NDX futures bounced to 12912.20 in the overnight session, attempting to emerge out of short gamma, but pulled back substantially from there. The return of (downside) trending strength was anticipated in the Cycles Model. It suggests further downside by the weekend. Whether it develops into a panic decline by the end of the month is TBD, but the indications are there. The current Master Cycle may continue its decline through mid-June with downside strength increasing into a probable panic through the month of May.
Today’s op-ex shows Maximum Pain at 12920.00. Long gamma starts at 12950.00, while short gamma begins at 12860.00.
ZeroHedge observes, “Goldman’s closely followed flows guru, Scott Rubner, broke one of his golden rules and sent an email this afternoon (“I do not send emails in the afternoon… this goes against every email rule that I follow.”) His message was simple – a doubling down on what he said last Friday when after a brief spell as a bull, he made a U-turn: “I am tactically bearish”
And as to why he broke his email rule – “things have changed and flow-of-funds changed today… this is new”.
What is he referring to? Simple: the same technical force that provided a backstop to stocks for much of the past month when fundamentals threatened to drag risk sharply lower and which helped push the market right back to where it was… is no more.”
SPX futures bounced to 4095.00 in an attempt to elevate it out of short gamma this morning. The decline may gain some intensity by the weekend with a possible bounce early next week. A decline beneath the 50-day Moving Average may bring on more selling, as universally recognized supports are broken. The initial target may be the Head & Shoulders neckline at 3850.00. This decline may have both time (June 15) and probable strength to bring SPX back to its October low.
In today’s op-ex Max Pain is at 4095.00. Long gamma begins at 4120.00 while short gamma starts at 4080.00 and remains strong down to 3775.00.
ZeroHedge reports, “US index futures are fractionally higher, led by tech, however continued turmoil surrounding First Republic Bank which tumbled as much as 30% this morning after losing half its value yesterday, has sapped much of the earlier optimism and gains. Yesterday was the SPX’s worst day in a month and was April’s second move that exceeded 1%, in either direction. As of 8:00am ET, S&P futures were up 0.1%, while Nasdaq futures gained 0.8%, but both were well of their highs. Google parent Alphabet and Microsoft Corp. both beat first-quarter earnings expectations in results published after the market close. Microsoft gained in the premarket Wednesday, while Alphabet reversed an advance to move into the red. Meta Platforms is due to report after the bell today.”
VIX futures consolidated inside yesterday’s move, leaving the 50-day Moving Average at 20.24 as the next target. The Cycles Model suggests the new trend may intensify by the weekend, with a possible panic during the month of May.
Today’s op-ex shows Max Pain at 18.00 with short gamma at 16.00-17.00. Long gamma starts at 21.00 and remains strong to 33.00.
ZeroHedge observes, “Equities feel like they are approaching “a point of instability,” warns Nomura’s Charlie McElligott in his latest note.
Today we see an old-school “risk off” trade, with USTs rallying sharply, Equities / Commodities (Gold, Crude, Copper) lower, Credit wider and USD ripping higher to the pain of “Anti-Dollar” trades everywhere.”
TNX bounced this morning but may attempt another probe to the trendline at 33.50 before a possible reversal. Should that take place, the new trend in TNX may last through mid-July.
ZeroHedge notes, “Pressure on reserves and extra demand for the Fed’s RRP facility will keep weighing on stocks and other risk assets.
Debt-ceiling dynamics are distorting the Treasury bill curve. Bills are first in the line of fire if the debt ceiling becomes binding due to the way they are issued. This is leading to a surfeit of demand for bills which mature before “X Day”, the day when it is anticipated the Treasury will hit the debt ceiling. Tax payments are slower than average this year, bringing estimates for X Day to early June.
This has led to 1-month bills yielding only ~3.75% versus 3-month bills at ~5%. The current overnight RRP rate is 4.80%. We can use the rates implied by Fed Funds futures to imply what the 1-month and 3-month RRP rates would approximately be.”
USD futures are consolidating following its rise out of its Master Cycle low. The consolidation may be positive as trending strength may come back by the weekend. The Cycles Model suggests the new trend may last through mid-June.
Crude oil has dropped beneath its 50-day Moving Average at 76.49 this morning, potentially confirming the decline starting on April 12. The trendline at 75.00 may be the next target, taking it to the 61.8% retracement of the rally from April 2020 and the weekly Cycle Bottom at 53.05.
ZeroHedge observes, “Oil prices fell on the day amid banking and debt ceiling fears weighing on consumer sentiment and knocking into broad market sentiment (and a stronger dollar did not help).
“The crude market is in wait-and-see mode with trading dominated by short term strategies as opposed to real investors,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth.
“Longer-term investors aren’t going make real bets until there is clarity around China’s recovery and US recession.” Earnings are also likely pulling the focus to other asset classes, she added.”