SPX has completed an impulsive decline and is due for a retracement. The 50% retracement value is very near 4400.00, as is other overhead resistance. Should that be the retracement target, we may see the rally continue another 24 hours in an attempt to take back this week’s losses. However, the 0-DTE options trades are favoring the puts with the 4350.00 strike gaining strength. Should SPX decline beneath 4350.00, the decline may resume sooner.
The Ag Index was repelled by the upper trendline of its 8.6-month declining trading channel. The Cycles Model suggests another 4 weeks to the end of the new Master Cycle. Should support at the 50-day Moving Average at 437.20 hold, we may see it break out of the channel in the next week. Trending strength makes a comeback starting tomorrow and may last through mid-July.
An update on the BKX shows it challenging Intermediate-term support at 79.24. It is now on a confirmed sell signal with a decline to the end of the month. Normally I would suggest a target at the Cycle Bottom. However, the potential for a panic decline is significant next week.
NDX futures are lower this morning, down to 14796.90. NDX is on an aggressive sell signal beneath 15000.00 with further reinforcement at the Cycle Top at 14500.08. A confirmed sell signal lies at the lower trendline of the Ending Diagonal and Intermediate-term support at 14054.67. Most analysts still believe that the uptrend is still in force. A few are now timidly calling for a small pullback. The Cycles Model calls for a panic Cycle to emerge over the next week until the end of the month.
Today’s op-ex shows Max Pain at 14975.00. Long gamma starts at 15000.00 while short gamma begins at 14950.00. The short gamma trend appears to be accelerating.
ZeroHedge remarks, “Now that we know that hedge funds have been quietly but persistently derisking for the past 9 days, a move which now appears to be spreading to institutions and high net worth retail, it makes sense why today was the third consecutive day of the market giving back.
As Goldman trader Mike Washington notes in his EOD summary, it was a relatively light volume session with semis + MAGMAN + software + retail favorites all selling off in tandem; the bank’s trading desk was “peppered with questions on the move lower but there wasn’t much to point to other than froth coming out of lower quality sleeves of the mkt.” The desk also saw an uptick in selling in more speculative complexes like growth software on the way down from not just the hedge fund community but also institutional long-onlies (who had been piling in while HFs were selling) reducing length, as well as a defensive bid for value. As an aside, Powell’s testimony was largely in line with a slightly hawkish tilt, reiterating that we are ‘very far’ from the 2% inflation target and rates will be ‘somewhat’ higher by year end (fed fund futs now pricing in a ~70% probability for a July hike).
This brings us, or rather Goldman, to ask we first said on Monday is the only question that matters: Is the rally about to sizzle or broaden out?”
SPX futures are challenging the Cycle Top support at 4351.70. Beneath it lies an aggressive sell signal. Other reinforcements lie at the upper trendline of the Ending Diagonal at 4250.00, while a confirmed sell signal lies beneath the 50-day Moving Average and lower trendline at 4188.40.
In today’s op-ex Max Pain lies at 4375.00. Long gamma begins at 4400.00 while short gamma starts at 4350.00. It appears that short gamma may dominate the day.
ZeroHedge reports, “US equity futures and global markets slumped for a 4th day as policy tightening fears from the US to Norway to Switzerland to the UK hobbled the recent bull run which sent US stocks to a 52-week high last Friday. At 7:45am, S&P 500 and Nasdaq futures were down 0.3% following a selloff on Wall Street on hawkish warnings by Fed Chair Jerome Powell in testimony to Congress. The Bloomberg dollar index was higher with the Norwegian krone outperforming among Group-of-10 currencies. Treasury yields edged higher across the curve, mirroring mild increases in the UK and Europe. Brent crude slid nearly 1%, gold fell and Bitcoin topped $30k amid optimism over ETFs related to the token but has since reversed back under after today’s tightening barrage. Today’s macro data focus includes Jobless data, Home Sales, regional mfg activity, and the leading index. Powell speaks at 10am and there are 4x other Fedspeakers.”
VIX futures hit a morning high at 13.98 as it rose from an extended Master Cycle low on day 266. The Cycles Model suggests an uptrend in VIX that may last through mid-August. I have been advocating accumulating shares, long options and ETFs for the past two weeks and now our patience may be rewarded.
Wednesday’s op-ex shows long gamma above 13.00. with no short gamma The heavy short gamma positions held until yesterday’s expiration have all disappeared.
TNX may resume its rally today after finding support at the trendline and mid-Cycle level at 36.82. Most analysts consider the bond market to be flat since March. However it has only ventures beneath the uptrend line three times in the past three months. The current Master Cycle is due to end in early July.
ZeroHedge reports, “An otherwise boring day in which everyone pretends to be listening to Powell but is really playing wordle was broken up momentarily by some bond market action when 1 minute after 1pm ET, the Treasury announced results from today’s 19-Year 11-Month reopening auction of 20Y paper, which saw nothing less than stellar demand.
Stopping at a high yield of 4.010%, this was a 6bps increase compared to May and the first 4-handle auction since November; more notably, it stopped through the 4.028% When Issued, a 1.8bps stop through, which was the highest since January.
The bid to cover was even more impressive: printing at 2.87, it was more than 30bps higher compared to May and was also the highest on record since the return of the 20Y tenor after it was put on hiatus in 1986.”
USD futures are rising out of their June 16 master Cycle low. The Cycles Model implies that the new Master Cycle may extend beyond mid-August.