NDX is nearing its down-trend line near 12100.00 this morning on day 251 of the Master Cycle, reaching a morning high at 12018.41 thus far. We are just a week away from the scheduled top, but may come early when certain targets are met. This may be one of them. Note that NDX did not reach the trendline in December, so this may be its last chance to test the downtrend. Those not following the Cycles patterns think a breakout is possible with clear skies above. However, many NASDAQ companies have been hollowed out by debt and own few tangible assets. Should interest rates rise, they may find it impossible to weather the storm.
ZeroHedge notes, “The current move higher in stocks has all the hallmarks of being a bear-market rally and thus fated to end in disappointment.
Equities have bounced as much as 14% off their October lows, the third +10% bounce in this bear market. But as Wednesday’s disappointing earnings from Microsoft highlight, the market is vulnerable to abrupt reversals. A Federal Reserve still in tightening mode, elevated financial conditions and an inverted yield curve show why it will remain so. This is not an advance to buy and close your eyes.
Bear-market rallies are a microcosm of manias, from tulips to crypto. Their power comes from convincing even the most hardened skeptic. A rapid rise in prices creates its own good-news force-field, drawing in the final, few remaining non-believers. It is only then they deliver their cataclysmic finale.”
SPX futures are now above the descending trendline, making a new high at 4041.00. Yesterday’s fake-out challenged the 200-day Moving Average at 2961.61, then bounced to the trendline at the close. The Cycles Model calls for up to another possible week in the current Master Cycle. Should the rally find its legs, it may go as high as the Cycle Top currently at 4252.08. However, keep in mind that there are two resistance levels (not shown) prior to that, at 4065.00 and 4100.00. Finally Germany admitted they are at war with Russia. What comes after that? The weekend looks very volatile.
In today’s op-ex, Maximum Pain for options investors is at 3995.00, while 4000.00 is hotly contested by both puts and calls. Long gamma may begin at 4050.00, while short gamma starts at 3950.00. While short gamma was contested yesterday, it appears that long gamma may have its turn today.
ZeroHedge reports, “In a mirror image of Tuesday’s action, when MSFT earnings hammered stocks (after first headfaking them higher) only to see the selloff reverse completely during the course of Wednesday trading, on Thursday US equity futures and tech stocks were set to gain after an upbeat earnings report from Tesla reinforced optimism about the health of Corporate America. As of 7:30am, Nasdaq 100 futures were up 0.7% while S&P 500 futures rose 0.3%. Tesla jumped about 8% in premarket trading after the electric-car maker reported better-than-expected profit and said it was on track to deliver about 1.8 million vehicles this year. Risk sentiment was boosted by news that US energy giant Chevron had authorized a massive $75 billion stock buyback, representing 22% of its outstanding shares, helping elevate energy stocks around the globe. Asia stocks jumped to 9-month highs as Hong Kong returned from break and European stocks rose by 0.4%. Meanwhile, the dollar continued to weaken as speculation continued to mount that the Fed is drawing closer to the end of its rate-hiking cycle, and would follow in the footsteps of first Canada and then Indonesia, both of which have officially paused. Bonds and gold edged lower.”
VIX futures consolidated in a very narrow range between 19.02 and 19.28. It has been two weeks since the Master Cycle low. The Cycles Model suggests that the new trend may strengthen next week. Analysts have watched the VIX trending sideways-to-lower for an entire year. Unfortunately, many have drawn straight lines from that to suggest a continuing downtrend.
TNX is consolidating with a slight upward tilt. Unfortunately, TNX has up to two weeks left in its Master Cycle with the most likely outcome being a decline to its 200-day Moving Average currently at 33.36 n as little as a week’s time. The Cycles Model shows strength returning just as the reversal is due.
ZeroHedge reports, ” After yesterday’s blowout 2Y auction which printed barely above 4%, and showed just how little faith the bond market has in Powell’s “higher for longer”, moments ago we got an even more impressive 5Y auction which not only showed relentless buyside demand but blew away several records.
Printing at a high yield of 3.530%, this was not only the 5th consecutively lower 5Y yield, and some 70bps below the September high of 4.228%, but it was a whopping 44bps below December’s high yield of 3.973% and also stopped through the When Issued 3.554% by a whopping 2.4bps, which was the second highest stop through on record going back to Jan 2016 (only Oct 21’s 2.5bps was bigger).”
USD futures have declined to 101.30 and threaten to make new lows. The Cycles Model shows today may be a day of strength with the possibility of extending the Master Cycle low on day 273. It also implies a possibly strong reversal just as seen in the SPX yesterday. The Cycles Model suggests a “tidal wave” rally out of this low that may last through the month of February as both domestic and foreign investors pile in to the USD as a safe haven.
Gold reversed this morning down to 1932.20, testing the Cycle Top support at 1924.63. A breakdown beneath that level gives us a sell signal. If so, gold is due for a possible 60-day decline. The outcome is still tentative, but be aware of the possibility. Remember, gold is not a currency. It is a commodity, subject to market rules.
ZeroHedge highlights the thinking of the gold bugs:
“Gold is enough, Beautiful gold, Lovable gold, Spendable gold..….”
Gold – can’t eat it, can’t use it, but its everything crypto never was: tangible, exchangeable, a store of value, and a kitty for when things get tough. In uncertain markets…. Don’t forget the yellow stuff.”