July 21, 2022

1:15 pm

It finally took until today’s action to recognize that there is no Triangle formation in the SPX…yet.  Triangles usually denote one final move will follow.  This decline is far from over.  This Cycle has now taken 50 days from the last high.  The prior two Cycles were 51 and 52 days long.  This is close to the end of the current daily Cycle.  There are all types of speculation about the rally going higher.  The main thing to keep in mind is that it is a short squeeze and nothing more.  It may limit out near 4000.00.

ZeroHedge remarks, “Earlier today Goldman trader Rich Privorotsky confirmed something we said over the weekend, namely that most Goldman clients “are hating this rally.” Well, just a few hours later, Nomura’s Charlie McElligott made the continuation of this most hated rally the centerpiece of his daily note, writing that his focus “is a scenario in the near-term where this US Equities squeeze could further accelerate into next week and “drag in” the folks who’ve been bearish and expecting this qtr’s earnings to be the one that shows the damage inflicted from tighter FCI…but in fact, might not yet be the broad case.”


7:50 am

Good Morning!

SPX futures faded, but remained above the 50-day Moving Average at 3928.00.  For those who have not yet gone short, a decline beneath the 50-day confirms the sell signal.  The Cycles Model suggest yet another possible 17 days of decline to the bottom of Wave C of (3) and next Master Cycle low.

ZeroHedge reports, “US equity futures edged slightly lower on Thursday but rebounded off session lows, as China’s worsening property crisis, political chaos in Italy where Mario Draghi rasigned as PM, and Russia’s plans to annex occupied Ukrainian territory all damped global sentiment, which however was offset by news that flows via the Nord Stream 1 pipeline had resumed and oil prices tumbled on fading US gasoline demand and a ramp up in Libyan output. Yes, as Bloomberg succinctly puts it, it has been an “eventful day” for Europe,  that includes the resignation of Italian Prime Minister Mario Draghi, an ECB rate decision and the restart of Russian gas flows via the Nord Stream pipeline.

Investors were also waiting for American unemployment claims to gauge their potential impact on Federal Reserve policy tightening and for earnings from companies including AT&T, Philip Morris and Snap. A European Central Bank meeting that’s expected to result in its first rate-hike in more than a decade is also among a flurry of concerns for traders.

S&P 500 contracts were down just 0.1% and those on the Nasdaq 100 little changed as of 715am in New York. The tech-heavy Nasdaq 100 index had gained for a second day on Wednesday, rising to the highest level since June. The Stoxx Europe 600 Index and the euro recouped losses following the resignation of Italy’s Prime Minister Mario Draghi. Treasury yields rose, pushing the 10-year benchmark above 3% and the dollar was flat. Bitcoin slumped after Tesla announced it had sold 75% of its holdings.



VIX futures rose to test the mid-cycle support/resistance at 24.57 this morning.  A cross above that confirms the buy signal off the Master Cycle low made yesterday, on day 259.  The Wave structure appears to be complete.  This may be a good time to accumulate VIX ETF shares and options.

SeekingAlpha reports, “Market volatility declined on Wednesday, sending the S&P VIX Index (VIX) below its 200-day moving average for the first time since late April. The subdued volatility has had implications on benchmark index tracking ETFs and volatility-based ETFs and ETNs.

The VIX fell to as low as 23.4 as of Wednesday’s late-morning action. This marked its lowest level since April 22 and first time below its 200-day moving average since April 21.”


USD futures are down modestly after testing the trendline at 107.50.  There may be room for a modest new low.  However, USD is on the verge of a triple strength breakout that may challenge the 2001 peak at 121.21.  This will complete a 21.5-year Top-to-top Cycle.


TNX rallied this morning above the 50-day moving Average at 30.06 and is challenging Intermediate-term resistance at 30.76.  The Cycles Model suggests the probe higher may fizzle out next week, but not before challenging the June 27 peak at 34.83.  The fear of rising rates may be the trigger for lower stock prices.

ZeroHedge reports, “With the 20Y part of the curve still deeply kinked and inverted (due to lack of buyside liquidity for this tenor) and offering the highest absolute yield of any US treasury, moments ago a $14 billion auction for 20Y paper (19-year, 10-month reopening of cusip TH1), showed that there was blockbuster demand for duration.

Pricing at a high yield of 3.420%, this was not only the first drop in yield since December 2021, but also stopped through the When Issued 3.447% by 2.7bps, the 2nd highest on record with only April’s 3.0bps higher.

The bid to cover of 2.65 was above last month’s 2.60 and the highest since April.”


West Texas crude futures declined to 96.42 this morning, again challenging mid-Cycle support at 94.81.  The Cycles Model infers another 4 weeks of rally to challenge the 50-day Moving Average currently at 109.06 before moving much lower.  Higher prices at the pump are in store until Labor Day, when real demand destruction sets in.

ZeroHedge comments, “WTI Crude is back below $100 this morning, down almost 5%, after a perfect mini-storm of headlines hit energy bulls (in the short-term).

On the demand side there were drivers on both sides of the Atlantic.

Official US data on gasoline inventories showed significant demand destruction (building 3.5mm barrels despite a modest cut in refinery runs) – a particularly negative development in the middle of what’s known as summer driving season in the US.

“In aggregate,” wrote analysts at Sevens Report Research, “all of these data points continue to suggest high prices are resulting in demand destruction among consumers as inflation continues to pressure personal balance sheets.”





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