NDX futures are approaching 15000.00 in their decline. A decline beneath this may reinforce the aggressive sell signal given by the Cycles Model. Further bolstering of the aggressive sell lies beneath the Cycle Top at 14462.55. A confirmed sell signal may not be given until NDX declines beneath the Intermediate=term support at 14013.09. Aggressive signals are often subject to push back, but may lead to better positioning at the Cycle turns. Each layer of support/resistance gives a higher probability of success.
Today’s op-ex shows Maximum investor pain at 15075 (Wouldn’t you know?). Long gamma begins at 15100.00 while short gamma lies beneath 15000.00.
ZeroHedge remarks, “With prescient flare, in 2012 our long-time friend Josh Brown, better known as the “Reformed Broker”, wrote a piece called the relentless bid. He explained that mammoth asset managers like Merrill Lynch and Morgan Stanley are constantly buying stocks and holding on to them as opposed to trading in and out as fees-based accounts replaced transaction-based accounts. Josh has a good sniffer, this was the early stage of the passive investing torrent.
These days there are even larger forces at work that are putting a constant bid under the market. This is the interplay between the $11 Trillion of passive investments and the 0DTE index options, but it has created a ticking time bomb. There are alarming unintended consequences of mechanical buying by passives and the surging options volumes. Both work together in a self-reinforcing feedback loop to artificially distort risk indicators by suppressing volatility. Once again this is causing a massive buildup of one-sided, overcrowded long positions. In the past, this has led to vicious, almost disorderly sell-offs from time to time and it is bound to happen again.”
SPX futures are consolidating in a narrow range. A decline beneath the Cycle Top support gives an aggressive sell signal. A further decline beneath the Ending Diagonal trendline and the 50-day Moving Average at 4163.17 confirms the sell signal. SPX has completed a 17.2-month top-to-top Cycle and is due to end its Master Cycle, currently shown as completing at the high on day 246. Still unresolved is the possibility that the Master Cycle may actually terminate at a low in the next two weeks.
Today’s op-ex shows Max Pain at 4385.00. Long gamma may begin at 4400.00, whils short gamma starts at 4350.00.
ZeroHedge reports, “US equity futures are flat and global markets grind lower, as bond yields and breakevens rise in reaction to the latest “shockingly” hot UK inflation data (May U.K. CPI unchanged at 8.7% vs. exp. of a drop to 8.4% y/y ) which saw the odds of a 50 bps BOE hike tomorrow jump to 50%. At 7:30am, S&P futures were down -0.1%, flipping between modest gains and losses after trading in a narrow range after the S&P index notched its first back-to-back losses in nearly four weeks. Economic bellwether FedEx Corp. tumbled 3% in premarket trading after its outlook fell short of analyst consensus estimates on weakened demand. The Bloomberg gauge of the dollar moved higher and Group-of-10 currencies were mixed, with the pound the worst performer. Treasury yields drifted higher across the curve, following their UK counterparts. Gold and oil were little changed, while Bitcoin climbed for a third-straight day. BBG reports that Equity ETFs have seen $102BN in inflows vs. $93bn for FICC ETFs; if ECM and M&A turn back on, could flow outperformance increase.”
VIX futures revisited their low at 13.48 last night. A hawkish Powell speech may jolt the VIX back above the 50-day Moving Average. It’s time to accumulate VIX shares, Options, ETFs.
Today’s op-ex shows Max Pain at 21.00, which is heavily contested. Short gamma is strong beneath that strike down to 13.00. Long gamma begins at 23.00 and is strong to 50.00-60.00.
TNX is bouncing off mid-Cycle support as it may be due for a double dose of trending strength. The next resistance is the Cycle Top at 41.27. The Cycles Model shows growing strength into the first week of July.
ZeroHedge observes, “The market has slide in overnight trading ahead of Fed Chair Jerome Powell’s monetary policy testimony to Congress.
According to just released prepared remarks, he will tell lawmakers on Wednesday there is still “a long way to go” to cool inflation and interest rates are expected to rise further this year, reiterating his comments from last week.
“[I]nflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go,” Powell’s prepared remarks state.
“Nearly all [officials] expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” he added.”
USD futures are hovering beneath the 50-day Moving Average at 102.36. A move above that level gives a buy signal for the USD. The Cycles Model suggests a rising USD through mid August.
Gold futures jus broke down beneath the May 26 low at 1936.00, hitting a low at 1929.75. The Cycles Model suggests a continued decline to the end of July. Initial support lies at the mid-Cycle at 1864.23. However, the decline is likely to go to the Cycle Bottom at 1619.20.