November 30, 2022

3:35 pm

SPX at 4100.00?  Usually the mid-Cycle resistance at 4027.23 would be the stopper for this rally.  However, due to other analysts calling for the SPX at 4100.00 I put the trendline across all the tops since January, not expecting it to meet under normal rules..  It is currently at 4100.00.  In a normally impulsive decline, this doesn’t work, but the corrective decline that we have seen thus far has spent a lot of time on the rebounds.  This makes for an emotionally confused market for most investors.  The average retracement is 38% of the time spent in decline.  This rally is 83% of the time spent on the last decline.

 

2:45 pm

SPX has made a new Master Cycle high at 4037.45 (thus far) on day 279 of the current MC.  The DJIA and NDX did not make new highs.  I have commented that the Wave (B), E, [e] combination is a rogue wave to the third degree.  The extra three weeks of rally in this Cycle appear to have been made to punish the shorts.  The tables may turn overnight.

Those that can stomach the gut wrench, this is an excellent time to add short positions.  The VIX made a new Primary Cycle low by a tick.  Good luck and good trading!

 

8:00 am

Good Morning!

SPX futures traded in a range from 3951.00 to 3973.00 in the overnight market and is currently flat.  The expectation is that Powell will offer some insight on “when the next pause/pivot” may happen.  Good luck on that.  SPX bounced at the Short-term support at 3936.62 yesterday, completing its first small declining impulse.  It is more likely than not that today’s activity may be flat in the morning and find its direction this afternoon.

Sentiment in the options market has turned more bearish.  Maximum pain for investors is at 3965.00.  Options favor calls above 3975.00 with long gamma beginning at 4000.00.  Puts are favored at and beneath 3960 with short gamma starting at 3950.00.  This could be a rollicking day for options since Powell has the ability to drop a bombshell at his presentation.

ZeroHedge reports, “US futures rose on the last trading day of November as anxious investors awaited a potentially monkey-hammering speech from Federal Reserve Chair Jerome Powell (although as JPM said, most of the downside is already priced in) and assessed a softer stance from China on Covid curbs. S&P 500 futures rose 0.2% by 745a.m. ET while Nasdaq 100 futures rose 0.3%. The underlying indexes have closed lower for three consecutive days amid Covid restrictions and unrest in China. In Europe, shares climbed the most in more than a week as data showed eurozone inflation slowed for the first time in 1-1/2 years. Benchmark Treasury 10-year yields slipped and are down more than 25 basis points in November.”

 

 

VIX futures made a marginal new low at 21.67 last night before rising back to a flat line this morning.  It remains above its Primary Cycle low made on November 23.  The Cycles Model infers a rally into the December monthly options expiration on December 21.

Today’s op-ex shows Max Pain at 25.00.  Short gamma starts at 24.00.  Long gamma begins at 27.00 with rising long conviction up to 40.00 with nearly 12,000 call contracts at that level.  The December 21 (monthly)op-ex still shows Max Pain at 25.00, but long gamma may have begun at 26.00 and the conviction level rises up to 70.00 with 161,590 call contracts at that strike.  This may have an effect on the price level, as this may impel the dealers to buy the VIX in the futures as the VIX rises.

 

TNX continues its rise, although almost hesitantly.  The Cycles Model suggest growing strength, especially next week, implying a breakout above the 50-day resistance at 38.87 and possibly above the Cycle Top resistance at 42.38.  The Model suggests rates may be rising through the year end.

RealInvestmentAdvice observes, “In Part one of this series, Our Currency The World’s Problem, we discuss the vital role the U.S. dollar plays in the global economy. With an understanding of the dollar’s role as the world’s reserve currency, it’s time to discuss how the Federal Reserve’s monetary policy machinations influence the dollar and, therefore, the global economy and financial markets.

Given the Fed’s recent extreme monetary policy actions, which haven’t been seen in over 40 years, it is more important now than ever to appreciate the potential global consequences of the Fed’s stern fight against inflation.

Triffin’s Paradox

In Part 1, we highlight the following two lines, which help describe Triffin’s paradox.

“To supply the world with dollars, the United States must consistently run a trade deficit. Running persistent deficits, the United States would become a debtor nation.”

“Simply the growing divergence between debt and the ability to pay for it, GDP, is unsustainable.”

Increasingly borrowing without the means to pay it off is unsustainable. The terms zombie company or Ponzi Scheme come to mind when considering such a system. That said, because the printer of the currency and taxer of its citizens is in charge, we can only ask how long the status quo can continue.”

 

USD futures consolidated within the prior day’s trading range.  It is on a buy signal.  USD may rally in strength to the next Master Cycle pivot expected in mid-December.  Lower liquidity and higher yields both put upward pressure on the USD.

 

BKX, our liquidity proxy, is consolidating beneath mid-Cycle resistance at 109.34, which shows the limits of its ability to rally.  It is on a sell signal with the Cycles Model implying weakness through the end of the year.  The Head & Shoulders formation may be triggered at the neckline at 97.00.  Since Wave [3] cannot be the shortest Wave, the minimum decline for the next segment of the Cycle (possibly extending to the end of January) takes BKX down to 65.00.  However, the Head & Shoulders’ lower target is still credible.

ZeroHedge (TME) says, “Liquidity is off 60%

Total Treasury market depth has declined 60% over the last year, to levels observed around previous crises…”

 

 

 

 

 

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