.”
VIX futures jumped to a morning high at 26.48 and remained near the top of its range after testing mid-Cycle support at 24.16 last Friday. Note tat mid-Cycle support is strong and rising, offering a platform for the next move higher. The Triangle formation has lulled investors about market risk. However, dealers and hedge funds selling options will not want to see VIX rising above the 50-day Moving Average at 28.70.
The NYSE Hi-Lo Index appears to have made its Master Cycle high on Thursday as the NYSE made yet another weaker attempt at a comeback. While there may be a fleeting chance at a new high this week, the Cycles Model suggests a new (lower) low by mid-August. The final and deepest low is anticipated by mid-October.
TNX futures slid to test the 50-day Moving Average at 29.99 this morning. The Master Cycle low was made on Wednesday. The new Master Cycle may be short-lived, topping out during the last week of July. UST/TLT may be a buy at that point, as yields may take a nose-dive with a loss of 50% or more through mid-November.
USD futures hit a new high at 107.81 today, throwing-over the Broadening trendline. The Cycles Model suggests the probe higher may last until mid-August. Normally Wave (4) would decline to the lower trendline before the final high. The all-time high in the USD was made in July 2001 at 121.21. Should USD continue its rally, we may se it approach that level.