SPX may have reversed from the mid-Cycle resistance at 3950.82. The reversal may be confirmed with a decline beneath Intermediate-term support at 3925.00 or the 50-day Moving Average at 3904.29.
The Ag Index has stopped its decline last Thursday on day 261, very likely ending a retracement. I had previous thought that the Ag Index may decline alongside other assets as liquidity declines. However, the Cycles Model may indicate otherwise. In essence, food may become more valuable than any other asset as liquidity diminishes.
BKX, our liquidity proxy, has extended its Master Cycle to test mid-Cycle resistance at 105.88 on day 266 of the Master Cycle. A reversal may be imminent. If so, the new Master Cycle may take BKX beneath the neckline of the Head & Shoulders formation in a short-but-sharp decline lasting through the end of January. Abundant liquidity may be a thing of the past.
ZeroHedge observes, “It would be best to consider the idea that if you have good credit you will always be able to get a loan a myth. This is not about you, it is about markets and reality. People learn in a credit crunch that liquidity is far more important than interest rates. We are currently in a credit tightening cycle and it seems that greed has temporally overshadowed the potential this has to impact the economy.
Many years of an easy credit environment have numbed people to the reality that credit is not a guaranteed right. This is a reality that can hit us like a slap in the face. The notion you stand a snowball’s chance in hell of getting a loan in such an environment has yet to dawn on many people. ”
SPX futures reached a morning high of 3914.80, between the 50-day Moving Average at 3901.44 and Intermediate-term resistance at 3925.32. The 50% retracement value is 3931.39. Today SPX will have completed 17.2 market days from the December 13 high and has another 17.2 days to complete this Master Cycle. Investors are being worn down since this is the 10th day of nominally positive returns after a 7-day decline. The market just doesn’t feel bearish.
In today’s op-ex, Maximum pain for options investors is at 3875.00. Long gamma starts at 3900.00, while short gamma begins at 3850.00.
ZeroHedge reports, “Futures extended their Friday post payrolls gain on the back of Chine reopening optimism coupled with speculation that China’s tech crackdown is finally ending – just as we speculated this weekend when reporting on Jack Ma’s ceding control of Ant Financial. S&P futures rose 0.4% as of 7:30 am ET while Nasdaq contracts 100 added 0.5%. And while European stocks were mostly in the green, the bulk of overnight action was in Asia where the Hang Seng Tech Index jumped 3.2% Monday, led by Alibaba Group after a top central bank official said the clampdown on the Internet sector was drawing to a close. The broader market also advanced, with a gauge of Chinese equities listed in Hong Kong rising 2%, helping push the MSCI Asia Index up 20% from its October low, setting it up for a bull market. The dollar weakened to a seven month low and oil rallied.”
VIX futures are higher this morning and may have crossed above the lower Triangle trendline at 21.50. Overhead resistance is the 50-day Moving Average at 22.89, offering a potential buy signal. Traders may recognize a breakout above 23.76 to 24.30.
TNX is consolidating above Friday’s low. Friday is day 260 of the Master Cycle and may actually mark the low, should TNX rise above the trendline at 36.50. This is a very close call and should be watched carefully.
ZeroHedge comments, “Is the Fed trying to wean the markets off monetary policy? Such was an interesting premise from former British diplomat Alastair Crooke via the Strategic Culture Foundation, to wit:
“The Fed however, may be attempting to implement a contrarian, controlled demolition of the U.S. bubble-economy through interest rate increases. The rate rises will not slay the inflation ‘dragon’ (they would need to be much higher to do that). The purpose is to break a generalised ‘dependency habit’ on free money.”
That is a powerful assessment that, if true, has an overarching impact on the economic and financial markets over the next decade. Such is especially important when considering the effect these repeated monetary and fiscal interventions have had on financial market returns of the previous decade.”
USD futures are challenging the trading channel trendline at 102.91 and may be putting in a Master Cycle low on day 256. Stand by for a reversal that may confirm the low.