June 14, 2023

9:55 am

BKX may have finally completed its retracement at 83.38 and its Master Cycle on day 260 today.  The retracement was an irregular one, since it had not achieved its prior high at 85.95.  Nor has it achieved the Head & Shoulder neckline at 92.50.  That suggests the minimum Head & Shoulders target may be achieved this summer.  The next Master Cycle Pivot occurs at the end of June.  The Model suggests a panic is possible starting by the end of this week.

ZeroHedge notes, “Investors are underpricing the possibility that the Federal Reserve will telegraph a higher peak rate with its new dot plot this week.

The median of FOMC members’ indications will show an additional one or two hikes, while a couple of them may pencil in more tightening than that. Should the median show more than one increase, Treasuries are bound to sell off.

The Fed will need to revise its dot plot to acknowledge that it isn’t done with its efforts to quell inflation that is still running well above its own estimates.”

 

8:10 am

Good Morning!

NDX futures rose to 14953.30 this morning, then settled back down to consolidate within yesterday’s trading range.  The 18.5-month top-to-top Cycle is drawing to a close, despite everyone’s desire for a halt or a pause in the Fed hikes.  The problem with that thinking is the elephant in the room, which is being ignored.  That is, the war in the Ukraine.  Wars are inflationary.  The succking sound in Eastern Europe is greater than any numbers the DOL can concoct to make us look good.

Today’s op-ex shows Maximum investor pain at 14750.00.  Long gamma begins at 14800.00 while short gamma starts at 14700.00.

ZeroHedge comments, ” More joining the party

1. improving breadth – 397 out of S&P 500 stocks in green, a significant increase from the year-to-date average of 259, even though the S&P has seen a 14% growth this year.

2. Long onlies continue to hold substantial cash reserves, and there’s no significant selling pressure in supercap tech stocks despite the buying of cyclicals, leading to the ‘catch-up trade’ in other sectors. (Goldman’s sales)

Chasing other stuff

We have been pointing out the need to chase other stuff beyond mega cap tech (here and here). Goldman’s PB shows this is happening. Note the selling of mega cap and the buying of financials by hedge funds.”

 

 

SPX futures rose to 4279.60 this morning, making a new retracement high above the 61.8% retracement level at 4311.34.  The current retracement is now at 67%, lest anyone believes we are in a new bull market.  The Cycles Model suggests a strong reversal may be possible.  Despite the consensus, a Fed pause may not be “baked in.”

Today’s op-ex shows Max Pain at a hotly contested 4325.00.  Long gamma begins at 4350.00 while short gamma starts at 4300.00.

Zerohedge reports, “US equity futures are higher – again – with markets positioned for Jerome Powell to announce a hawkish, yet bullish pause, in the Fed’s rate hiking campaign at 2pm today. S&P futures rose 0.15% as of 7:45am ET following the S&P 500’s fourth consecutive increase — the longest winning stretch since early April – which approached the 4,400 mark, the highest level in over a year. Small caps/Russell outperformed (in line with what we said last night) as bond yields reverse an earlier drop into Fed Day, while the USD is again weaker pre-mkt. Commodities are rallying led by Energy and Metals, WTI oil rises back over $70 and base metals are up 4% – 7% MTD on hopes of Chinese stimulus. In Europe, a rally in miners helped push the Stoxx 600 benchmark to the highest in three weeks.”

 

 

VIX futures are consolidating within yesterday’s trading range.  Friday’s Master Cycle low stands.  The Cycles Model suggests more near-term strength with a high probability of a panic Cycle during the week of June 26.

Today’s op-ex shows Max Pain at 14.00 with no short gamma while long gamma begins at 15.00 and stretches to 40.00.  Long gamma gets serious above 20.00, so I would expect the VIX to stay beneath that level.

 

TNX is taking a pause after yesterday’s burst of strength.  The pause may not last, as trending strength returns in spades by the weekend.  The current Master Cycle may continue through the 4th of July Holiday.

Zeroedge notes, “US econowatchers have been stumped by a bizarre divergence in the US economy in recent months. On one hand, the aftermath of the March bank crisis which destroyed two of the largest California banks, led to a crippling tightening in credit standards at least according to the SLOOS survey. On the other hand, after a brief airpocket three months ago when credit card debt saw its lowest increase in over two years, revolving consumer credit has exploded higher and the last two months have seen a near-record increase…

… even as the interest rate on credit cards has jumped to the highest on record.”

 

Gold futures rose to 1973.75 this morning, in a possible attempt to complete its retracement at the 50-day Moving Average at 2000.00.  Today is day 259 of the Master Cycle, which would usually call for an end of the Cycle.  However, the Cycles Model also calls for a burst of trending strength over the next couple of days, which may prolong the Cycle until the weekend.  Stand by for a reversal that may mean lower prices until the end of July.

 

 

 

 

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