December 12, 2022

8:00 am

Good Morning!

NDX futures rose to 11611.60 this morning, still beneath Friday’s high at 11707.08.  There are $3.7 trillion of expiring options on Friday, suggesting volatility ahead.  Today is day 258 of the equities Master Cycle.  Normally we would expect an end to this MC in just a matter of days.  However, as of Friday morning, the NDX may have completed 6.45 days of a 12.9-day decline, leaving six more days (as of this morning) to complete the Master Cycle at its low.

ZeroHedge remarks, “Earlier this weekend, we laid out the rather gloomy (it hardly catastrophic) outlook from Goldman’s headge of hedge fund sales, Tony Pasquariello, who previewed both the short-term case as well as the medium-term (namely the next 3 or so months), and concluded that he can’t see the argument for lasting, significant upside: “with QT and negative earnings revisions just starting to really kick in — alongside money market rates that are assuredly heading higher — we’re going into 2023 with a stock market that charges an 18 multiple for the prospect of 0% earnings growth.”


SPX futures made a morning high of 3950..1 thus far and may challenge Friday’s high at 3977.02.  Should it fail, we may see SPX tumble to new lows in the next week.  The chart illustrates that potential outcome.

Today’s op-ex shows Maximum pain for options investors at 3945.00.  Long gamma wins at 3950.00 with 6369 call contracts, edging out put contracts numbering 6097 put contracts at the same level.  Short gamma is confirmed at 3900.00 with 6394 put contracts vs. 677 call contracts.

ZeroHedge reports, “After tumbling on Friday and slumping for 9 of the past 11 days, US stock futures staged a modest rebound after opening lower ahead of a crunch week for markets, which also is the last real week of 2022, with investors bracing for the release of US inflation data tomorrow and the Federal Reserve’s 50bps rate hike on Wednesday. Contracts on the S&P 500 and the Nasdaq 100 were up 0.2% and 0.3%, respectively, as of 7:30 a.m. ET; the underlying indexes both ended down last week, snapping a two-week winning streak. The S&P 500 had its biggest weekly decline since September last week; the Nasdaq 100 has already receded 3.9% this month, while the S&P 500 is down 3.6%.”



Despite the bounce in equities, VIX futures made a new Cycle high this morning at 24.44, edging to the trigger point for many investors at 25.00.

Wednesday’s op-ex shows Mx Pain at 22.00.  While there are few put contracts, long gamma begins at 25.00, with 7034 call contracts vs. 274 put contracts.  Calls are well populated up to 47.50.  The December 21 expiry show Max Pain at 26.00 with Long gamma extending to 70.00


TNX futures came down to 35.20 to test the trendline before bouncing back above it.  While November 16 may have been the classic master Cycle at 26 days, there has been some powerful buying of long-dated treasuries until December 7 (day 281).  It appears that the buying has been exhausted and the uptrend in yields is being re-established.

ZeroHedge remarks, “The Real Goal of Fed Policy: Breaking Inflation, the Middle Class or the Bubble Economy?

“There is no sense that inflation is coming down,” said Federal Reserve Chairman Jerome Powell at a November 2 press conference, — this despite eight months of aggressive interest rate hikes and “quantitative tightening.”

On November 30, the stock market rallied when he said smaller interest rate increases are likely ahead and could start in December. But rates will still be increased, not cut.

“By any standard, inflation remains much too high,” Powell said.

“We will stay the course until the job is done.”


USD futures made a lower low at 104.32this morning, but the bounce/rally off the December 2 low remains intact.  The new Master Cycle may be very short, as today is day 257 of the current MC.  The Cycles Model suggests trending strength (long) may re-appear by this weekend.



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