July 6, 2023

11:56 am

VIX has given us an unambiguous buy signal as it rallied above the 50-day Moving Average at 15.94.  Trending strength has finally arrived and may help propel the VIX higher over the next tow months.

 

11:46 am

SPX may have issued its first aggressive sell signal by crossing the lower trendline of its most recent 2-month rally.   It has bounced from short-term support at 4382.94 and may retest the trendline.  The Cycles Model calls for two more weeks of decline with a potential target at the 2-hour Cycle Bottom at 4090.10.

 

11:29 am

BKX has declined through its Intermediate-term support at 79.64 and its 50-day Moving Average at 78.88, creating a confirmed sell signal.  Liquidity is draining out of our economy.  One absolute way to make liquidity disappear is through bankruptcies.  Liquidity increases through the issuance of debt.  However, bankruptcies and insolvencies have the opposite effect and may cause the economy to contract.

July 3 (Reuters) – U.S. Chapter 11 bankruptcy filings jumped 68% in the first half of 2023 from a year earlier, Epiq Bankruptcy, a provider of U.S. bankruptcy filing data, said on Monday.

SVB Financial Group, Envision Healthcare Corp, Bed Bath & Beyond, Party City Holdco, Lordstown Motors and Kidde-Fenwal were among some casualties of decades-high interest rates and sticky inflation as the era of easy money drew to a close.

ZeroHedge inquires, “The Federal Reserve has hiked interest rates to levels not seen since before the financial crisis in 2008. The money supply had contracted at a rapid rate. This should cause the economy to slow down. Yet month after month, we get strong job numbers, rosy economic headlines, and assurances that the economy remains robust.

What exactly is going on here? Why hasn’t the predicted recession materialized yet?

 

8:15 am

Good Morning!

NDX futures are sliding lower from their double top to a low of 15104.00.  The Cycle Top support is at 14920.78.  Beneath that may be an aggressive sell signal.  Most articles on tech are retrospective, as if by looking backwards you will know where you are going.

Today’s op-ex shows Max Pain at 15225.00.  Long gamma may start at 15300.00 while short gamma may begin at 15200.00.

ZeroHedge notes, “Highest since the SBV collapse

The US 10 year is trading at 3.92% as of writing. A level last seen when SBV hit the world. Note the 50 day crossing the 100 day moving average here. Previous big crosses saw yields move sharply higher…

Source: Refinitiv

Pushing it

Will they push tech to a new all time high as a share of sector fund assets? Big tech has decoupled from rates. GS writes: “Tech has had a tremendous rally despite higher rates, so on a scenario of lower rates I think this cohort has another leg higher”.

 

 

SPX futures have declined to a morning low of 4405.40 thus far, soon to reach or power through the Cycle Top support at 4397.62.  An aggressive sell signal may await beneath that level.  The Cycles Model shows a potential low during options week, where trending strength may increase.

Today’s op-ex shows Max Pain at 4440.00.  Long gamma may begin at 4455.00 while short gamma starts at 4425.00.

ZeroHedge reports, “US futures extended losses as markets finally noticed the recent surge in Treasury yields across the globe, sparking fears of stagflation and following recent remarks from the Federal Reserve that were more hawkish than anticipated. Sentiment was also cautious ahead of fresh employment data. Stocks have struggled as a result, with the Stoxx 600 down 1.2% and on course for its largest fall in six weeks. As of 8:00am, ET, S&P 500 and Nasdaq 100 futures lose 0.6%. Treasury yields rose across the curve, adding to gains on Wednesday spurred by the Fed minutes. The policy sensitive two-year rate inched up to 4.96%. The dollar initially dropped but then spiked after a blow out ADP report.”

 

 

VIX futures have risen to a morning high at 15.63, breaking out above a previous high at 14.93 and approaching the 50-day Moving Average at 15.94.  An Aggressive buy signal may be made at either level.  Trending strength has kicked in and may last the rest of this week.

ZeroHedge remarks, “VIX seasonality

Use the summer vacations wisely…

Source: Equity Clock

Some fear has moved sharply higher

European “VIX”, the V2X, has moved sharply to the upside. The index has not closed here since early June. The gap vs VIX is very wide.”

 

TNX surges higher this morning, nearly taking out the March high at 40.91 and possibly aiming for the Cycle Top resistance at 41.31.  As you can see, the Master Cycle is nearing its end and may be over by the end of the week.  While TNX is due for a pullback, the message may be clear.  Higher rates are on their way.

ZeroHedge remarks, “The effects of Fed rate rises will be increasingly amplified as households’ duration risk rises, strengthening the hand of those in the FOMC who would prefer a “wait-and-see” approach to further tightening.

Five hundred basis points of rate rises in a little over a year would normally be expected to cause some damage. While there have been a few casualties along the way, and growth has taken a hit, it’s remarkable how resilient the economy has been.

Yet this rate-hiking cycle has been different from others in that the Fed has had a large amount, over $5 trillion, of the market’s duration risk sitting on its balance sheet, shielding the economy from the worst of the effects of rate rises.”

 

 

 

 

 

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