NDX futures are lower this morning. The bullish signal may be changing to bearish this morning since NDX is challenging the trendline at 12000.00. A close beneath 12000.00 would confirm it. Technically, NDX may have met its minimum requirement for a retracement rally (a Flat Correction). The 12.9-month Cycle may be complete, or nearly so. Cyclically, the bear market resumes in the NDX beneath mid-Cycle support at 11876.78 where a sell signal may be confirmed.
However, should the bulls prevail, Wave (C) is equal to Wave (A) at 12699.00. In addition, the first Fibonacci retracement at 38.2% is at 12890.00. There is no assurance that any of those targets may be met. Today is day 255 in the current Master Cycle. It takes both time and price to meet for a reversal. The NDX is closing in on both this week.
This morning’s op-ex shows Maximum Pain for options investors at 12175.00. Long gamma starts a 12250.00 while short gamma begins at 12150.00. Dealers and hedge funds working the options market may exert influence to keep the NDX out of either camp.
ZeroHedge observes, “Back on January 9, despite a wave of raging pushback (putting it mildly) as the consensus bearish call was dead certain that the bottom was about to fall out of the market – after all, who in their right mind would fight the Fed when the Fed has clearly telegraphed that it wants risk lower – we warned that “We Are Setting Up For A Tech-led Squeeze Higher As Shorting Gets Extreme.”
What happened next was a historic tech-led squeeze as shorts got steamrolled over and over, and every attempt to push stocks lower was met with furious dip-buying (mostly by retail) which pushed S&P futs above all key resistance levels (50DMA, CTA trigger, 200DMA, descending channel) which sent it to a two month high of 4,100.
The bear-capitulating result, as Goldman’s Michael Nocerino puts it in his latest market note (available to pro subs), is that with just two trading days left in the month, “the January effect has come to fruition as the SPX is +6.02% and NDX is +11.2%, making this Nasdaq’s best start in over 20 years.”
SPX futures are lower, but must close beneath the declining trendline at 4000.00 to create an aggressive sell signal. Confirmation of that sell signal comes beneath the 50-day Moving Average at 3944.25. Should SPX (and NDX) follow the calendar Model, the reversal may come on Wednesday or Thursday. However, the window for a reversal is now open and the minimum retracement may be met at 4100.00. Other retracement values are the 50% retrace at 4142.03 and the Weekly mid-Cycle resistance at 4162.69. Resistance in the INDU is at 35026.00.
The options chain in the SPX is not available this morning.
ZeroHedge reports, “US equity index futures dipped, with megatech underperforming after a month of blowout gains. MegaCap Tech are lower ahead of key earnings this week: AAPL -1.3%, AMZN -1.8%, GOOGL -1.3% (all three will report on Thur, post-mkt) and META -1.8% (will report on Weds, post-mkt). Investors are also bracing for a barrage of central bank announcements including the Fed’s 25bps rate hike on Wednesday, and looked ahead to the busiest week in earnings season with 107 S&P companies reporting, representing a whopping 35% of earnings by sector. Commodities are mixed with lower energy; the dollar and Treasuries were both weaker. The question – as we hear from the Fed, ECB and BOE – is will stocks sustain last week’s rally?
S&P 500 futures slipped 0.9% at 7:30 a.m. ET, dropping to 4,406 after briefly printing above 4,100 on Friday and closed 2.5% higher last week. Nasdaq 100 futures declined 1.2% after the tech-heavy index soared 4.7%, its fourth straight week of gains. Despite today’s drop, the index is set for the best January since 1999.”
VIX futures rose to 20.20 this morning out of Friday’s Master Cycle low on day 270. The extension was unexpected, but the decline is now complete. An aggressive buy signal may have been made, to be confirmed by crossing above the 50-day Moving Average at 21.34. The mid-Cycle resistance at 25.27 (25.00) may be universally recognized as a buy signal by most analysts. A breakout above the December high at 25.84 may trigger massive buying/hedging.
ZeroHedge observes, “Time to get busy
We have a bombastic week ahead of us.Three major central bank decisions, massive earnings and many major macro releases. Hard to remember such a busy calendar. Volatility has imploded and given the busy schedule going forward we find protection is a must, bullish or bearish. Time for a thread on volatility.
The volatility reset
SPX 1 and 3 month implied vols have moved one way over the past months: lower.
The protection puke
Goldman’s Garret shows the change in 3 month SPX implied volatility; “…effectively cut by a third over the last few weeks.”
USD futures continue to consolidate between 101.45 and 101.85. The low made on January 18 has not been exceeded. he Cycles Model shows trending strength rising this entire week. The 4-month decline in the USD has lulled investors to sleep. This week may give a wake up call.
TNX futures rose to 35.63 this morning, still sort of the overhead resistance at 35.92 that carries a buy signal. The next Master Cycle terminus is only a week away. The inability to rise above resistance suggests another decline beneath the mid-Cycle support at 33.73, possibly to the 200-dy Moving Average at 33.34, completing the Master Cycle.
Crude oil futures have declined to 78.75, approaching the 50-day Moving Average at 78.36. A decline beneath it triggers a sell signal. The trendline near 70.00 may trigger the Broadening Wedge formation with a target near 50.00. Stay alert for a continued decline through the end of February.
OilPrice.com reports, “Traders believe the Federal Reserve could finally stop hiking interest rates this March as indicators suggest inflation is finally coming under control.
- Oil prices climbed on Friday on positive economic data coming out of the U.S., and expectations are the hike this week will be lower than previous ones.
- Other bullish factors for oil prices include rising Chinese demand and growing geopolitical risks in the Middle East following reports of drone attacks in Iran.
Traders expect the Federal Reserve to end its rate hikes in two months, which could push oil prices higher due to the generally inverse relationship between rates and oil prices.”
Gold futures re consolidating around the Cycle Top support/resistance at 1927.42. Having made its Master Cycle high last Wednesday, gold is susceptible to a turn-down with the Cycle Top as the trigger for an aggressive sell signal. Should that occur, gold may decline through the end of March.