The Agriculture Index rose out of its 269-day Master Cycle low this morning. The Cycles Model calls for a potential rally lasting about 3 weeks. This may be an aggressive buy signal. Once it rallies above its 50-day Moving Average at 475.00, the next target is the Lip of the Cup with Handle formation. The rally may gather strength this week and sustain it over the next three weeks.
Zerohedge reports, “It’s been two days since Russia suspended its participation in the Ukraine grain export deal after a swarm of drones targeted at least one Russian warship from the Black Sea navy. Wheat futures soared Monday as traders eye tightening world supplies following Russia’s exit.
Moscow immediately suspended its compliance with the grain deal, known as the Black Sea Grain Initiative, which was formed and launched in July and ended a five-month Russian blockade of Ukraine’s ports. The United Nations and Turkey brokered the deal, allowing safe passage for cargo ships in and out of Ukraine’s ports to haul farm goods worldwide.”
Domestically, things aren’t any better. ZeroHedge observes, “La Niña has returned for the third consecutive winter, allowing for drier-than-average conditions across America’s crop belt. Some farmers told Bloomberg that conditions are so dry that “fertilizer is evaporating from the soil, and plants are struggling to emerge from the ground.”
The odds are stacking up that this winter’s growing season in the Midwest is going to be a bad one. The latest government data shows drought is intensifying across the western half of the US. ”
SPX futures fell back beneath the minor Cup with Handle formation (not shown) and round number resistance at 3900.00. This may be considered an aggressive sell signal, although there is a risk of another probe higher. Confirmation of the sell signal may be found beneath the 50-day Moving Average at 3858.81. The Broadening formation reveals the strong influence in both directions as this is a highly emotional market. Today is day 249 of the current Master Cycle and may qualify this high as the end of the Cycle. What follows is a panic decline lasting up to two weeks.
In today’s op-ex puts and calls are hotly contested between 3900.00 and 3905.00. 3850.00 is another hotly contested area. Long gamma may be confirmed at 3925.00, while short gamma may predominate at 3800.00.
ZeroHedge reports, “US futures were mixed at the start of another busy week of earnings and key central bank decisions, after posting their best two-week rally since November 2020, with investors bracing for the Federal Reserve’s meeting and another busy earnings week. S&P 500 futures were down 0.4 as of 7:30 a.m. in New York, having dipped as much as 0.7% earlier, after the index closed 2.4% higher on Friday, while Nasdaq 100 futures fell 0.7%. Both gauges are set to pare gains for October, which has been the best month since July. The market drop was led by chipmakers and Chinese stocks. The 10-year Treasury yield hovered around 4.04% after surging by nine basis points on Friday, but has receded from about 4.25% in the past week; yields on UK gilts were steady ahead of what could be the Bank of England’s biggest interest-rate hike in more than 30 years. The dollar rose as the yen and pounds reversed much of last week’s gains. Crypto unexpectedly spiked.”
VIX futures rallied above mid-Cycle resistance at 26.62, reaching a morning high of 27.07 thus far. Friday may have been the end of the extended Master Cycle at 277 days. It may be on an aggressive buy signal with confirmation at the 50-day Moving Average at 27.93. While the VIX and SPX Cycles originally did not match, the extension of VIX and shortening of the SPX Master Cycles may have done what did not appear obvious earlier.
Wednesday’s op-ex shows Maximum Pain for options investors at 27.00. Short gamma begins at 26.00 and long gamma, though light, starts at 28.00and extends to 40.00.
TNX is on the rise again, but has not exceeded its Cycle Top resistance at 41.18 where a buy signal lies. However, the Cycles Model calls for a possible new low by mid-November, although the Fed announcement on Wednesday may cause an inversion. In either event, the rally in rates may resume through the end of the year after this brief pullback.