SPX has crossed beneath the 50-day Moving Average at 3978.91 after bouncing from it yesterday. There may be another 4.3 days of decline from this morning’s high. Mark your calendars for March 1 for a probable low. A possible alternate date for a low would be Friday, March 3. Afterwards, there may be a two week retracement, so prepare for a short squeeze in early March. I won’t be available to blog during that time, so use your discretion.
ZeroHedge warns, “Late last week, when we showcased the dramatic reversal of one of Goldman’s biggest (and most accurate) bulls into a (tactical) bear, pointing out what according to GS flow trader Scott Rubner was one of the top bearish factors for stocks, we noted that CTAs – which until recently were aggressive buyers of stocks – could very soon turn into (potentially very motivated) sellers as “CTA flows dynamics present asymmetrical risk to the downside” should the selling in stocks accelerate.
The reason for that is that both the Short-Term and (more important) Medium-Term pivots were about to be taken out if the drop in S&P futures extended below 4,000.”
BKX, our liquidity proxy, broke through Intermediate-term support at 109.94 yesterday, then bounced to retest that support/resistance line. It is now heading lower supports between the 50-day at 106.51and mid-Cycle support at 105.55. The Cycles Model shows a continued decline to the end of March, suggesting a total retracement to the October low.
ZeroHedge gives Martin Armstrong’s view, ” Armstrong explains, “They want a war, but they also need it because the monetary system is collapsing… “
“You have had interest rates at negative since 2014. So, suddenly interest rates are rising. Any bond owned by any institution in Europe is a loser. They have lost so much money, it’s incredible. What happens? Nobody is interested in long term debt – period…
If you have interest rates rising, and rates are going to be going up because the Fed cannot stop this kind of inflation. Then, you got war.
You have untold billions of dollars being shipped into Ukraine which is absurd. This is what you have…
You also have to look at what Janet Yellen said, and she was concerned with the tons of new debt coming out. You are exceeding the balance sheets of the Primary Dealers. To be a Primary dealer you have to be able to guarantee you will be able to buy X amount of debt. If you can’t sell it, what happens? The bank is stuck with the debt, and then, they go bust. So, we have a real problem here. They cannot continue to issue this kind of debt in perpetuity.
They have been borrowing money since WWII with no intention of paying anything off… The Fed is independent, and they don’t want the long term debt. They have been moving towards the short end of the curve. How do you continue to fund a government if there are no buyers for the debt? This is on a global scale.”
So, war checks all the boxes? Armstrong says, “Absolutely…””
SPX futures bounced to 4015.90 as gamma weary dealers cashed out their short positions, settling at Max Pain. The Cycles Model suggests another week of decline that is likely to land near the Cycle Bottom at 3610.39, taking out the December low and possibly lining up with the October low.
Today’s options chain show Maximum Pain at 4015.00, thus the overnight move to that level. Long gamma begins at 4035.00-4050.00. Short gamma begins strongly at 4010.00.
ZeroHedge reports, “US futures rebounded from yesterday’s post FOMC selloff, rising back over 4,000 as concern about aggressive monetary tightening eased and Nvidia soared 10% after giving a bullish revenue outlook. Contracts on the Nasdaq 100 were up 1% as of 7:45 a.m. ET while S&P 500 futures rose 0.4%. The underlying stock gauges closed mixed on Wednesday as minutes from the Federal Reserve’s latest meeting signaled its determination to keep hiking interest rates to combat inflation. The tech rally may be short-lived thought: treasuries edged lower again, reversing yesterday’s gains. The Bloomberg Dollar Spot Index recovered from earlier lows, pressuring most Group-of-10 currencies. Gold was little changed, while oil advanced. Bitcoin rose nearly 2% following two days of losses, before fading some of its gains.”
VIX futures probed the lower side of yesterday’s trading range, with a morning low of 21.74. There is a likelihood of VIX challenging the 50-day Moving Average at 20.63, the 50% retracement level of the rise from the 18.11 bottom on February 15, which is shaping up to be the expected Master Cycle low.
Next Wednesday’s VIX options chain shows Max Pain at 22.00 with puts leading at 21.00 and lower. Short gamma is in short supply while long gamma takes hold at 25.00. There’s not a lot of hedging yet, but that may change by the weekend.
TNX may be having a running correction (higher highs and lows), suggesting the uptrend may resume with gusto by early next week. The Cycles Model indicates the rally may continue through the week of March 20.
ZeroHedge reports, “Following yesterday’s mediocre at best 2Y auction, moments ago the Treasury sold $43 billion in 5Y notes in what was a solid auction.
The high yield of 4.109% was a nearly 50bps jump from last month’s 3.530% (thank you Jan NFP and retail sales seasonal adjustments), and the highest of the current tightening cycle with just two expections: the 4.228% in Sept 22 and 4.192% from Oct 22; separately, thanks to today sharp rally in across the curve, the auction tailed the When Issued 4.106% but just modestly, and would have likely stopped through if yields didn’t slide by 6bps today.
The bid to cover of 2.48 was below last month’s solid 2.64 (which was the highest since August 2020), but above the recent average of 2.42.”
USD futures are running higher to 104.63 this morning. The Cycles Model indicates a possible burst of trending strength through the weekend, culminating in a probable Master Cycle high by mid-week. The USD may become a safe haven for a possible panic in equities during the same period.