12:42 pm
SPX topped out at 4018.43, just above the 50-day Moving Average at 4011.78. I have been considering the alternate count and have put it on the chart. This calls for another week of decline to an area near 3500.00. By the way, the initial Head & Shoulders minimum target was 3913.00. I removed it when I saw the next potential Head & Shoulders shown here. Stay short and enjoy your holiday!
Tony
8:35 am
Today’s Employment Situation Survey shows, “Total nonfarm payroll employment increased by 315,000 in August, and the unemployment rate rose to 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in professional and business services, health care, and retail trade.”
ZeroHedge reports, “With Goldman warning ahead of today’s payrolls print that an “Inline print of 300k(ish) will keep pressure on this tape”, moments ago the BLS reported that – as expected in the somewhat negative case – August payrolls indeed came 300k(ish)- or 315K specifically, dropping from an downward revised 528K in July, and just above the 298K consensus estimate. After all of last year’s data revisions, this was the lowest monthly increase since April 2021.”
Watch for the rally to rise above or stay beneath the 50-day Moving Average at 4007.82.
7:20 am
NDX futures hovered above the proposed Head & Shoulders neckline at 12012.98 after a nearly 12.5% decline from its August 16 high. Today is day 17 (of 55) of the current Master Cycle. Although oversold, NDX is deep in short gamma territory beneath 12500.00. The 50-day Moving Average is at 12496.97. The 38.2% Fibonacci retracement is at 12665.46. In other words, a rally above 12500.00 gives the bulls some relief, but leaves the Head & Shoulders formation in its wake. The alternate view is a continued decline to or beneath the June 16 low.
Today’s op-ex shows NDX in short gamma beneath 12500.00. There is no discernible long gamma level. QQQ (closing price 299.40) shows short gamma up to 305.00. Long gamma may begin at 306.00, but not as strong as short gamma beneath 300.00.
ZeroHedge observes, “While there is a wide range of forecasts for tomorrow’s payrolls print (see below), the median Street consensus expects the rate of payrolls growth to resume cooling in August, following a blowout month in July. The jobless rate is expected to hold steady, and there will be focus on the rate of participation after a decline last month. Average hourly earnings metrics will be a key focus to help gauge how surging consumer prices are translating into second-round effects and the wage-price spiral; some gauges suggest that the rate of pay rises is now exceeding the Fed’s preferred measures or inflation.”
SPX futures are flat, ranging from 3955.00 to 3974.00. Current conditions suggest a possible binary outcome. Should SPX remain beneath the 50-day Moving Average at 4007.82, the decline may continue to the next level of support at the Cycle Bottom at 3681.21. On the other hand, should the rally persist, the 38.2% Fibonacci retracement is at 4065.00 and the 50% retracement is at 4115.00.
In the SPX op-ex, Max Pain is at 4005.00, even though short gamma starts at 4000.00. Long gamma starts at 4050.00. In other words, SPX must rally above the 50-day Moving Average at 4007.82 to regain long support in the options. Op-ex in SPY (closing at 396.42) remains in short gamma beneath 400.00, with super-short gamma beneath 395.00. Long gamma starts at 408.00.
ZeroHedge reports, “US futures dropped on Frida, ending a third straight week of declines, as investors eyed a key jobs report that will be pivotal for this month’s Fed rate hike decision. S&P futures fell 0.2% at 730 a.m. ET, with the underlying cash index down 2.2% this week. Nasdaq 100 futures fell 0.3%, with the tech-heavy index down 2.6% in the previous four days. The dollar index slipped from a record high and the euro strengthened. 10Y yield traded slightly lower, at 3.25%, following yesterday’s spike.”
VIX futures consolidated above the mid-Cycle support at 25.04. While the Wave off the Master Cycle low appears complete, it may also be in a binary position, where it could either retrace down to 22.00 or continue its rally with the Cycle Top resistance at 34.14 as the potential target.
In next Wednesday’s op-ex, Max Pain appears at 26.00. Calls dominate above 27.00 with long gamma potentially starting at 27.00. Beneath 26.00 is a mixed bag, with calls dominating at 23.00 and 24.00.
TNX may have made its long-awaited reversal this morning, after a 272-day Master Cycle. The reversal may be an indication of liquidity flowing out of equities and into cash or Treasuries. The Cycles Model suggests a possible 75-day decline to a target near 16.50. This may be quite a move and has little or nothing to do with the Fed. In fact, it may be a surprise to them.
USD futures pulled back, but remain above the trendline near 108.70. Despite lower yields in TNX, USD may continue its rally through the end of September.