April 6, 2023

7:30 am

Good Morning!

NDX futures probed lower to 12875.10 before bouncing back to breakeven.  The latest rally in NDX has all the appearances of investors charging ahead, looking through the rear view mirror, despite crumbling economic data.  Is Wile E. Coyote running off the cliff?  NDX rates an aggressive sell due to meeting time and target requirements.

In today’s op-ex Maximum Pain for options investors is at 13010.00.   Lang gamma may begin at 13025.00, while short gamma begins at 13000.00.  In other words, the shorts may be gaining ascendancy.

ZeroHedge comments, “Well that all escalated quickly.

As Goldman’s John Flood noted: “First time in a long time that I can recall bad economic data actually being bad for stocks.”

Just a month ago, the world and his pet rabbit was crowing about soft-landings and strong labor markets (ignoring the constant reminders that the labor market is the ‘last to go’)… and now US macro data is serially surprising to the downside (with ISM Services and ADP today)…

 

SPX futures have been consolidating within yesterday’s trading range in the overnight market.  It has also met the time requirement for a correction and has been repulsed by multiple resistances at or near 4133.00.  It also rates an aggressive sell.  Tomorrow is a market holiday, but not a federal employees holiday, leaving us to decide in advance how large a bombshell the DOL is about to lay.

Today’s op-ex reveals Max Pain at 4085.00.  Long gamma begins at 4100.00 while short gamma starts at 4050.00.  The 50-day Moving Average is at 4026.65, where the sell signal may be confirmed.

ZeroHedge explains, “For the past 9 months we have been warning that, whether by accident or due to active and malign data manipulation, the US labor market is in a far worse shape than indicated by the labor market. Here is an example of some of our work into what could prove to be the most destructive and glaring errors by the US Department of Labor, because while (mis)represented how “strong” the Biden labor market is, they were giving the Fed a false sense of comfort in the strength of the economy and enabling it to hike rates long past the point where they should have been pausing and/or pivoting.”

ZeroHedge reports, “Nasdaq futures dropped despite a continued slide in yields as the “bad news is bad news” mood extended for a third day, as traders awaited further data on the US jobs market that may fuel concerns about a potential recession. Nasdaq 100 contracts slid 0.2% by 7:30 a.m. in New York, the third straight day of losses for the tech index just after entering a bull market and posting its strongest March in over a decade. Contracts on the S&P 500 were little changed before the start of the Easter long weekend following a string of weaker-than-expected data releases from the US which has put the risk of a recession back into focus for investors who will be watching initial jobless claims closely today. Treasury yields extended a slump as growing fears that world economy is set for a sharper slowdown outweighed concerns over elevated inflation and monetary tightening. The dollar was flat, oil rose and bitcoin dropped.”

 

 

VIX futures are also consolidating inside yesterday’s trading range.  Cyclically, it is poised to go much higher.  The Cycles Model suggests a double surge of strength next week, first on Monday and again on Wednesday.

Nex Wednesday’s op-ex shows Max Pain at 19.00, which the dealers would dearly love to hold.  There is no short gamma to speak of.  Long gamma begins at 20.00.

The April 19 expiration is yet another story.  Max Pain is at 22.00.  Short gamma begins at 21.00 and runs to 17.00 while long gamma begins at 24.00 and extends to 100.00.  Speculators are taking their positions.

 

TNX made a marginal new low at 32.53 this morning, on day 274 of the Master Cycle.  Something is about to break loose in rates that may surprise investors caught the wrong way.  The next two weeks may show a startling outcome, totally unexpected by investors.

ZeroHedge reports, “After ugly ISM employment data, dismal JOLTS, soaring WARN notices, and a weaker than expected ADP print, this morning’s Challenger, Gray & Christmas report announced a bigger than expected 89,703 job cuts in March (270,416 year-to-date), up 319.4% YoY. The West dominated the cuts (East 13,638; Midwest 21,764; West 48,123; South 6,178), with technology-sector companies have announced 102,391 cuts so far this year, “on pace to surpass the highest annual total for the sector announced in 2001,” the report notes.

Source: Bloomberg

“We know companies are approaching 2023 with caution, though the economy is still creating jobs,” Andrew Challenger, firm’s senior vice president, said in statement.

“With rate hikes continuing and companies’ reigning in costs, the large-scale layoffs we are seeing will likely continue.”

 

ZeroHedge comments, “US 10 year – the break down

US 10 year extending the move lower, “well” below the 200 day moving average. Seems that lower for longer really is hitting the market.

Source: Refinitiv

 

Bond volatility on the move

MOVE moving higher today again. The gap vs VIX is back to very wide levels again…”

 

 

USD futures are rising to a morning high of 101.77 thus far.  This may put yesterday’s low at 101.09 as the “swing low.”  The Cycles Model suggests that Monday may begin the week with a surge in the USD that may continue through the end of April.

ZeroHedge comments, “Last week, Fox News aired a segment discussing the possibility that the US dollar will cease to be the global reserve currency and what that would mean for Americans. The tone of the piece suggested that a “catastrophic” decline of the US dollar was not only possible, but perhaps even imminent. CNN last week also aired its own segment suggesting the US will face “a reckoning like none before” if the “dollar’s dominance” in the global economy falls significantly.

Much of the analysis was framed to stoke the public’s fears of Chinese geopolitical power, and the Fox segment was especially hyperbolic in its predictions of near-total economic devastation resulting from any movement away from the dollar in international trade and reserves.”

 

Gold futures have edged down to a morning low of 2024.60 after making a probable master Cycle high yesterday, on day 259.  The Cycles Model calls for a steep decline into the end of April, after which the decline may  resume through early August.

ZeroHedge observes, “In February, central bank gold reserves rose by another 52 tons, according to the latest data compiled by the World Gold Council.

It was the 11th straight month of central bank net gold purchases.

Through the first two months of 2023, net central bank gold purchases came in at 125 tons. This is the strongest start to a year since 2010.

China was the biggest buyer in February. The Peoples Bank of China increased gold holdings by a reported 24.9 tons. It was the fourth consecutive month of reported Chinese gold purchases. In that time, China’s official gold reserves have grown by 102 tons.”

 

 

 

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