April 13, 2023

2:45 pm

SPX is approaching its 2-hour Cycle Top resistance at 4152.26 and has completed its corrective fractal.  A reversal may be imminent.

ZeroHedge remarks, “It has now been six months since the S&P 500 made its latest bear market low, having retraced around 50% of the decline from the January 2022 highs. The last week or so has seen the market trade siedways in a narrow range just below its downtrend resistance…

The question is  – where to from here? An upside breakout on a Fed pause (but would the required recession anxiety to prompt a dovish Fed work against earnings expectations and this drag the market down?) Or a downside retest of the lows as recession bites and The Fed remains ‘higher for longer’ as the main inflation indicators it monitors remain far above their goals (to maintain their credibility)?”

 

7:45 am

Good Morning!

NDX futures are probing a new low at 12820.00.  The next step is to challenge the 5o-day Moving Average at 12466.97.  The Cycles Model calls for a possible three-week decline that may challenge the Cycle Bottom at 10513.49.  The Current Master Cycle is due to end in the first week of May.  Investor bearishness is growing, which makes it hard to discern direction, as the crowd is most often wrong…until they’re not.

Today’s op-ex shows Maximum Pain for options investors at 12875.  There is a huge call wall (over 300,000 contracts) at 12900.00 and sustained up to 13250.00.  On the other hand, puts rule at 12770.00 and below.  Options sentiment appears much more bulish than bearish.

RealInvestmentAdvice maintains, “Despite media headlines, podcasts, and broadcasts suggesting “doom and gloom” lurks around the corner, investor bullishness has increased markedly since the October lows. This isn’t the first time we have discussed investor sentiment, which is often wrong at the extremes.

One of the hardest things to do is go “against” the prevailing bias regarding investing. Such is known as contrarian investing. One of the most famous contrarian investors is Howard Marks, who once stated:

Resisting – and thereby achieving success as a contrarian – isn’t easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, particularly when momentum invariably makes pro-cyclical actions look correct for a while.

Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it’s challenging to be a lonely contrarian.‘” – Sentiment Is So Bearish It’s Bullish

That bolded sentence is the most relevant to today’s discussion.”

 

SPX futures are probing the lower end of yesterday’s trading range wile on an aggressive sell signal.  Aggressive signals are in areas where the Cycles may have pivoted, but remain subject to push-back.  Confirmation of the sell signal is at the 50-day Moving Average at 4032.45.  February 2 remains the high of the year in SPX.

In today’s op-ex the 4100.00 strike is hotly contested by both puts and calls.  Long gamma starts at 4120.00 while short gamma begins at 4080.00 with a put wall at 4040.00.

ZeroHedge reports, “For the fourth day in a row, US equity futures are effectively unchanged in the overnight action, as the April doldrums continue, and as shown below spoos have traded in a narrow 80 points range all month.”

 

 

VIX futures are trading lower after making a new Master Cycle low yesterday on the VIX op-ex day.  The trading pattern now suggests the probability of yet another low in the VIX in the next few days.

Next week’s op-ex shows the 23.00 strike being hotly contested.  Short gamma starts at 21.00, extending to 17.00.  Long gamma begins at 25.00 and extends to 100.00.

 

TNX futures pulled back to 33.89 this morning, but have since recovered some of the losses.   TNX is due for yet another possible Master Cycle low next week, suggesting a second test of the trendline.  The short-term direction of TNX remains in question until in exceeds its overhead resistance at 35.10 – 35.52.  The long-term trend is still higher.

ZeroHedge reports, “One day after a solid 3Y auction priced “on the screws”, moments ago the Treasury sold $32BN in a 9-year 10-month Reopening of 10Y cusip GM7. Cutting to the case: it wasn’t ugly but it could have been better.

Stopping at a high yield of 3.455% – the lowest since September and 53bps below the March yield – the auction tailed the 3.435% When Issued by 2bps, which may sound like a lot but it’s actually better than last month’s 2.7bps tail, and also better than December’s 3.7bps as well as November’s 3.4bps. Needless to say, the last few benchmark auctions have not been a walk in the park.”

 

USD futures are probing a new low at 100.65.  This extends the downturn for up to another week.  China is unloading its USD holding in the FX market as they are likely preparing for war.

 

Gold futures are soaring to a new Master Cycle high (on day 267) at 2060.65.   The next level to challenge is the February 2022 high at 2078.80.  Thereafter, it must beat the 2020 high at 2089.20.  Should that happen, a new uptrend may be established.  Conversely, should it fail, a potential 50% decline may ensue.

 

 

 

 

 

 

 

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