September 12, 2022

3:21 pm

It appears that the VIX may close above the 50-day Moving Average at 23.61.  Another reason for selling the SPX.

ZeroHedge comments, “The pendulum is about to swing the other way…

As we detailed early last week, since the Aug expiry, and as we warned two weeks ago in “Now It Gets Ugly: CTAs Turn Short, Have Over $8BN To Sell This Week”, the CTA community flipped from long $25BN of US stocks to short ~$15bn of US equities, selling tens of billions in the process, resulting in one of the largest net selling sprees by CTAs in US equities over the last 5 years!”


3:15 pm

TNX is making a new retracement high in day 283 of the Master Cycle.  Tomorrow appears to be another strong day for TNX, according to the Cycles Model.  Strange times.  Traders are worried.

ZeroHedge reports, “After an ugly 3Y auction this morning, the sale of $32 billion in 10Y paper which concluded moments ago was even uglier.

Stopping at a high yield of 3.330%, the auction was not only the highest of the current tightening cycle, but also surpassed the 3.209% hit in October 2018 during the previous tightening cycle, making today’s high yield the highest since April 2011 when the yield was 3.494%. More notably, the auction stopped a whopping 57.5bps above the August yield of 2.755%, and tailed the When Issued 3.303 by 2.7bps, the biggest tail since April and one of the biggest tails on history.”


11:15 am

SPX may have reversed just above our target at 4108.00 at 4119.28 and has crossed beneath that resistance, creating an aggressive sell signal.  It did so in 17.2 days from the high at 4325.28 instead of the 18.5 days anticipated.  That leaves a probable 21.5 market days of decline to the low expected in mid-October.  Confirmation of the reversal occurs at the 50-day Moving Average in the vicinity of 4031.00.


7:30 am

Good Morning!

NDX futures have risen to 12694.40, a 43% retracement from the low, after exceeding its 50-day Moving Average at 12542.98.  The Cycles Model suggests a further rally to the 50% retracement value at 12825.00 or possibly higher, to the Intermediate-term resistance at 12862.17.  The Master Cycle which started on August 16 may reach the halfway point by mid-day on Tuesday.  Intermediate Wave (3) of Primary Wave [3] is setting up to run over the next month.  Wave threes are never the smallest and often are multiples of Wave ones.

NDX options are now trading daily.  Today’s op-ex shows Max Pain at 12620.00.  Long gamma begins at 12750.00.  Short gamma may begin at 12600.00.  There is a large holding of calls at 12530.00, so long gamma may start lower.

ZeroHedge writes, ““Illiquidity is the new leverage and flows are more important than fundamentals,” said the CIO, one of our industry’s great thinkers. “This has been our framework for considering vulnerabilities in the post-2008 world,” he said. “Following the GFC, an intended consequence of successive rounds of quantitative easing was a shift of systemic risk from banks to the asset management industry,” he explained, the Fed’s $9trln balance sheet now bloated beyond comprehension, quantitative tightening accelerating, rates rising at an unprecedented pace.”


SPX futures are fast approaching the next level of resistance at 4106.29, both Intermediate-term resistance and the 50% retracement value.  Should that target be reached this morning, there is an increasing probability of a reversal by mid-morning.  The Master Cycle half-way point (in time) is mid-day on Tuesday.

In today’s op-ex, Max Pain appears at 4045.00, while long gamma emerges at 4100.00.  Short gamma begins at 4000.00.

ZeroHedge reports, “It appears that Goldman’s trading desk was right again. Just days after the vampire squid’s sellside researchers were warning that the market has not yet bottomed, the bank’s far more accurate flow traders said that “The Pain Trade Is Now Up, The CPI Doesn’t Matter At All, And The Q4 Chase Starts Early“, and on Monday morning it was all engines go in global stock markets, with US equities poised to extend their brisk rally from last week as investors braced for the final CPI before the Federal Reserve’s September decision. Futures for the S&P 500 and Nasdaq 100 both rose 0.5% each at 715 a.m. in New York, extending above their Friday session highs, putting the underlying gauges on track for a fourth day of gains, while Europe’s Stoxx 600 index climbed for a third day, and Asia was almost all green.



VIX futures are higher this morning, but not exceeding the 50-day Moving Average at 23.70.  The initial buy signal comes at a closing price above the 50-day Moving Average.  Friday’s action may have fulfilled the downside needed at a nearly 60% retracement.  However, there may be room to move lower, possibly to 22.00.


TNX is lower, but still within its consolidation range of the last week.  The Cycles Model calls for an acceleration to the downside starting tomorrow.  The Current Master Cycle stretches to mid-November as  money moves from equities to bonds.


USD futures declined to 107.57, just above Intermediate-term support at 107.41.  The decline may continue as USD challenges support.  However, the longer-term trend is higher.



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