Imagine that! Closing price at Max Pain 4145.00.
SPX stopped its retracement at 4151.58, short of the Ending Diagonal trendline and 2-hour Cycle Top. It is on an aggressive sell signal with confirmation beneath the 100-day Moving Average at 4118.00. Take appropriate action.
SPX has erased much of the loss seen at the open of the market. While it has broken beneath its Ending Diagonal trendline and 2-hour Cycle Top at 4156.03, it stands as as top line resistance. Should it exceed that level, SPX may still go higher to the 50% retracement level at 4225.00. However, options are still dominating the market. Remember, 4145.00 may be the Max Pain level. We may see some strong moves on either side of that level.
ZeroHedge observes, “The massive beat in the payrolls print has removed any hopes of a Fed Pivot and sent rate-hike expectations soaring…
With the odds of a 75bps hike in September now topping 70% once again…
All of which stole the jam out of the market’s bullish donut with stocks plunging…”
The Employment Situation Summary reads, “Total nonfarm payroll employment rose by 528,000 in July, and the unemployment rate edged down to 3.5 percent, the U.S. Bureau of Labor Statistics reported today. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care. Both total nonfarm employment and the unemployment rate have returned to their February 2020 pre-pandemic levels.”
The news of this report has sent the SPX directly down to the 100-day at 4118.20. We have almost an hour before the market opens. Stay alert and, provided the market remains negative find the earliest opportunity to go short. Short gamma begins at 4120.00.
ZeroHedge reports, “We are now well and truly in bizarro world.
In a time when the US is in a technical recession, when tech companies are mass laying off thousands of people, moments ago the BLS reported that in July the US added a whopping 528K jobs, more than double the 250K expected, up solidly from last month’s upward revised 398K (up from 372K) and the highest since February’s 714K!
NDX futures declined to 13272.20 as I write, still above critical support at 13020.00. NDX has a structural resistance at 13450.00, which limits its upside today, on day 256 of the Master Cycle. An aggressive sell awaits at a reversal today. A decline beneath the Lip/Neckline at 13020.00 may confirm a sell signal.
In today’s op-ex, Max Pain lies at 13150.00 with long gamma at 13200 and short gamma at 13100.00 in a moderately populated options screen. This may produce a very volatile options expiration.
ZeroHedge remarks, “Earlier today we said that JPM’s 7th and unstated reason why the rally would continue is that Goldman sellside desk warned that “without clear signs of a positive shift in macro momentum, temporary re-risking could actually increase risks of another leg lower in the market rather than signal the end of the bear market.” And since Goldman’s sellside desk is – whether on purpose or purely by accident – always wrong, and since Goldman is currently aligned with the Fed itself in hoping talk jawbone risk assets lower, we said that the translation is: “we are going up.”
But maybe this time Goldman is right?”
The Shanghai Composite bounced for a second day, but remains firmly on a sell signal. The Cycles Model suggests another three weeks of decline that has the capability of making a new low. The Cup with Handle formation remains in play. Its Wave (2) peak was made in September, two months prior to the NDX peak in November, suggesting that the Shanghai Composite may lead the NDX in its decline.
ZeroHedge comments, “For a while, it was a popular narrative: Chinese stocks would outperform those in the US and other advanced economies. The thesis was simple. China needs to ease financial conditions, via a stronger equity market and weaker currency, to engineer an economic recovery, whereas the US and Europe are doing the opposite to cool inflation at the risk of a recession.
It was a great trade in June following Shanghai’s reopening from lockdown, but since then it has given up all the profit. That shows that China’s efforts to reflate the economy are facing considerable constraints.
US House Speaker Nancy Pelosi’s visit to Taiwan has left few scars in financial markets so far. Japan reported Thursday that China likely fired missiles over Taiwan during military drills for the first time, but markets have largely stayed quiet. Without dramatic escalation in coming days, geopolitical risks may give way to central bank policies and economic data as the major driver for markets.”
SPX futures are lfat this morning, holding above the 100-day Moving Average at 4118.20. While the SPX may rally to 4200.00, a reversal from that level may be an aggressive sell, based on today being day 256 of the Master Cycle. A decline beneath 4118.00 confirms the sell signal.
In today’s op-ex, Max Pain lies at 4145.00, while Calls dominate above 4155.00. Long gamma may start there, as well with 5801 contracts. Short gamma starts at 4120.00, close to the 100-day MA. Dealers need the market to stay calm, but it may see a spike in volatility instead.
ZeroHedge reports, “Markets are muted this morning with US equity futures paring back modest gains, ahead of the much-anticipated US jobs report later Friday. S&P 500, Nasdaq 100 and Dow Jones futures are little changed as sentiment gets hit after China imposed sanctions against Pelosi and would halt military talks with the US over Pelosi trip, while European stocks slipped after a stronger Asian session. The Nasdaq has stopped just short of a 20% rebound from its June low that would meet the technical definition of a bull market. The dollar and Treasuries were steady. Oil and gold slipped and Bitcoin recouped much of yesterday’s losses.”
VIX futures started rising this morning after bottoming at 21.49 in the overnight market. The Cycles Model suggests a double dose of strength beginning this weekend and lasting through next week. This may be a great entry point for a long position. The ensuing rally may last through late September with strength, I may add.
ZeroHedge remarks, “VIX – getting there
VIX has retraced the latest uptick, but note the VVIX is still above the most recent lows. Watch this closely as a constantly crashing VVIX could be reversing, and that matters. Let’s see if we can get some more inverse panic during Friday that could open up for trades using cheap(er) options plays.”
USD futures rose above Intermediate-term support/resistance at 105.96 this morning, confirming the rally may be back underway. The next resistance is the Cycle Top at 107.94.