The bounce in SPX was higher than expected, but the advice is still valid. The EW format is at the Minute level, so I had not anticipated a move this large. However, the final Waves of Triangles are often rogues. I had anticipated that in the VIX, due to a higher degree format. It has yet to happen. Fundamental analysis tells us that SPX should rally from here. That is simply not so. The Triangle formation is a continuation pattern with the next move, Wave C, equal or greater in size that Wave A.
ZeroHedge comments, “One day after a “sinkhole” slide for US stocks driven by news of an Apple hiring freeze and facilitated by zero market liquidity, the risk now – as Goldman described over the weekend – is of a meltup in the opposite direction as buyback blackout period ends on July 22, at which point some $5.5BN in daily buybacks will return and relentlessly lift offers with little concerns for price…
… and amid the catastrophic liquidity where top-of-book liquidity is a tiny $2 million (meaning a $2MM order can move ES by one tick)…”
ZeroHedge further reveals, “Last Thursday, we reported that after having patiently and bravely bought every (or almost every) f**king dip of the Biden bear market, retail investors were on the verge of throwing in the towel and were ready to capitulate alongside their far wealthier (and much more experienced) institutional peers. One day later, we also reported that while in his latest note the biggest Wall Street bear – and contrarian – BofA Chief Investment Strategist, Michael Hartnett, had not turned bullish just yet, he strongly hinted that he will in the near future as a result of his expectation that the Fed will pivot in the near future, and “the most difficult decision in investing for the rest of 2022 will be to pick which FOMC one should flip portfolio before – Sep 20th , Nov 1st or Dec 13th” with Hartnett saying it will most likely be November when the Fed capitulates.”
As mentioned yesterday, sell the bounce.
SPX futures rose to 3868.50 in the overnight session, a 60% retracement from yesterday’s low. Futures are declining as the SPX loses strength. The Triangle formation is complete and offers a minimum target equal to Wave A, approximately 540 points lower from yesterday’s high.
Today’s options chain shows Max Pain at 3850.00. Calls dominate above 3870.00 and puts take over beneath 3840.00. Long gamma exists above 3900.00, while puts do not show a clear level of short gamma in today’s op-ex. However, short gamma is cumulative and may exert influence beneath 3800.00.
ZeroHedge reports, “After yesterday’s sharp late-day swoon sparked by news that Apple is reining in hiring (which, of course, is expects as the US slides into recession, and is a necessary condition for the Fed to end its rate hikes), sentiment reversed overnight and US index futures climbed to session highs, rising as high as 1% just before 7am ET, as traders remained focused on the earnings season, with tech stocks set to rebound following Monday’s losses.
Nasdaq 100 and S&P 500 contracts were 0.7% higher by 7:30am in New York. Both indexes declined Monday as investors worried over the strength of the economy after Apple joined a growing number of companies that are slowing hiring.”
VIX futures slid to 24.58, still within normal retracement levels. Friday’s candidate for the Master Cycle low occurred on day 254. Today is day 258. There is a slight chance for a modest new low, but the odds of that happening will decrease over the next few days. Today will be a good day to accumulate shares in the VIX.
TNX futures rose to 30.13 in anticipation of a final cross above the 50-day Moving Average at 30.06. The Cycles Model suggests another week of rally in TNX, possibly aiming for the Cycle Top resistance at 34.83. Overseas investors are selling USTs.
ZeroHedge notes, “Foreign official institutions sold $34.1 billion in USTs in May…
BUT… foreign private investors (not central banks or reserve managers) bought a record $133.94 billion in May…
Most notably, China’s holding of US Treasuries fell below $1 trillion for the first time since June 2010…
This is the 6th straight month of selling by China for a total of $100 billion over that period.
China was the biggest seller in May (the latest month available) followed by Ireland and Canada.
Crude oil futures declined to 96.53 this morning as it seeks to find support at the mid-Cycle at 94.62. There is likely to be another probe higher, possibly testing the 50-day Moving Average at 109.24, just above the 61.8% retracement value.
ZeroHedge reports, “Just hours after Gazprom declared force majuere with a number of its European clients – implicitly cutting off NatGas supply to the continent; Canadian energy firm TC Energy has declared force majeure on some crude shipments on the Keystone pipeline after a power failure at a pump station in South Dakota.
The power failure was reportedly driven by the extreme temperatures spreading across the US (it was reportedly around 20 degrees above normal at around 100 degrees).”
Gold futures slipped back to a low of 1703.20 before a bounce bringing it back to flat line. Gold is now in a retracement mode where it may rally to the Lip of the Cup with Handle formation, or possible higher. There are two weeks left in the bounce, per the Cycles Model.
Investing comments, ”
- Fed officials observe blackout ahead of interest rate decision
- Unusually light week for US economic data
- Gold seems to be boxed in a trading range of $10 or less
After saturating the airwaves last week with chatter on the merits and demerits of a super-sized interest rate hike for July, Federal Reserve officials are no longer commenting ahead of the July 27 rate decision.
Will gold bulls find the silence ‘golden’?”