BKX may be resuming its decline following the reversal on April 19. The next decline may be as strong (or stronger) as the first, leading to a possible 50% decline, in line with the Head & Shoulders target. It may be accompanied by much tighter liquidity and possible bank closures through mid-June. It’s time to be personally prepared for a liquidity event, as well as aligning your portfolio for such an outcome.
ZeroHedge remarks, ““Credit started tightening six to nine months ago,” said the developer, a close friend, entrepreneur, with large residential projects across the nation. “It started with the money center banks,” he continued. “This pushed us to regional banks for our latest projects, but then SVB happened.” The market froze.
“The lender for our latest 30-story project in a tier-one city backed out, so we scrambled, and spoke with well over 100 banks. Not one will provide financing.” His firm is a leader in their market niche. A strong track record.
“The Fed is going to have to inject liquidity and slash rates to break this financing freeze on new construction.” Not only have higher rates failed to push home prices down materially, but they are now reducing new supply.”
ZeroHedge observes, “Credit Suisse reported Monday that clients had withdrawn 61.2 billion francs ($69 billion) in the first quarter and that outflows were continuing, highlighting the challenge faced by UBS in rescuing its rival in March.
In the last financial statement as an independent company, Credit Suisse reported a loss of 1.3 billion Swiss francs ($1.46 billion) for the first three months of the year. It said “significant net asset outflows” were seen in March.
Most asset outflows originated from its wealth management unit and occurred in all regions. The troubled bank said, “These outflows have moderated but have not yet reversed as of April 24, 2023.”
NDX futures appear frozen in place over the weekend. April 4 appears to be the high thus far, although I have marked April 18, which is 6 points lower. The Wave structure is anomalous and offers few clues as it may be approaching a major turning point.
Today’s op-ex shows Maximum investor pain at 13040.00. 13000.00 is hotly contested by both puts and calls. with short gamma possible beneath it. Long gamma may begin at 13050.00 and longs are own 102 contracts at 13100.00.
ZeroHedge observes, “Boring is king
NASDAQ continues trading the incredibly boring range in April. We have basically seen a 2.5% max move from low to high so far in April.
Don’t brag you trade NASDAQ
It is not a cool thing these days. NASDAQ 1 month and 5 days realized volatility.
…but downside convexity is back
Latest CTA flow projections via Goldman’s flow guru Scott Rubner:
1 week: – flat tape: +$5.7bn to buy, up tape: +$7.1bn to buy, down tape: -$36.2bn to sell
1 month: – flat tape: +$100mm to buy, up tape: +$11.1bn to buy and the “kicker” – down tape: -$222bn to sell”
SPX futures are nudging the lower end of the trading range with a overnight low of 4111.20, but ramped up in morning trading. Unlike the NDX, SPX appears to have completed its retracement rally on April 18. It is on an aggressive sell signal that may be confirmed beneath the 50-day Moving Average at 4028.15. This week shows trending strength may come back in a big way, starting today, most likely primed to the downside.
Today’s op-ex shows the 4130.00 strike hotly contested by both puts and calls. Long gamma may begin at 4150.00, while short gamma starts at 4100.00.
ZeroHedge reports, “In what is shaping up as yet another unchanged open, futures are set up to open violently unchanged after earlier sliding as much as 0.6% following lackluster sentiment in Asia, but a reversal during European trading. Investors are bracing for a barrage of earnings ahead of the busiest reporting weak in Q1 earnings season which sees the likes of MSFT, GOOGL, Meta, AMZN and XOM all set to report amid rising interest rates and economic slowdown worries. S&P 500 contracts fell as much as 0.6% before paring the drop to unchanged as of 7:30 a.m. ET while futures for the tech-heavy Nasdaq 100 benchmark were 0.1% lower.”
VIX futures jumped to a new high at 18.24 this morning after making its Master Cycle low on the 19th. While standard technical analysis shows no buy signal until it reaches the 50-day Moving Average at 20.35, the Wave structure and Cycles both indicate that the turn may have been made. Should that be so, the Cycles Model suggests a probable rally in VIX to the end of May.
Wednesday’s op-ex shows Max Pain at 18.00. Short gamma rests at 16.00-17.00 with no conviction beneath it. Long gamma starts at 19.00 and extends to 42.50.
ZeroHedge comments, “Subdued equity volatility is poised to rise soon as the US economy becomes more recession-like.
Oscar Wilde once said the only thing worse than being talked about is not being talked about. It’s a fate that’s befallen the VIX in recent months as its limelight has been stolen by the increasing focus on options with zero days to expiry.
But that’s likely to change soon as it and other measures of longer-dated volatility rise as the economy enters the recession event horizon: the transitory state between a slowdown and an inescapable contraction.
We can see this most clearly in the rapid deterioration in unemployment claims across the US.
When the percentage of states with claims rising sharply reaches around 20% (where it is now), it typically shoots much higher, with a recession often following soon after.”
TNX has settled somewhat lower as it tests the 200-day Moving Average at 35.30. The current Master Cycle has about a week left, leaving the possibility of a probe above the 50-day Moving Average at 36.51, which it tested last week.
ZeroHedge remarks, “With Wall Street’s attention suddenly transfixed on the upcoming debt ceiling fiasco following our report “Why This Week’s Tax Data Could Lead To A Much Earlier Debt Ceiling Crisis“ (as well as subsequent articles here and here) in which we warned that sharply weaker tax receipts (a non-trivial puzzle considering the BLS claims the US generated 4 million jobs since last year yet tax receipts are 30% lower) in 2023 could bring forward the infamous X-date from the previous consensus of as far as October to as soon as June, on Friday we said that the latest Daily Treasury Statement (or DTS) which updates the Treasury’s daily cash balances, receipts and outlays, would be a doozy and far more important and informative than the Fed’s Friday H.8 statement (which tracks bank deposit and loan data).”
USD futures are lower as they digest last week’s bounce out of its Master Cycle low. Despite protests to the contrary, the Cycles Model suggests a rising USD to the middle of June.
ZeroHedge remarks, “Over the last few weeks, it has seemed you can’t turn a page, blink at a pixel, or hear a news report without some form of de-dollarization headline shrieking at you. From Brazil to Saudi Arabia, and from India to Argentina, and increasing number of nations are ‘reportedly’ shifting away from the dollar hegemon.”
Gold futures bounced this morning and may retest the Cycle Top resistance at 2030.69 before resuming their decline. It was not able to overcome its 2020 high at 2089.20, suggesting it may retest its 2016 low at 1045.40. Gold may be in a Cyclical decline within a secular bull market.