September 13, 2022

2:45 pm

There’ may still be a bounce, but not from this level.  SPX is in serious short gamma, which may only be controlled in the overnight market.  It’s going lower for now, but we may see a bounce in the morning.

ZeroHedge comments, “Ahead of this morning’s hotter-than-expected CPI print, the world and their pet rabbit was convinced – and chasing – that ‘peak inflation’ was here, The Fed would pivot, and stonks would continue to rip higher into a utopian soft-landing.

That has all gone to hell today as every asset class shits the bed in response…

…as rate-hike expectations are smashed hawkishly higher and the odds of a subsequent recession soar.”


11:55 am

SPX may be due for a bounce that may last the balance of today’s cash market hours.  Overhead resistance is now at the 50-day Moving Average at 4031.00, so there is no trade here, other than shorting at the bounce, should you have been long or in cash  at the top.

ZeroHedge comments, “As we noted in our preview last night, so confident was Wall Street that today’s CPI print would be a miss – driven ostensibly by a plunge in energy prices – that the Y/Y whisper dropped as low as mid/sub 7%, with Goldman saying the “Headline number most likely shows some disinflation and wont impact mkt meaningfully after tape’s recent run higher, unless shockingly cool…call it sub 7%…then keep your rally caps on” and JPM piling on that “a 7-handle CPI YoY we would likely to see a strong rally tomorrow.

In retrospect, pretty much everyone was wrong, with headline CPI coming in at a “shocking”, red hot 8.3%…

… a number which 47 of 50 economists missed, and which just BMO (and two other smallish banks, SMBC Nikko and Berliner Sparkasse) predicted correctly:”


7:20 am

Good Morning!

NDX futures reached an overnight high of 12831.60, a 50% retracement of the decline from August 16.  This fulfils the retracement requirement for NDX.  Additional resistance lies at 12974.37, the Intermediate-term resistance at a 58% retracement.  The absolute resistance is the Lip of the Cup with Handle formation near 13000.00, should the markets become exuberant.  However, today is also the half-way point for the current Master Cycle in a Wave (3) of [3].

Elliott Wave Principle (EWP) points out that, “Third Waves are wonders to behold.  They are strong and broad, and the trend at this point is unmistakable…Third Waves usually generate the greatest volume and price movement and are most often the extended Wave in a series.”  (Elliott Wave Principle, Frost & Prechter, page 78).  There is more to this summary that you should read, including the description for Declining C Waves on page 81.  EWP points out, “There is virtually  no place to hide except cash.”

In today’s op-ex, Max Pain is at 12575.00.  Long gamma begins at 12600.00.  Short gamma starts at 12400.00.   QQQ (closing price: 310.74) shows Max Pain at 304.00 with long gamma beginning at 307.00.  Short gamma starts at 300.00.

This appears to be positive, almost to the extreme.  However, the market always proves the majority wrong.

9:00 am  NDX futures have fallen into short gamma beneath 12400.00 after a “Hot CPI” announcement.  This has all the earmarks of a runaway train.

ZeroHedge observes, “Ahead of tomorrow’s CPI print, Wall Street is split between those who say tomorrow’s inflation data is fully priced in and won’t have an impact on either stocks or the Fed which won’t ease until the breadth of price increases comes closer to the Fed’s 2% goal, and those who – echoing recent comments from the Fed – believe that the CPI is all that matters for the Fed’s upcoming rate decision, even though odds of a 75bps rate hike in two weeks time are just over 90%.”


SPX futures reached a morning high of 4142.40, a 58.3% retracement.  The 61.8% Fibonacci retracement is at 4155.00.  Should SPX go higher, there may be a Cycle Pivot at mid-day which marks the half-way point (in time) of the current decline.  From there, we may see 18.5 market days of decline to Wave 3 of (C).

In today’s op-ex, Max Pain is at 4085.00.  While calls are sparse, puts begin in earnest at 4075.00 and are in serious short gamma at 4050.00.

8:50 am  SPX futures dropped abruptly into short gamma beneath 4050.00 at the CPI announcement.  The Cycles Model suggests as many as 21 days of decline straight ahead.  The market is now pricing in a 100-basis points hike in rates in September.

ZeroHedge reports, “US futures extended their gains for fifth consecutive day – their longest winning streak since July – rising ahead of today’s “pivotal” CPI data.

Futures on the S&P 500 and Nasdaq 100 gained 0.7% at 7:45 a.m. in New York ahead of the data that’s due at 8:30 a.m. The underlying gauges advanced Monday for a fourth straight day amid hopes that inflation will show further signs of cooling with the headline print actually declining for the first time in two years, before the Fed’s decision on interest rates next week. Treasury yields dipped while the Bloomberg dollar index extended its recent decline, sliding 0.3% to a two week low as traders bet that US inflation is near peaking, therefore challenging the dollar-dominance narrative, in the process pushing oil and bitcoin higher.”



VIX futures pulled back to 23.53, challenging the 50-day Moving Average at 23.60.  The Cycles Model allows a potential week-long rally from here, should conditions warrant.  A possible target may be the Head & Shoulders neckline at 40.00.

8:45 am  VIX futures leaped higher at the CPI report at 8:30 am.  The Cycles Model shows growing strength over the next week.

Tomorrow’s op-ex shows Max Pain at 22.00 with diminishing shorts and long gamma beginning at 25.00.  Long gamma is strong to 40.00. observes, “Stocks finished the day higher yesterday, with the systematic flows continuing to dominate in an illiquid market. The depth of the book on the S&P 500 futures has vanished over the past few days, allowing this market to move much more than what we have seen in recent weeks.


This allows systematic flows to dominate the market and push it around. The options market positioning suggests this market is overextended, and some cracks are starting to show in its stability. The VIX was higher yesterday by about 5% and closed right around 24.The S&P 500 was higher by about1%. The index managed to complete around 4,110 while hitting a high of 4,125. There are plenty of good Fibonacci levels at 4,125 that could offer resistance to the market and keep it from advancing. But at the same time today’s CPI report will play a much more significant role in what happens.


TNX rose again this morning to 34.12 in what is still a retracement move.  Today is day 278 in the current Master Cycle, an unusually long Cycle.  A slowdown in today’s CPI may have produced a strong reversal in TNX, currently happening as I write.

ZeroHedge reports, “Expectations for a 0.1% MoM drop in CPI has set the squeeze-algos on fire in recent days as the small drop signals ‘peak inflation’ and goldilocks and a unicorn-filled Fed will step back and declare victory (with a lag). Short-term interest-rates – however – have not been buying that dovish story, so how the market reacts to today’s print will be fascinating given the technical background of extreme negative delta and positioning, and now momentum. The market was pricing in a 90% chance of a 75bps hike by The Fed next week ahead of the CPI print.

Headline CPI came hotter than expected rising 0.1% MoM vs expectations of -0.1% MoM. That is the 27th straight month of rising inflation.

Source: Bloomberg

Perhaps more notably, Core CPI was dramatically hotter than expected rising 0.6% MoM (vs +0.3% exp)”



USD futures abruptly reversed at Intermediate-term support at 107.45, rising to 108.84 as I write.  This reversal was to be expected, as the USD maintains its upward trend.  The Cycles Model suggests the next peak in the USD at the end of September.




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