SPX just crossed beneath the Cycle Top support at 3982.16 and declined beneath yesterday ‘s low. This may constitute an aggressive sell signal, while yesterday’s decline did not cross the Cycle Top support.
Art Cashin, the dean of the NYSE floor, told a story on Tuesday at Barry Ritholtz’s Big Picture conference in midtown that illustrated this point perfectly. It was in the days before the Cuban missile crisis. Mr. Cashin was a young trader. One day a rumor mushroomed that the Russians had launched their missiles. World War III was starting. Mr. Cashin ran across the street to find the best trader he knew – who was in a bar having a drink. Mr. Cashin ran in breathlessly, hardly able to talk.
“Stop,” the trader said. “Have a drink. Explain everything.” After hearing all the information, the trader had one order: “Buy. Don’t sell. Buy.”
“Why?” Mr. Cashin wondered.
“Because if you’re wrong, the trade’ll never clear. We’ll all be dead.”
SPX futures rose to 4004.10 in the overnight session. The market structure still appears bullish but the 61.8% Fibonacci retracement has ben met on day 263 of the Master Cycle. SPX may still bounce around, since there may be a few more “me too” investors finally getting off the sidelines. The daily mid-Cycle resistance is at 4044.50. Meanwhile, the risk of a sudden reversal is high. VIX ix not making new lows.
Today’s op-ex has a broad epicenter of Max Pain centered around 3925.00. However, long gamma begins at 4020.00 and short gamma strengthens at 3920.00.
ZeroHedge reports, “US futures jumped from Monday’s shallow dip, which in turn followed the S&P 500’s best week since June, boosted by a triple-whammy of positive news out of China, including the Xi-Biden meeting which pointed to easing tensions between Washington and Beijing, China’s Covid pivot and property measures, and solid earnings from Walmart which boosted guidance and announced a new $20BN buyback. Contracts on the Nasdaq 100 extended earlier gains and were up 1.1% as of 7:1 a.m. ET while S&P 500 futures surged above 4000, rising almost 1.0%. Treasury yields and the dollar slipped while bitcoin resumed its modest rise. At 8:30am we get another inflation read in the form of the latest PPI Print, which is also expected to ease modestly.”
VIX futures declined to 23.18, within yesterdays trading range. Friday’s low may be considered a Trading Cycle low, a lesser degree than the Master Cycle, despite the length of the decline. The next Master Cycle (high) may arrive in mid-December..
Wednesday’s expiring VIX options show an overwhelming number of short contracts beneath 27.00 with Max Pain at 28.00. While VIX options are a very small ortion of the market, it would appear that the dealers and hedge funds may be loath to pay out the short gamma.
TNX may be completing its final probe lower on day 259 of the Master Cycle. It has already exceeded its downside target of 38.00 but may have another short probe lower. Be prepared for a sudden and sharp reversal. Trending strength may resume by the end of the week. With PPI declining (below), what’s going to make interest rates rise again?
ZeroHedge reports, “Just days after the CPI missed across the board sparking a record surge in stocks, moments ago the PPI followed suit when the BLS reported that in October wholesale inflation not only eased across the board but missed every single forecast, with the highlight being the unchanged print in core PPI, a sharp drop from last month’s 0.2% increase and far below the 0.3% forecast. Here is the breadown:
- PPI 0.2% M/M, Exp. 0.4%, Last 0.2% (revised from 0.4%)
- PPI 8.0% M/M, Exp. 8.3%, Last 8.4% (revised from 8.5%)
- PPI Core 0.0% M/M, Exp. 0.3%, Last 0.2% (revised from 0.3%)
- PPI Core 6.7% Y/Y, Exp. 7.2%, Last 7.1% (revised from 7.2%)
The YoY increase in headline PPI of 8.0% was the lowest since July 2021, the lowest in over a year.”
USD futures declined to 105.20 this morning, challenging the mid-Cycle support at 105.28 on day 253 of the current Master Cycle. Mid-Cycle support is the usual target for Waves 2, so the end of the decline is near. The USD is likely to follow the reversal in the 10-year treasuries, which is imminent.
Investing.com comments, “The dollar is inching lower again this morning and we think the ongoing correction could extend a bit more as optimism on US-China relations appears to be lifting sentiment. That said, a broader and sustained US Dollar downtrend on the back of the China and/or Fed pivot story appears premature. Today, keep an eye on the ZEW and UK pre-Budget headlines
US Dollar: A bit more pain
The dollar showed tentative signs of recovery yesterday, but appears to be lacking any strong support at the moment. While we don’t buy the one-way traffic, and the USD-bearish narrative in the longer run, there may be extra downside room for the greenback this week.”
WTI futures declined to a morning low of 84.08 after closing beneath the 50-day Moving Average at 85.94 yesterday. It is on a confirmed sell signal with the next Master Cycle low due in early December.
OilPrice.com reports, “Significant global economic uncertainties in the coming months made OPEC cut on Monday its estimate of global oil demand growth for this year and next, in the fifth reduction of consumption forecasts since April.
OPEC revised down each of its 2022 and 2023 oil demand growth forecasts by 100,000 barrels per day (bpd) from last month’s estimates due to China’s still-strict Covid policy and economic challenges in Europe, the organization said in its Monthly Oil Market Report (MOMR) out on Monday.”
Gold futures rose to 1789 in the overnight session as it rallies toward the mid-Cycle resistance at 1804.32. The current Master Cycle has about a week left to produce that result, as today is day 252.