1:155 pm
SPX has reached the halfway point in this hourly Cycle. There may be a sharp probe toward the 50-day, but the rest of the Cycle may be very sharply down. No one will be ready for what comes next.
ZeroHedge comments, “Despite all the worries over the possibility of a recession in the quarters ahead, the stock market seems to have priced in a “soft landing” for the economy.
The cyclicals-to-defensives ratio has yet to really react even to the slowdown in the economy we have already seen over the past year or so as indicated by the reversal in the ISM Manufacturing PMI. If the latter continues to deteriorate in the months ahead, cyclicals (like the tech and consumer discretionary sectors) could have a great deal of pain still in front of them.”
7:15 am
Good Morning!
NDX futures continue to rise in a bear market correction. NDX is on a confirmed sell signal. The likely path this morning is to test the underside of the Lip of the Cup with Handle near 11100.00. Today NDX completes 8.6 days of a 12.9 day decline. The last 4.3 days are the most violent of the Cycle.
Today’s op-ex shows Maximum Pain for options investors at 10750.00. Long gamma starts at 10800, while short gamma begins at 10700.00. QQQ (Close: 264.68) investors have turned bullish. Max Pain is at 263.00. Long gamma begins at 270.00, while short gamma starts at 260.00.
ZeroHedge remarks, “Aggressive tightening from the Federal Reserve has caused tech stocks to plummet back to Earth in 2022, and as Visual Capitalist’s Nick Routley details below, this has shaken up the membership of the trillion dollar market cap club…”
ZeroHedge warns, “Legendary financial and geopolitical cycle analyst Martin Armstrong says, “The cheating in the midterm election next week is going to be so great that it is almost impossible to make a prediction. . . . In a fair midterm election, the Republicans would win the House and the Senate.”
SPX futures rose to 3796.90 thus far in an effort to reach the 50-day Moving Average at 3818.91. The rally may not yet be over, so that short-term target is possible. Today is the half-way mark for a probable 8.6-day decline.
Today’s op-ex shows Max Pain at 3755.00 with long gamma beginning at 3775.00. Short gamma starts at 3740.00 and is quite deep, extending to 3500.00.
ZeroHedge reports, “This morning’s price action has a whiff of what happened two weeks ago when a relentless barrage of bad earnings reports by tech giants propelled stocks higher during the latest bear market meltup, amid speculation the worst news is priced in. Well, after last week’s FOMC mauling, risk has once again started to meltup following Friday’s stark divergence between the “good” payrolls number and “catastrophic” employment data, sending stocks sharply higher and the dollar sliding.
And while some may have expected the selling to return after Sunday’s latest cut to high end iPhone 14 shipping forecasts, which Apple blamed on China but which appears to have been driven as much by a decline in demand and sent AAPL shares down 2%, this morning US stock futures have reversed earlier losses of more than 1% and looking to extend Friday’s rebound, as investor attention turns to the latest inflation report and the midterm elections later this week. At 7:30am ET, contracts on the Nasdaq 100 were up 0.4% after earlier sliding as much as 1.3% as Chinese officials reiterated their intention to “unswervingly” stick to a Covid Zero approach; S&P 500 futures also reversed early declines to rise 0.4%. The benchmark had snapped a four-day slump on Friday following a mixed jobs report. The dollar reversed earlier gains; while Monday’s partial gains in Treasuries were underpinned by a 4-basis point drop in the 10-year yield. The two-year rate, more sensitive to monetary policy, remained higher around the 4.68% level.”
VIX futures are rising after finding a probable Master Cycle low last Friday, on day 284. It has been one of the longest Master Cycles that I have seen. VIX has been unresponsive to the decline in stocks until now. However, it indicates that Volatility may be considerably higher in December and in 2023.
TNX is beneath its Cycle Top resistance at 441.91 this morning, but it may not last beneath its resistance. Trending strength appears to be growing, with a strong burst higher by the end of the week. TNX is due for a Master Cycle high in mid-November.
USD futures has dropped beneath its trading channel trendline at 110.60 and the 50-day Moving Average at 110.98. This may cause an extension of the Master Cycle low. Today is day 277 of the (old) Master Cycle, with a possible extension due to the elections.
Crude oil is correction from what is likely to be its Master Cycle high on Friday. If so, it may be in the final decline of the current correction. The next Master Cycle (low) is due in mid-December. While the bear-term outlook is bearish, longer term prospects are still positive, even after a two year bull run.
ZeroHedge remarks, “It has been a great year for energy stocks as the chart below clearly reveals…
… and it will be an even better year (and decade) for energy stocks.
Why? Not because of what Goldman trader Michael Sullivan wrote last week explaining why Energy has (finally) become everyone’s favorite sector (more than two years after we first told our readers to go balls to the wall long XOM):”