Crude oil fell to a morning low at 84.56, resuming its decline. This decline is due to continue through the end of October, according to the Cycles Model. Good luck and good trading!
Gold futures just crossed beneath both Cycle Bottom support at the Lip of its Cup with Handle formation at 1680.00, reaching a morning low of 1672.25. It may bounce in the next few days, so no trade is recommended. However, it may be a good short at the bounce.
That bounce in the SPX finished quickly. The slippery slope is here. The Cup with Handle formation becomes activated at 3880.00. I chose this over the Head & Shoulders formation with a target at 3650.00 due to the massive “right shoulder.” Traders are looking for a reason for the decline. There is none. It’s just time for the decline and short gamma will help it along.
ZeroHedge remarks, “It’s unclear what the catalyst for this leg lower is – US macro data was mixed at best with labor signals better while manufacturing was weaker and surveys confused – but markets are puking after an early bid…
Stocks have erased all of the late-day panic-bid in stocks yesterday and more…”
NDX futures rose to 12186.00 in the overnight session, a mere 23% retracement and short of the next overhead resistance at 12437.24. The Cycles Model suggests that equities are on the brink of the next panic decline. The first installment begins this weekend and may extend to mid-October.
Today’s op-ex shows Max Pain at 12225.00. Long gamma begins at 12500.00. Short gamma may begin at 12000.00, but is confirmed with at 11800.00 with 86 put contracts. Today’s op-ex is light, but tomorrow the hammer falls in the options market with calls dominating above 12100.00 and puts reigning beneath 12000.00.
ZeroHedge reports, “Amid all the chaos of yesterdays post-CPI collapse, Goldman’s Prime Services group noted that “our sense is that hedge funds were relatively calm and shorting/hedging using Macro Products.”
In other words, they saw little sign of long liquidations or risk unwinds.
Overall US book was net sold for a second straight day (1-Year Z score -0.8) , driven by short sales outpacing long buys 1.7 to 1.
Yesterday’s notional short sales in US equities was the largest in 3 months.”
SPX futures peaked in the overnight market at 3958.70, a 22% retracement of Monday’s decline, then pulled back. SPX may have completed a 17.2-day Cycle on Monday. It may be in the middle of its first panic decline, lasting several days. There is little chance of a significant rally, because the next hourly turn is due mid-day today.
Today’s Max Pain lies at 3945.00, very near yesterday’s close. While long gamma is at 4000.00, short gamma begins at 3925.00 and extends beyond 3500.00. This is a very slippery slope, which intensifies on Friday into the weekend. The first significant low of this decline may happen on or near Sept 20. The Current Master Cycle, however, is not due to bottom until mid-October.
ZeroHedge reports, “Extremely illiquid US equity futures (top of book depth is between $1-2MM) dropped after trading flat for much of the overnight session, ahead of a packed data slate today including retail sales, industrial production and capacity utilisation for August, the Empire State manufacturing survey and the Philadelphia Fed business outlook for September, and the weekly initial jobless claims, as Treasury and Bund yield rose after Russian energy supplier Gazprom warned that nearly full EU gas inventories can’t guarantee a safe winter with money markets raise tightening wagers, pricing as much as 193bps of ECB hikes by July versus 186bps on Wednesday (and as much as 210bps of Fed hikes by March). As of 7:15am ET, S&P 500 futures slipped 0.1% after a tumultuous few days of trading following the consumer price index reading; Nasdaq 100 futures fell 0.4%. Both underlying indexes had slumped on Tuesday after the report, nearly erasing a four-day rally, before slightly rebounding on Wednesday. European stocks were flat, while the MSCI Asia Pacific Index reversed earlier gains to trade down. The dollar resumed its rise while the yuan dropped below the critically important 7.00 level against the greenback. Ethereum completed the merge and traded around $1600 without any big moves in either direction.”
VIX futures consolidated above the mid-Cycle support at 26.24 and is now advancing. The Cycles Model suggests the VIX may be due for a Master Cycle high on or around Sept 21. The SPX/NDX do not end their Master Cycle there. However, this may be the first show of strength for the VIX by breaking out above the Head & Shoulders neckline, which has been in place since January 2021, potentially ending a 20.5-month Cycle beneath the neckline and a 30.1-month Cycle from the peak in March 2020.
The next options expiration for the VIX is on September 21 and it is locked and loaded for a monster move. Currently Max Pain is at 26.00. Short gamma begins at 24.00 while long gamma begins at 27.00. The significance is that long gamma stretches to 110.00, possibly even 150.00. There are calls outstanding as high as 180.00!
THX is consolidating beneath yesterday’s Master Cycle high at 34.76. Wednesday was the last day of strength in the Cycle and stretched it to 285 days. Liquidity is looking for a home and bonds appear to be much less volatile than stocks.
USD futures consolidated this morning above its trendline near 109.00. As long as USD stays above 109.00, it may continue its move higher, ending at a possible new high by the end of the month.
WTI futures are consolidating beneath Intermediate-term resistance at 90.43. The bounce may be complete and we look for a resumption of the decline.
Gold futures are tumbling, hitting a low of 1690.00. The Cycle bottom is at 1685.38 and the Lip of th eCup with Handle is at 1680.00. Today is day 255 of the Master Cycle, so a bounce may be imminent. It appears that one of the two supports mentioned may be utilized for a bounce. Should gold break down beneath them, all bets are off.