SPX declined to 3813.22 testing the JPM Collar and short gamma at 3800.00. The bounce from there didn’t take it any higher, so SPX may be range-bound for now. The top of the range appears to be the 50-day Moving Average at 3880.15 and the bottom may be 3800.00 or a bit lower. A close beneath 3800.00 may set of a panic decline. The 38.2% retracement is at 3893.00.
ZeroHedge remarks, “After some wild moves in early and mid-December, the last four days of trading in 2022 should be a muted affair, with few notable macro/econ events or newsflow, and with technicals driving any year-end volatility.
So what should one watch for?
According to SpotGamma, major resistance remains at 3900, while support can found at 3850, the previously discussed JPMorgan “vol killing” collar at 3835, and eventually 3800. here, SpotGamma remains of the opinion that the S&P holds the 3800-3900 into Friday, 12/30 OPEX, and “for this week, this suggest that SPX moves to either side of this range should mean revert back into the 3835-3850 area.”
SPX futures tested the 50-day Moving Average at 3874.67 this morning before backing down. The Cycles Model called for a peak retracement this morning and that may have been it. The last week of 2022 may be a rather peaceful week, as there are no Cyclical indications, positive or negative, to imply otherwise.
Today’s op-ex shows Maximum pain for options investors at 3820.00. Calls are sparsely populated up to 3900.00, where long gamma kicks in. Short gamma begins at 3800.00. This arrangement leaves a wide berth for a potential sideways market.
ZeroHedge reports, “US futures reopened from the extended Christmas break, rising as high as 3900 and following European and Asian stocks higher as China’s reopening buoyed sentiment in the final trading week of the year. At 745am ET, S&P futures were up 0.5% at 3,890 while Nasdaq futures rose 0.2% even as Tesla tumbled again in premarket trading. Asian stocks extended gains for a second day after China moved to end quarantine for inbound visitors, effectively ending its zero-Covid regime. Futures are advancing after the underlying benchmarks slid over the last three weeks. Treasury yields were higher, 5Y-30Y at highest levels since November, with the curve steepening. The dollar declined versus most of its G-10 peers. Gold was in the green. Oil in New York traded for $80 a barrel, buoyed not only by China’s reopening but as freezing weather shut more than a third of Texas Gulf Coast refining capacity over the past few days. Trading remains thin with many markets including Australia, New Zealand, the UK and Hong Kong closed for holidays”
NDX futures rose to challenge the trendline near 11050.00, but pulled back, as well. This situation appears to be more dangerous to equities, as NDX is leading the indices lower.
Today’s op-ex show both puts and calls are very sparse, with a possible long gamma at 11100.00. QQQ (Friday’s close: 267.36) shows Max Pain at 267.00. Long gamma may begin at 274.00, while short gamma starts at 265.00.
ZeroHedge observes, “After a strong October and November, the final month of 2022 has seen a brutal return to the same painful grind lower that marked most of 2022, and is on pace to record the 2nd worst December performance on record…
ZeroHedge remarks, “Some stunning stats on the epic collapse in the tech sector, i.e., the GAMMA (Google, AAPL, Meta, MSFT, AMZN) Meltdown, courtesy of Goldman trader Michael Nocerino and Peter Callahan:
The Big Tech cohort (AAPL, MSFT, GOOG, AMZN, TSLA, META & NVDA) has collectively shed ~$4.9 trillion of market cap during the course of 2022.”
VIX futures rose above the Triangle trendline at 21.00 this morning. While there is no unusual activity in the Cycles this week, things may intensify after the New Year. The first two weeks of January show a strong return of trending strength.
Wednesday’s op-ex shows Max Pain at 23.00. Short gamma may be nonexistent, while long gamma begins at 25.00.
TNX gapped up to the 50-day Moving Average at 38.25 this morning, although the futures show a lower peak. The Cycles Model shows trending strength roaring back this week with a potential Master Cycle high in the first week of January. TNX is on a buy signal.
USD futures challenged the long-term trading channel over the Holiday weekend, but has emerged above it. There are two weeks left in the current Master Cycle. There is no indication in the Cycles Model of any strength before the pivot date, so the short-term trend may be sideways-to-lower.
Crude oil futures peaked overnight at 81.06 and appears to be making its reversal on day 260 of the Master Cycle. It may not reach the 50-day Moving Average at 82.05. If so, we may see a two-month decline in crude prices. The Broadening Wedge formation has a potential target of 49.92 which may be reached by the end of February. That would be a 61.8% Fibonacci retracement from the March 2022 top to the April 2020 bottom.