January 24, 2023

11:05 am

BKX, our liquidity proxy, may have made its Master Cycle high yesterday , on day 255.  There is still a possibility of exceeding its November 11 high at 110.57 in the next few days.  If I were a banker, I would be selling all of my bank shares as a crisis is looming.  It’s not just rising interest rates and nonpayment of loans leading to losses.  The growing US government budget threatens to exceed the banks’ capabilities of servicing the national debt.  The current arrangement requires the Primary Dealers to assume all debt not sold in public auctions.  This may exceed the banks’ balance sheets in very short order.

ZeroHedge reports, “A group of 43 Democrats want to completely eliminate the debt ceiling, which they say Republicans have ‘weaponized’ – which would give the government a blank check to borrow without any limit from Congress.”

Ed. Congress is the home of idiots.

 

10:17 am

SPX may have made a reversal at the descending trendline at 4022.00.  It may come back to retest the resistance at that level.  However, it has tested short gamma at 3990.00 and a decline may accelerate beneath that level.  The market has halted several times which may either be a technical break or a natural halt as several mega-caps have declined more than 10% at the open.

ZeroHedge reports,”Update 2 (11:15am ET): The NYSE says it is continuing to investigate issues with today’s opening auction and “impacted members may consider filing for Clearly Erroneous or Rule 18 claims.” The NYSE adds that “In a subset of symbols, opening auctions did not occur”

* * *

“Update (9:52am ET). According to the NYSE, as of 9:48am, all systems are back to normal, although that is an understatement in a market where nobody knows what the correct opening price is! We are still waiting for the NYSE to give a detailed explanation of what caused this latest “broken markets” episode.

While it is still unclear what was the “technical glitch” that sent the world’s biggest companies into a multi-trillion market cap rollercoaster, Bloomberg reports that “a wave of sell orders targeting financial services stocks swept across American equity exchanges at the open of trading Tuesday, sending companies including Wells Fargo & Co. and Morgan Stanley to brief but sharp plunges from which they mostly quickly recovered.”

 

7:30 am

Good Morning!

NDX futures made a morning low at 11812.00.  A decline beneath yesterday’s low at 11800.00 confirms the decline.  A decline beneath the 50-day Moving Average at 11415.00 confirms the resumption of the downtrend.  The mid-Cycle line at 11901.00 provides overhead resistance.  The downtrend line is at 12000.00 may provide the last resistance, should NDX rally further.  The end of January marks the end of a 12.9-month Cycle from the all-time market high.  Whether the markets go higher or lower in the next two weeks, what comes after may offer a whole new dimension to the decline.  Futures have paused as major tech giants Microsoft and Texas Instruments report earnings today.

Today’s op-ex shows Maximum Pain for options investors at 11830.00.  Long gamma stats at 11850.00 while short gamma begins at 11800.00.

ZeroHedge remarks, “Over the weekend, we reminded readers that on Thursday, JPM’s trading desk – despite turning increasingly bearish in recent days – cautioned against shorting the rally because as Matt Reiner on the Cash Trading Desk warned, “something I’m noticing in Tech, and don’t think many are talking about it – LO’s are quietly adding in Mega names, and consistently too – The demand has been on and off the desk now since Jan 2 this year, but the numbers are starting to adding up – I bet the demand in the near term continues (GOOGL, AAPL, META, AMZN).” As he further explained “If we see the MegaCaps rally, that will likely drag the index higher given the recent increase in market breadth.”

We followed up with statistics from Goldman’s Prime desk, which confirmed that indeed there had been a dramatic reversal in sentiment when it comes to giga-tech market “generals” as “hedge funds net bought US Info Tech stocks for a second straight week led by Semis & Semi Equip names (after being sold in 10 of the 11 prior weeks).”

 

US30  futures have declined beneath the 50-day Moving Average at 33570.00.  I show this as a contrast to the NDX, since the decline may already be underway for the DJIA.

 

SPX futures made a morning low at 4006.10.  Critical short-term support is at 4000.00, while overhead resistance is at 4022.00, a very narrow trading range.  The breakout tells us the direction of equities (especially SPX and NDX) over the next two weeks.  The daily tracing bands are narrowing, suggesting a powerful breakout is possible at those levels.

Today’s op-ex shows Max Pain at 3995.00.  Long gamma reigns above 4000.00, while short gamma takes over beneath 3975.00.  Dealers and hedge funds are grossing up on longs.  A decline from hers may be disastrous.

ZeroHedge reports, ” The rally in US tech stocks and European markets paused on Tuesday as investors prepared for earnings updates from industry giants, including Microsoft and Texas Instruments. US equity futures fell after the tech-heavy Nasdaq 100 posted its best two-day gain since November, as traders braced for the worst tech earnings slump since 2016. Europe’s region’s Stoxx 600 Index erased an early advance to fall into the red. At 7:30am ET, S&P 500 futures were 0.2% lower and Nasdaq futures were down 0.3%; the tech-heavy benchmark is up8.5% in January, on pace for its best month since July even as profit estimates are declining and as Federal Reserve officials advocate for more policy tightening to combat inflation if at a slower, 25bps pace. The USD rose; Treasuries were unchanged while commodities were mixed with strength in natgas, nickel, oil and precious metals.

 

 

VIX futures remain neutral, consolidating within the mid-range of yesterday’s trading.  The Master Cycle low on January 12 is only 10 days from a 12.9-month Cycle in the VIX.  What this means is that the VIX has begun a new 12.9-month Cycle with a bullish bias.  The next Master Cycle high may be near the end of February.

 

USD futures are hovering in place.  The Cycles Model indicates a change in trending strength starting as early as tomorrow.  The following two weeks may show strength upon strength as tje Master Cycle continues to rise through the end of February.

TheEpochTimes reports, “A recent report by the Congressional Budget Office (CBO) projects that two major Social Security funds in the United States will dry out in the coming decades, with one of them running out within the next 10 years as younger members in the programs are set to lose more than older members.

“If the gap between the trust funds’ outlays and income occurs as CBO projects, then the balance in the trust funds will decline to zero in 2033 and the Social Security Administration will no longer be able to pay full benefits when they are due,” the CBO stated in its report, published in December (pdf).

The Old-Age and Survivors Insurance Trust Fund will be exhausted in 2033 and the Disability Insurance Trust Fund will be exhausted in 2048, the agency said. If the trust funds are combined, the money will be gone by 2033.”

 

Gold futures made an overnight high of 1943.70, stretching the Master Cycle peak to day 277.  Gold is trading as an inverse of the USD.  As USD gains strength, gold May decline, gaining strength to the downside.  he new Mster Cycle also lasts until the end of February.

 

TNX ix rising but may be stopped by Intermediate-term resistance at 35.96.  Should that be the case, TNX may have another two weeks of decline to retest the mid-Cycle support at 33.64.  Another possible target may be the 200-day Moving Average at 33.22.