2:19 pm
SPX is consolidating at short-term resistance at 4066.66 this afternoon and may pull back to the 50-day Moving Average at 4027.60. There may be one final surge higher on Monday to the mid-Cycle resistance at 4101.77 or the 50% Fib retracement at 4106.00. Mid-day on Tuesday is the calendar mid-point of this Master Cycle decline. Of course, Cycles are organic and subject to many criteria, so be on the alert.
ZeroHedge chimes in, “SPX – welcome back to the 100 day moving average
Spooz is up around 4% from Wed lows, hitting the upper part of the short term negative trend line, but the first “real” resistance is at 4100. Note the 50 crossing the 100 day right here. Imagine the pain should we trade above the negative trend line…
Source: Refinitiv
NASDAQ – short term
NASDAQ bounced in the lower part of the trend channel and is squeezing higher. Tepper lows at 12k remains the short term support. First real resistance is at 12600. It is easy to get excited about break ups/downs, but this is a market stuck in a range, so trade it accordingly. Do note the 50 day having crossed the 100 day…”
ZeroHedge observes, “With stocks slumping since mid-August, the mood on Wall Street had turned near apocalyptic again as even seemingly inexhaustible meme stock-chasing retail investors had thrown in the towel on BTFD, and started to sell every ramp. However, after trying several times and failing to break below 3,900, it was only logical that stocks would then ramp up immediately to the peak “gamma gravity” point, which as Goldman’s Brian Gartnett calculated was at ES 4,000 by the widest stretch on record: as the Goldman traded calculates, there is +100k in a single daily option line, or as Garrett puts it “Index option $ notional volumes have never been higher.”
9:10 am
While agricultural conditions worsen this summer, the Ag Index is more affected by general market liquidity than actual supply and demand. Opportunities arise out of mismatches in the marketplace and we may be seeing one arising here. The Cycles Model suggests a continued decline to mid-October or even mid-November in the Ag. Sector. GKX has already reached its 505 retracement value at 439.52. However, the correction has further to do. The 61.8% retracement value is 387.78 and the July 2021 low is at 380.54. These may be price targets from which we may go long, with a very high potential return next year. In the meantime, problems are building in the Ag Sector, but opportunity lies in waiting.
ZeroHedge reports, “Drought conditions expanded and intensified over the Northeast this summer, according to the latest report from the US Drought Monitor.
Extreme drought plagues eastern Massachusetts, including Boston, and southern and eastern Rhode Island. A severe drought is more widespread, encompassing much of South Jersey up to the coastal area of Maine. Much of the Northeast is in abnormally dry conditions as of Thursday. ”
ZeroHedge also observes, “More than six months into the Russian invasion of Ukraine, the global fertilizer crunch threatens to starve a planet as prices are too high for some farmers ahead of the next planting season.
That’s the view of Maximo Torero, chief economist from the Food & Agriculture Organization (FAO) of the United Nations (UN), who told Bloomberg TV that elevated fertilizer prices could decrease global grain production by upwards of 40% in the next planting season. ”
7:15 am
Good Morning!
NDX futures rose to 12478.90, a new retracement high and confirmation of the probable extension of the rally. The Cycles Model offered a potential reversal yesterday, but the markets ignored it, having not yet even retraced at 38.2% retracement at 12613.00. There is more to go. The current Master Cycle, which began on August 16, only reaches its half-way point at mid-day on Tuesday. The 50% retracement value is at 12825.00, just under Intermediate-term resistance at 12856.63. Both targets are viable.
In today’s op-ex, Max Pain is at 12325.00-12340.00. Calls gain dominance at 12350.00 and long gamma kicks in at 12400.00. Calls remain strong until 12600.00.
ZeroHedge remarks, “SPX is up 3.2% from recent lows
Back above 4k and people are still waiting for new lows…
Source: Refinitiv
Evaporating puts
As we outlined yesterday in our thematic email (We will probably bounce here), the institutional players loaded up on puts just in time for the bounce. Note they loaded up on single stock puts, and not index puts. Second chart shows that this put buying has led to “…MONSTER richening in Put Skews (wingy downside) to some “extreme” levels amongst key S&P Mega Cap Tech / Growth type names”. Index skew on the other hand remains depressed (chart 3).”
SPX futures rose to a new retracement high of 4044.70, above the 50-day Moving Average at 4025.42. The next resistance is the Intermediate-term value at 4103.18, very near the 50% retracement value at 4106.01. The current Master Cycle reached its half-way point at mid-day on Tuesday. The second half of the Cycle may be intensely destructive with a high probability that the Head & Shoulders targets may be fulfilled in the next month.
In today’s op-ex, Max Pain is at 3980.00. Short gamma begins at 3950.00. Calls gain dominance at 3995.00 and long gamma really kicks in at 4025.00. We are in a gamma-induced short squeeze.
ZeroHedge reports, “US equity futures, European stocks, and pretty much all risk assets rose on Friday morning as the dollar finally stumbled, dropping by the most in a month to the lowest level in Septemember, after hitting an all time high just two days earlier.
S&P 500 and Nasdaq 100 futures gained more than 0.8% at 730am ET. Europe’s Stoxx 600 Index jumped as miners rallied on optimism over Chinese demand, while banks surged following the European Central Bank’s record rate hike. That’s even as BofA said an “appalling” mood fueled a $11 billion US stock exodus in the week to Sept. 7. The yen headed for its best day in a month as Japanese officials and BOJ governor Kuroda gave the strongest hint yet at possible direct market intervention as a response to weakness in the currency. Oil and cryptos jumped.”
VIX futures reached a new low at 22.92 this morning, beneath the 50-day Moving Average at 23.81. The Cycles Model suggests that yesterday may have seen the worst of the decline and a reversal may appear on Monday, although a decline below 22.00 is not ruled out.
TNX is continuing its consolidation beneath its Master Cycle high, The consolidation continues until Tuesday, where more directional signals start. The Cycles Model calls for the current Master Cycle to extend through mid-November.
USD futures dropped beneath the trendline near 109.00 to a morning low of 108.35. However, the USD appears to be quickly recovering and retesting the trendline today. The trend appears to be generally upward through the end of the month.
ZeroHedge remarks, “After days of relentless ascent, which propelled the Bloomberg Dollar Index to record levels and the DXY to levels not seen since the start of the century, the dollar has tumbled overnight – despite reportedly very hawkish rhetoric from Jerome Powell on Thursday at the Cato Institute – sliding the most in one month to Sept lows.”
