June 12, 2023

3:24 pm

VIX appears to be closing near Wednesday’s Max Pain at 15.00.  The Call volume is growing with the June 21 op-ex exploding in the hundreds of thousands options with Max Pain rising to 21.00.

ZeroHedge comments, “In calls we trust

Highest reading in 18 months.

Source: DB

In VIX calls we trust (again)

Not overly surprising given the VIX reset. Chart shows VIX call options open interest.

 

2:04 pm

BKX reversed lower today without making a new high.  The current high on June 7  stands as the Master Cycle high on day 253.  The new decline is due to reach its first Master Cycle low by month end.  The loss of strength may reach panic proportions by the weekend with the US Treasury attempting to refill its coffers.  In addition, the June FOMC meeting is scheduled for this week with the CPI being announced on the first day of the meeting.  It is normal to see a Head & Shoulders target being met in a Wave (3), which could happen very quickly.

June 12 (Reuters) – Most big Wall Street banks expect the Federal Reserve to keep interest rates unchanged on Wednesday, while sticking to its hawkish tone due to a strong job market and elevated inflation.

Several economists say that it is a toss-up between a skip and a hike in the June meeting. Most banks expect the central bank to prepare markets for a hike in July.

Money markets are currently pricing in a more than 70% chance of a pause this month, with rate cut expectations pushed out to next year.

 

7:45 am

Good Morning!

NDX futures are consolidating beneath Friday’s high after a mimic of the 1999 rally.  The market has accomplished its feat of attracting buyers back in right at the peak.  NDX has overshot its 61.8% Fibonacci retracement level at 14325.00 in a classic throw-over above the Ending Diagonal formation.  The upper trendline and Cycle Top are at 14110.00.  A decline beneath that level produces a potential aggressive sell signal.  This peak did not produce a Master Cycle high because only 4 companies produced nearly all of the gain.  Instead, this potential pivot is a result of a 18.5 month peak-to-peak Cycle from the all-time high.  What may come next is a decline to the end of June.  The Cycles Model indicates a possible abrupt reversal and the beginning of a strong decline, whether a new high is made today, or not.

Today’s op-ex shows Maximum investor pain at 14525.00.  Long gamma starts at 14540.00 while short gamma begins at 14450.00.

Zerohedge comments, “It was only two weeks ago when, with the S&P about to break out to new 2023 highs, we noted that Bank of America ‘s client flows desk had declared retail capitulation (in the case of BofA, “retail” means High Net Worth individual investors), but it wasn’t just the rich that were dumping: a parallel analysis by Vanda Research found that all across the retail sector – including those Millennials armed with a few hundred bucks to spare and a Robinhood account – enthusiasm for buying stocks had shrunk and “retail investors are not chasing the rally.”

Well fast forward to today, when with the S&P blasting off above its previous range of 3,800-4,200 and about to take out the August 2022 highs, it didn’t take long for retail to make a dramatic U-turn and flood right back into the book.

According to the latest note from Vanda Research, which at the end of May was about to declare the end of retail’s infatuation with chasing stocks, “with an average flow into US markets of US$ 1.36bn/day over the past week, retail traders are officially back in the mix after a 3-month lull.”

 

SPX futures are also consolidating beneath its Friday high.  On friday is met its 61.8% Fibonacci retracement of the 2022 decline at 4311.34.  In addition, it may have completed a 17.2-month Cycle, as well.  A reversal at the Cycle Top resistance at 4302.50 may produce an aggressive sell signal.  A second aggressive sell signal occurs at the upper Ending Diagonal trendline at 4250.00.  A confirmed sell signal lies at the lower trendline and 50-day Moving Average at 4140.24.

Today’s op-ex shows Maximum investor Pain at 4295.00.  Long gamma begins at 4300.00, while short gamma starts at 4280.00.  There’s not much room to move in either direction.

ZeroHedge reports, “US equity futures, Asian markets and European bourses are all higher as part of a global risk-on tone, ahead of a week packed with central bank decisions. S&P 500 futures and contracts on the Nasdaq are both well in the green this morning, up 0.3% and 0.6% respectively as at 7:30 a.m. ET. The S&P is poised to surpass its August 2022 closing high, rising to the highest level since April of last year. Paradoxically, treasury yields are also ticking higher across the curve, with the sharpest rises in two- and three-year notes. A measure of the dollar is weakening, helping drive gains in spot gold prices. Oil prices are continuing their decline following another price cut forecast from Goldman Sachs, while iron ore drops slightly as recession fears once again outweighing fundamentals in commodities but certainly not in equities. Tesla was poised to set a record winning streak, rising for a 12th consecutive day. Keep an eye on labor strikes across US ports and potential stall supply chain normalization.”

 

 

VIX futures show a rally off Friday’s low at 13.50 to a morning high of 14.67.  The Master Cycle was stretched to 272 days, near the maximum deviation from the 258-day average.  The Cycles Model indicated a strong reversal over the weekend, which appears to have happened.  Further strength may be added to the rally over the next few days.

Wednesday’s op-ex shows Mas Pain at 15.00.  There is no short gamma.  Long gamma begins at 16.00 and extends to 40.00.

 

TNX continues to consolidate above the mid-Cycle support at 36.86.  The Cycles Model indicates possible growing strength as the week progresses.  The current Master Cycle may continue through the first week of July.

 

USD futures have declined to 102.84 this morning, approaching support at 102.20-102.61.  It is due for a Master Cycle low in the next few days, only to resume its rally that may last until mid-August.

 

Gold futures have declined to a low of 1968.45 this morning.  Gold is in the final days of its Master Cycle.  Ideally, it may rally to its 50-day Moving Average at 2000.00 in the next few days, completing its Master Cycle.  Following that, gold may resume its decline through the end of July.  The potential target may be the Cycle Bottom at 1604.15.

 

 

 

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