May 16, 2023

7:45 am

Good Morning!

NDX futures probed above its Ending Diagonal formation in a brief “throw-over” to 13436.60 before easing back under.  This may be the final probe for the NDX, whether it registers on the daily chart or not.  Today is day 273 of the old Master Cycle and it may be running out of time.  In addition, it has run up against the weekly mid-Cycle resistance at 13468.00.  The Cycles Model suggests a 30-day decline from here.  The target may be the Cycle Bottom at 10512.68.  For an Index that is so interest rate sensitive, NDX appears sanguine about the potential risk.

Today’s op-ex shows Maximum Pain at 13370.00.  Long gamma begins at 13400.00, while short gamma may begin at 13325.00.  The longs still have it, but the number of shorts is growing.

ZeroHedge comments, ““if political [debt ceiling] kabuki ends in risk-off drama then Fed does QE (like BoE last Oct)…this is why other assets classes not worried.” – BofA’s Michael Hartnett

Except in some specific corners, most of the markets don’t quite buy the story that the US Treasury could, after all, default on its obligations.

T-bills due around the estimated time of the X-date have shown some angst, with yields on one-month instruments up some 200 basis points in less than a month. Meanwhile, credit-default swaps are pricing in a 3% chance of a default. While that may not seem alarming, that default pricing is way higher than in 2011 and 2013, when we were last witness to such stress.”

 

 

SPX futures may be climbing Intermediate-term support at 4112.63 this morning.  While many claim it shows signs of a potential breakout, the Cycles Mode says “not”.  Today may be a trending strength day and the trend may be down.  A breakdown may come as a bit of a surprise to those who have abandoned their risk awareness.

Today’s op-ex shows Max Pain at 4130.00.  Long gamma starts at 4145.00, while short gamma begins at 4125.00.  A decline beneath Intermediate-term support puts SPX squarely into short gamma, which may have a steamroller effect on the SPX.

ZeroHedge reports, “US equity futures dropped on Tuesday ahead of today’s critical debt ceiling discussions in Washington and weighed expectations of more easing after China’s data showed the recovery there is rapidly losing momentum. Both S&P 500 and Nasdaq futures down -0.1% at 7:45am ET, but off the best and worst levels of the session. Treasuries are up ahead of the debt-ceiling talks with the Bloomberg dollar index slightly weaker, while oil is extending yesterday’s gains. Iron ore is up this morning, while gold is lower.”

 

VIX futures climbed above the long term trendline at 17.50 this morning and is on a buy signal.  Today is a high potential strength day.  Expect  a gap higher at the open.

Tomorrow’s op-ex shows Max Pain at 20.00.  Short gamma starts at 19 and runs to 15.00.  Long gamma begins at 21.00 and runs to 90.00.

 

TNX is now marginally above the 50-day Moving Average at 35.31 and rising.  Recognition of higher rates may be upon us as TNX is about to rally above its prior high at 35.32.  The 200-day Moving Average at 35.76 is another marker showing the trend may have changed.  The Cycles Model has already signalled a change in trend on May 4.

ZeroHedge remarks, “As the bond rally runs out of steam, the case for shorting Treasuries is becoming increasingly compelling.

The bond market that US political advisor James Carville wanted to be reincarnated as is about to get intimidating again.”

 

 

USD futures are backing away from the 50-day Moving Average at 102.34 as it consolidates its gains.  The Cycles Model maintains that the uptrend may continue to mid-June.

 

 

 

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