SPX futures are flat this morning, trading beneath its Cycle Top resistance at 4404.2. It remains on an aggressive sell signal on day 270 of the Master Cycle. The high at 4458.48 was made on June 30, day 260 and is likely to be recorded as such. The next Master Cycle is due in a bout 10 days. The next level of support is at the Intermediate-term at 4310.00, while the final support is the 50-day Moving Average at 4245.21. Beneath that is a confirmed sell signal.
Today’s op-ex shows Maximum Pain at 4410.00. Long gamma may start at 4425.00 while short gamma may start at 4375.00.
ZeroHedge reports, “After Friday’s downbeat market close, futures are again weaker to start the weak, if off the worst levels of the day, as we enter a heavy macro week highlighted by CPI, 8 Fed speakers, and the kick off of earnings season. Risk appetite also took a hit as focus turned to the threat of deflation in China: June CPI was flat – on the verge of deflation – while producer prices slumped 5.4% from a year earlier, the sharpest slide since December 2015.
As of 7:30am ET, S&P futures were down fractinally, erasing an earlier loss of 0.5%, with Nasdaq 100 futures lagging and down 0.2%. Bond yields are lower, the USD flat also erasing an earlier drop amid broad commodity weakness (as a reminder, the Black Sea Grain Initiative expires next week; keep an eye on Ags prices). Yellen’s China trip attempted to thaw US/China relations and while dialogue remains open there are no actionable plans for further step.”
VIX futures are challenging the 50-day Moving Average at 15.83, having reached a morning high at 16.21. VIX has made a confirmed buy signal and should be accumulated on any pullback. The next Master Cycle is due near mid-August, but may be extended to the end of August.
TNX futures made a morning high at 40.92, leaving Friday’s high at 40.94 as the potential Master Cycle high on day 259. Should that high remain, the new Master Cycle may last through the end of July with a potential target at the trendline and Intermediate-term support at 37.77. Contrary to popular opinion, there may be a nother rate hike in August.
ZeroHedge remarks, “10-year US Treasury yields eclipsed 4% this past week for the second time this year and the third time since 2008. The most recent move began in mid-May from a level 70bp lower than current market yields. The yield on 2-year US Treasury notes rose more than 100bp during the same period – sending the 2s10s yield curve back to its most inverted levels of the hiking cycle.
Despite these large moves, US Treasury yields rose less since mid-May than the yields on UK, Canadian, and Australian government bonds. UK gilt yields were up the most since mid-May, with 10-year yields higher by almost 100bp and 2-year yields by 175bp. What common denominator could explain these moves? The repricing of market-implied central bank policy paths.”
USD futures are higher this morning, consistent with the current Master Cycle, due for a potential high in mid-August. USD may see Trending Strength carry it along through the end of July.