12:20 pm
The rally in the BKX appears to have fizzled on June 13 as the knock-on effect appears to be the narrowing of leadership in all the other indices. The NDX and SPX only have 5 companies on which they can base their rally. Liquidity may be about to take another nosedive as the Cycles Model points down for the next two months. To make matters worse, the Fed releases the minutes to the June 14 meeting.
ZeroHedge observes, “A rise in bankruptcy filings points to increasing bankruptcies, loan charge-off rates and delinquencies, suggesting credit spreads are not reflective of the underlying credit backdrop.
A chart of bankruptcy filings (using weekly data from Bloomberg’s BCY function) and credit spreads I used in last Thursday’s MacroScope column generated a lot of reader interest. This chart, below, shows that filings for bankruptcies have risen sharply despite credit spreads idling for most of this year. Previous rapid rises in filings have been preceded by a widening in credit spreads.”
7:45 am
Good Morning!
I am revisiting the DJIA this morning to highlight some important characteristics about Cycles. First, there are Cycles at multiple units of measurement. For example, the Master Cycle has an average duration of 258 days. It may be considered the most basic Cycle. However, Monthly Cycles also exist that may consist or multiples of the Master Cycle. And, in some cases, may not coincide exactly with their brethren. This may be a case in point, where we have a double top, two weeks apart. Last Friday’s high was 260 days from the October 13 low, a typical Master Cycle.
The DJIA is being highlighted for another reason. It’s retracement high was on December 13 at 34712.48. It has not exceeded that high, even at this double top. There may be a final attempt to go higher, but time is running out and, should it do so, it must be very soon.
This morning’s INDU futures have declined to 34228.00 thus far. Should the INDU decline beneath the 50-day Moving Average at 33644.00, it will have created an aggressive sell signal.
NDX futures have declined to 15103.40 thus far this morning, leaving a double top. Time may be running out for another attempt to probe higher.
The NDX gives us another example of a double top, where June 13 marked the top of an 18.5-month Cycle, coinciding with the 17.2-month Cycle in the Blue Chips. Friday’s Master Cycle high also agrees with the Master Cycle high in the SPX. Cycle Top support lies at 14871.48 where an aggressive sell signal awaits.
ZeroHedge notes, “It would be (almost) perfect
NASDAQ started front running the 1999 analogy a while ago. Is a pullback to be expected…followed by a furious melt up later this autumn? Nothing is impossible…
Source: Refinitiv
Tech’s rates dislocation
Big tech continues driving the main narrative, and rates seem to not matter for this mighty sector, despite the 10 year trading at highest levels in months. NASDAQ vs US 10 year inverted gap at very wide levels.
SPX futures have declined to 4429.40 thus far this morning, nearing its Cycle Top support at 4390.98. Beneath that level an aggressive sell signal may be assumed. Of all the major indices, the SPX alone has made a new retracement high as well as a double top. Should SPX (or any of the other stock indices) go higher, time to make new retracement highs would be limited.
ZeroHedge reports, ” One day after a solid start to the new quarter, and after the US took a day off for Independence Day, sentiment has reversed for the worse and US equity futures and European stocks followed Asian shares lower, while bonds declined after the latest China services PMI print from China came well below expectations (53.9 VS 56.2 expected) and raised fresh concerns about the outlook for the global economy. At 7:45am ET, S&P 500 and Nasdaq 100 futures both fell more than 0.5%, indicating US stocks will open lower when trading resumes after the Independence Day holiday. The yield on 2Y Treasuries drifted about five basis points lower to 4.89%. The China-driven weakness was broad based with Japan’s NKY down -40bps, China’s Shcomp sliding -60bps and the HSI -1.5%. The Stoxx Europe 600 Index slid about 0.6% after soft euro-zone May PPI data, with miners leading the retreat on concern about waning minerals demand from China. Most commodities were lower with copper -70bps, oil -50bps and iron ore -40bps. The Bloomberg dollar index is higher, gold is climbing, and oil is also edging higher.”
VIX futures rose this morning to 14.74 before easing. A potential breakout lies above 14.90, while the 50-day Moving Average is at 15.99. Should the VIX go above the first level, it may create an aggressive buy signal. Above the 50-day May create a confirmed but signal. The extended tail of the Triangle formation may cause a slingshot effect above the long-term trendline at 18.00. The Cycles Model suggests trending strength may have resumed with possible knock-on consequences.
TNX is challenging its breakout occurring last week. Today is day 257 in the Master Cycle, suggesting the balance of this week may show higher rates.
ZeroHedge observes, “A note recently published by two Federal Reserve economists reveals a looming catastrophe…
The Fed’s interest rate hikes have already precipitated a financial crisis. The central bank managed to paper over that problem and get it out of the headlines with a bailout program. But it didn’t solve the problems. Banks continue to tap into the bailout loans as they struggle in this high-interest-rate environment.
And there are even bigger problems on the horizon.”