3:17 pm
The sideways frustration may be over, as SPX declines through Short-term support at 3822.13. Another nearby potential support is at 3810.32. Should both be surpassed, the doors open to a panic decline as trending strength gathers momentum later in the week. SPX is challenging short gamma beneath 3850.00. Short gamma strengthens dramatically beneath 3800.00.
2:59 pm
Here is the long view of TNX. It has gone coast-to-coast in the monthly trading band, completing a 2.15-year Cycle. A retracement is underway that may take TNX down 61.8% of that rally to 15.76, or the 43-month moving Average at 16.26 by the end of the year. The 10-year Treasury yield has slid below 30.00, causing foreign investors to shun it.
ZeroHedge remarks, “After yesterday’s average 3Y auction, moments ago the Treasury sold $33 billion in a 10 Year reopening (technically a reopening of the 9Y-10M cusip EP2), in an auction that could have certainly gone better.
The high yield of 2.96% was down from June’s 3.03%, the first drop since Nov 2021; even so with the lack of concession due to the sharp drop in yields for the past two days, the auction priced with a 2bps tail to the 2.940% when issued, the fifth consecutive tail for a 10Y auction and the 8th in the past 9.
The ugliness continued below the surface, with the Bid to Cover of 2.34 sliding below last month’s 2.41 and the lowest since Oct 2020; obviously it was well below the 2.50 six-auction average.”
10:25 am
The Ag Index has made a 61.8% retracement, fulfilling its pullback requirement. It may reverse shortly, so this is a good long entry. GKX may get a boost in its trending strength by the end of the week and may continue its rally through mid-August. It may reach its Head & Shoulders target by mid-October.
ZeroHedge warns, “The endless drought in the Southwest has become a full-blown national emergency. If Lake Mead, Lake Powell and the Colorado River keep drying up at the rate they have been, millions of Americans could soon be without water and electricity. Despite all of our advanced technology, those living in the Southwest continue to be extremely dependent on a handful of critically important water sources, and if those water sources get so low that they cannot be used we are going to have a major crisis on our hands.”
ZeroHedge reports, “Chicago corn soared the most in nearly a year after the sweltering summer heat may dent crop yields.
Bloomberg reports a heatwave over the Midwest grain belt is underway during corn’s pollination period, a flowering stage for the grain, and is the most crucial development period for yield determination. High temperatures and a lack of rainfall during the pollination phase usually result in lower yields. ”
8:15 am
Good Morning!
SPX futures made a new low at 3818.80 this morning. Support remains at 3810.00 and 3787.25. 8.6 days have elapsed with 28 market days to go in this Cycle. It’s time to be short, if not already.
Today’s options are relatively light, but in a tight range. Calls dominate at 3855.00 and above, while puts take over at 3850.00 and beneath. Long gamma begins at 3875.00. Short gamma begins at 3800.00. Tomorrow’s options screen shows short gamma possibly beginning at 3825.00 while long gamma moves up to 3875.00 – 3890.00. The bears are getting braver.
ZeroHedge reports, “US index futures, global markets, Treasury yields, bitcoin and oil all fell on Tuesday as the dollar continued its relentless ascent to levels just shy of the March 2020 global crash record high…
… highlighting pervasive trader unease about the economic outlook as high inflation and a looming recession are set to unleash a catastrophic global recession coupled with a worldwide dollar shortage, now with the added boost of China’s renewed struggles with Covid. S&P and Nasdaq 100 emini futures dropped about 0.5% each having slumped as much as 0.9% earlier, as traders brace for an ugly Q2 earnings season which may provide clues on how companies are weathering inflation and recession concerns.”
VIX futures are climbing higher, reaching 27.38 this morning. VIX shows a longer potential rally than the SPX decline at 75 calendar days and 52 (51.6) market days.
The NYSE Hi-Lo Index closed yesterday at -127.00, creating an aggressive sell signal. Its Cycle is in agreement with the VIX Cycle.
IG reports, “Is the recent slide in the VIX index likely to continue?
The Volatility Index (VIX) is again coming off its relatively high 30+ reading as it has done every month year-to-date, except in April, but is another spike higher around the corner?
The Chicago Board Options Exchange (CBOE) VIX, also called the “fear index” by market participants, aggregates 30-day put and call options on the S&P 500 index.
TNX has gone beneath the 50-day Moving Average at 30.01, but may not be on a sell signal. The Cycles Model calls for another 2 weeks of rally before a larger decline in August. This move may not be tradable.
ZeroHedge reports, “To find the last time the US 3 Year Treasury auction priced above 3.0%, one has to go back all the way to May 2007, because not even during the Lehman turmoil in 2008 or the Fed policy error of Nov and Dec 2018 did 3Y yields rise this high. We bring this up because moments ago the Treasury sold $43 billion in 3Y notes at a high yield of 3.093%, up from 2.927% in June and the highest in 15 years. Perhaps it was the surge in yields (because it certainly wasn’t the concession in today’s trade which has seen yields slide across the curve), the prompted a spike in demand by buyers, and is why after last month’s 1 basis point tail, today’s auction stopped through the When Issued 3.098% by 0.5bps.”
USD futures made a new overnight high at 108.41 as it continues its throw-over of the trading channel. The Cycles Model calls for another month of rally, so the question is, will it exceed the prior all-time high at 121.21? The Cycles Model calls for a near-term pullback, with trending strength returning at the end of next week.
ZeroHedge (TME) comments, “The DXY looks like a “coin” chart soon. It continues trading inside a positive trend channel and note we are getting rather elevated inside the channel, at least in the short term. 50 day is down at channel lows around 104. 200 day moving average is at 98! RSI is getting very overbought, but as we know overbought can stay overbought for longer than most plan. Let’s see how this develops from here, but people are far from all in on the dollar long trade (chart 2).”
TheEpochTimes reports, “BRICS members call for cross-border payment in BRICS currencies to challenge the U.S. dollar.
In his opening remarks, Xi stated, “We should also expand BRICS cooperation on cross-border payment and credit rating to facilitate trade, investment, and financing among our countries.”
Gold futures made a deeper low at 1721.80 this morning. The Cycles Model calls for a possible bounce by the end of the week that may last up to 3 weeks. The target for the bounce may be the Lip of the Cup with Handle. However, gold is in a very weak state, with a truncated, irregular Wave 2 suggesting more downside. Should it not bounce this week, the downside target may be near 1680.00.
ZeroHedge tries to explain why gold is acting up, “The current and open fraud regarding the paper gold price in the COMEX market is now as plain to see as the open desperation in the global financial system, which is unraveling in real-time all around us.
As risk assets tumble foreseeably into bear territory before a headwind of deliberately rising rates, precious metals have seen headline-making falls as well.”
Crude Oil futures declined to a morning low of 98.05 and is now bouncing to retest round number support/resistance at 100.00. Crude has the potential of two or more weeks of further decline into the next Master Cycle. Despite OPEC’s limitations which would call for higher prices, we may be witnessing demand destruction at work.
ZeroHedge comments, “Use it or lose it – this principle might apply to Saudi Arabia’s oil production capacity that is now eyed by the Western world to fill the Russia-sized gap in supply left behind by embargoes.
However, as Statista’s Katharina Buchholz details below, Saudi Arabia in the past three years only approached its declared maximum production capacity of 12 million barrels per day in one month, casting doubts on the kingdom’s ability to quickly up its production to stabilize world markets. According to Bloomberg, such predictions have come from UAE leadership, who together with the Saudis are the only OPEC members who have spare production capacity – at least on paper.”
