10:30 am
The Banking Index may have reached another Master Cycle high this morning as it may have completed a 70% retracement of its decline from its June 14 high at 83.38. The Cycles Model now suggests a 2-month decline that may fulfill the Head & Shoulders target despite Fed reassurances that banks have passed their stress tests.
In fact, hedge funds have never been more bearish on banks, despite the Fed rassurances. The Fed waited until the market close to announce that the emergency bank bailout facility usage hit a new record high.
8:00 am
Good Morning!
SPX futures rose this morning over it 61.8% Fibonacci retracement at 4401.00 after a 6-day decline and a 3-day rally (thus far). Cyclically and technically the retracement may be over today, but pressures are on for a strong end-of-quarter. After the 4-day holiday coming up, the emphasis may be on the downside.
In today’s op-ex, there is a huge collar put on SPX starting at 4320.00 with a heavy population of calls going to 4400.00. It is likely that SPX may close today in the upper range of this collar.
ZeroHedge reports, “The second quarter – and first half – of 2023 is coming to a close on an upbeat note, as US equity futures are higher, led by megacap tech, and especially Apple, which is set to open with a market cap over $3 trillion following a bizarre initiation report from Citi yesterday late, which set a $240 price target on the world’s biggest company, just in time to catch its all time high. As of 7:45am ET, S&P futures were 0.4% higher, set to close out a third straight quarterly gain…
… while Nasdaq futures rose 0.5%, indicating the index is set to extend its 37% surge since the start of the year, its best start to the year since 1982.”
NDX futures just crossed above the 61.8% Fib retracement at 15056.00 this morning. Quarter end dictates that id may stay at or above that level for the remainder of the day. An aggressive sell signal lies beneath the Cycle Top support, currently at 14709.60.
In today’s op-ex Max Pain lies near 14950.00. Long gamma lies above 15000.00, while short gamma lies beneath 14900.00. Both long and short open interest falls off dramatically after the holiday.
VIX futures revisited but did not go lower than the June 22 low at 12.73 overnight. The bearishness has been wrung out of the VIX. A breakout above the June 26 high at 14.33 mayu provide an aggressive buy signal.
the July 5 op-ex shows Max Pain at 17.00. Short gamma begins at 16.00, while long gamma comes in at 17.00.
ZeroHedge inquires, “The VIX has continued its remarkable descent last week despite downward pressure on US equities, falling below 13 to as low as 12.73 intraday on June 22, its lowest levels since Jan-20, before recovering to 13.54.
And while investors – most of whom are still skeptical about the current rally – might be in different “stages of grief” about the equity vol crush, according to BofA’s derivatives gurus Nitin Saksena and Benjamin Bowler, they can all agree on the key questions: what’s driving it; when will the VIX base; and how low can it stay?”
TNX broke out above its May 26 high at 38.59 on day 252 of its current Master Cycle. However, it has made an immediate reversal and may revisit Intermediate-term support at 37.14 or the mid-Cycle support at 38.93, prolonging the Master Cycle and positioning it at the low. The jury is out for another week to determine the true intent of the Cycles Model.
USD futures declined to a morning low at 102.52, just above the 50-day Moving Average at 102.47. The decline may not last since the Cycles Model shows (up) trending strength coming back next week. In fact, the may rally considerably higher through mid-August.