August 15, 2022

3:43 pm

SPX has reached its mid-Cycle resistance at 4300.58 today.  Mid-Cycle is different from the 200-day Moving Average due to an 185-day calculation.  Cycles do not work on integers divided by 10.  However, many will claim that it has made the 200-day Moving Average at 4327.84.  And many other commonly used moving averages, such as the 50-day Moving Average are very close to a Cyclical integer.  While I had pointed out trendline resistance at 4225.00, I had no idea that it would revisit the mid-Cycle resistance, as it did on March 29 at 4637.30.  While no sell signal is being given, it is time to become aggressively short.

ZeroHedge remarks, “Last week saw more “disinflationary” US data (misses in CPI, PPI and Friday’s U Mich 1Y Inflation Expectations vs prior “peak inflation” highs and Street estimates) ‘light the match’ for yet another squeeze-driven rip higher in stocks prompted by an improvement in the odds of sticking a “goldilocks” soft-landing, via a perceived lowering the risk of further Fed “hawkish overshoot” / policy-error.

Friday saw further extension of the recently noted “un-stable” speculative behavior seen previously at peaks of the “Retail / WSB YOLO frenzy” in 2021, evidenced by ongoing aggressive short-dated Upside Call option buying in Meme stocks.

And as Nomura’s Charlie McElligott warns, the aggressive “Spot Up, Vol Up” push in the “high spec” names has tended to preempt the potential for said Meme stocks to then collapse under the weight of their own “extended” implied expectations (and prior “Gamma squeezes” then turn the opposite direction)…so this area is worth keeping one eye on.”


9:25 am

Good Morning!

SPX futures declined to a morning low of 4246.80.  A cross beneath the neckline/lip of the Cup with Handle at 4225.00 produces a confirmed sell signal.  A reader has asked about the statement that the risk of a bear market disappears once the SPX closes above the 50% level.  On the surface that may be correct, but the writer is comparing apples with oranges.  Since 1932, all bear markets were of an Intermediate Degree or Primary Degree where the bear markets were made at the end of the declines.  What we experienced in the first six months were the beginning of the next higher degree, a Cycle Degree made up of a series of Primary Degrees.  The best comparison is not even the 1929 Crash (Cycle Wave a), but the bear market lasting from April 25, 1920 to July 7, 1932 (Cycle Wave c), a 26 month decline.

Today is day 266 in the Master Cycle (59 days from the June 24 low).  The Cycles Model shows strength tapering off today.  Today’s op-ex shows Max Pain at 4245.00.  Long gamma begins at 4300.00, while short gamma begins at 4200.00.

ZeroHedge reports, “US equity futures stocks were mixed and commodities from oil to iron ore tumbled as the latest round of terrible data from China further clouded the outlook for the global economy, an unexpected rate cut from the PBOC notwithstanding. Contracts on both the S&P 500 and Nasdaq 100 were lower by about 0.5% follows gains last week that sent the tech-heavy index up 22% from June to the highest since April, suggesting a four-week stocks rally – the longest since November 2020 – may stall at least until the $13Bn in daily buying from systematic funds and buybacks kicks in.”


This morning the VIX made a substantial move higher, possibly marking the reversal out of  a rogue Wave E.  VIX options expiring on Wednesday are heavily populated in both puts and calls.  25.00 marks the cross-over between puts and calls…

ZeroHedge observes, “VIX – did you see me on Friday?

Regular readers of TME are familiar with our overshooting of equities view and the volatility puke we have been waiting for. We believe the latter has occurred and that VIX “showed” this on Friday. While the market continued moving higher over the past hours, the VIX started catching bids. This matters…



TNX fell today, indicating possible money flows into UST.  The Cycles Model indicates a probable low this week.  This may be an extension of Wave 4 with a new target near mid-Cycle support at 23.56.




This entry was posted in Published. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *