7:15 am
Good Morning!
NDX futures declined to 12797.50, beneath their 100-day Moving Average at 12879.76. The Chart shows that NDX challenged the neckline at 13020.40 and failed to close above it yesterday. There may be an aggressive sell signal at the bounce, provided it stays beneath the neckline. NDX has the most obvious reversal points of all the indexes and may lead the charge lower. While most analysts think that massive shorting leads to more short covering, there comes a point when the shorts are correct. The beginning of Primary Wave [3] may leave little doubt of the market’s direction.
ZeroHedge remarks, “uly was a tremendous month for stocks, it was also a mediocre (at best) month for hedge funds which not only underperform the S&P when stocks slide (as they did during the crashes of 2020 and early this year), but also underperform the broader market during sharp squeezes like the one that took place in July, prompting some to ask just what is the point of paying someone 2 and 20 to some overweight billionaire to always underperform.
The question of hedge fund utility becomes that much more pressing when one reads in the latest Goldman Sachs Prime Services hedge fund weekly report that while the GS Equity Fundamental L/S Performance Estimate rose +0.57% between 7/22 and 7/28 (roughly a third the performance of broader – and free – MSCI World TR +1.74%), this return was driven almost entirely by beta of +0.56% (i.e., market exposure), with alpha of just +0.01%.
In other words, not only can’t hedge funds generate alpha, they can’t even keep up with the market’s own beta! That will cost 2 and 20, please.”
SPX futures declined to 4082.30 after failing to overcome the 100-day Moving Average at 4121.42. This would be an early sign of a reversal and aggressive selling/shorting on the bounce may be advised, provided the 100-day is not breached.
Today’s op-ex shows Max Pain at 4115.00 in a thin market. Options are long above 4120.00 and short beneath 4100.00. Long gamma is not discernible, but short gamma may begin at 4050.00. The shorts are becoming more confident in the options market.
ZeroHedge reports, “Forget inflation, stagflation, recession, depression, earnings, Biden locked up in the basement with covid, and everything else: today’s it all about whether Nancy Pelosi will start World War 3 when she lands in Taiwan in 3 hours.
US stocks were set for a second day of declines as investors hunkered down over the imminent (military) response by China to Pelosi’s Taiwan planned visit to Taiwan, along with the risks from weakening economic growth amid hawkish central bank policy. Nasdaq 100 contracts were down 0.7% by 7:30a.m. in New York, while S&P 500 futures fell 0.6% having fallen as much as 1% earlier. 10Y yields are down to 2.55% after hitting 2.51% earlier, while both the dollar and gold are higher.”
VIX futures rose to an overnight high of 24.58, just short of the mid-Cycle resistance at 24.87, where a buy signal lies waiting. Of course, Friday’s (Master Cycle) low occurred on day 268, so confidence is high that the reversal was made yesterday. This may be an aggressive long signal, as well.
InvestingCube explains, “The VIX index jumped sharply this week after steadily dropping since June. It is trading at $22.85, which is about 7.63% above last week’s low of $21.34. However, this price is about 37.54%, below the highest point in May this year. The rise coincides with the ongoing Dow Jones and S&P 500 sell-off.
Volatility inches up slightly
The VIX index is one of Wall Street’s most popular volatility gauges. It is used to measure the sentiment among investors by considering activity in the S&P 500 options market. In most periods, the index has an inverse relationship with the S&P 500, Dow Jones, Russell 2000, and Nasdaq 100.”
TNX futures declined again to a new low of 25.16 as it sinks toward the mid-Cycle support at 22.89. Today is day 266 of the current Master Cycle, putting us on alert for an abrupt reversal. The talk of a Powell pivot may be premature, as rates appear ready for a reversal higher. Should TNX break out above the Cycle Top resistance in the next three weeks, we may see TNX reach 50.00 by year end.
ZeroHedge remarks, “For many people, former Fed Chairman Paul Volcker’s relevance today is rooted in how he broke the back of surging inflation in 1980. He is widely credited with employing the harsh policies that ended the high levels of inflation seen in the United States during the 1970s and early 1980s. back then few people realized his brave and bold move would shape the economic system for decades.
Paul Volcker served two terms as the 12th Chair of the Federal Reserve from 1979 to 1987. He was nominated to the position by President Jimmy Carter and renominated by President Ronald Reagan. Paul Volcker died on December 8, 2019. Before his death, Volcker participated in an interview with Ray Dalio. I recently stumbled upon this video from February 2019 on YouTube.
USD futures may have bounced off the 50-day Moving Average at 104.72 this morning, on day 251 of its Master Cycle. If the low has been made, the USD may embark on a two-month rally. The next resistance is the 2001 top at 121.21.
WTIC futures are in consolidation after threatening its July low. This has thrown investors off, as this is a zigzag formation that will end mush higher in the next three weeks. The 50-day Moving Average at 107.35 remains the target.