July 31, 2023

1020 am

I have had some questions from readers about the “Long View” in the SPX.   I actually became aware of this trendline in 1987, as the SPX found support on it at the October 22 low.  That gave me confidence to trust the rally as it rose to the 2000 high.  This final rally has surprised me, as I had judged that the August retracement had met the retest requirement that trendlines often have (observe the BKX, below).   However, this trendline is persistent, approaching 50 years.

 

9:34 am

The Master Cycle may have completed last Thursday at 90.54 on day 258.  However, the reluctance to decline and certain irregularities in the structure imply there may yet be another probe higher.  The Cycles Model often has Wave (2) terminate at the mid-Cycle resistance at 92.80.  Doing so may clear up all of the irregularities.

 

7:45 am

Good Morning!

NDX futures rose to 15800.80 over the weekend, but receded back to flat this morning.  The Master Cycle high remains on July 19.  However, today is day 258 of the Master Cycle and there is a high probability of a probe to 16000.00 as the structure may not be complete.  In addition, there is considerable pressure to end the second quarter on a high note.

Today’s op-ex shows long gamma from 15650.00 with pockets of strength up to 16000.00.

ZeroHedge remarks, “Investors have now gone “all in” on the soft landing narrative, just like they did in 1989, 2000 and 2007.”

 

SPX futures have risen to a weekend high of 4592.40 as it approaches the 1987 trendline for a retest.  The trendline may have begun as early as 1974.  My records show that the trendline held the August 1981 low, so the “1987” label may be a misnomer, although it defined the 1987 low.

There are very few analysts who take the long view.  The trendline held support until the decline in 2008, when it became overhead resistance.  SPX then remained beneath the trendline until January 2021 when it emerged above the trendline again until May 2022.  The trendline stopped the summer rally in August 2022.  This test of the trendline may be the final one.  today is day 258 of the Master Cycle.  The end may be hours away.

Today’s op-ex shows Max Pain at 4570.00.  Long gamma begins at 4600.00, but thins out quickly above it.  Short gamma may lie at 4565.00 and is well populated beneath it.

ZeroHedge reports, “Global stocks markets struggled for direction and US equity futures were flat in Monday’s quiet session following a rally Friday that pushed the Nasdaq 100 nearly 2% higher amid optimism that a soft landing for the world’s biggest economy is within reach. Sentiment was shaken by early weakness in Treasuries – which briefly pushed the 10Y yield to 4.0% after the BOJ was forced to intervene unexpectedly in the bond market one day after “tweaking” its YCC – continued strength in the USD (which sent the yen tumbling contrary to what virtually all so-called experts predicted), and a rally in commodities, and especially oil (and gasoline) which has soared in recent days.

As of 7:30am, US equity futures were 0.1% higher at 4,612 while Nasdaq futures were largely unchanged. Treasury yields edged higher, mirroring moves in UK and European bond markets. Gold drifted lower, while Brent climbed over $85 and to a level where markets will soon realize that headline inflation is about to storm right back; Bitcoin rose 0.3%. Apple and Amazon.com are among companies reporting earnings in the coming days.

 

 

VIX futures rose to 13.98 before pulling back a bit to a low of 13.77.  VIX is in its “accumulation” stage and may be poised to launch above the 50-day Moving Average and its 5-year trendline.

Wednesday’s op-ex shows Max Pain at 14.00.  Short gamma is in short supply.  Long gamma may begin at 15.00 and stretches to 34.00.

 

TNX futures rallied to 40.06 this weekend, but has pulled back with the cash market high of 39.67.  There is a substantial risk that TNX may break out above the early July high, but may not last more than a few days, as today is day 257 in the Master Cycle.

ZeroHedge remarks, “Yield curves around the world over the last month have shown early signs of steepening. But it’s a re-steepening in real yield-curves that investors should be alert for, as this would be a negative signal for liquidity and thus risk assets.

Never underestimate the BOJ’s propensity to surprise. After giving the impression policy would be unaltered, at its meeting last week the BOJ shifted their ceiling for 10y rates from 0.5% to 1%, and introduced greater flexibility in its yield-curve control policy. 10y yields broke through 50 bps, and currently trade at just over 60 bps (with the BOJ buying bonds this morning), while USDJPY whipsawed around and closed higher on the day by 1.2%.”

 

USD futures have pulled back from Friday’s high, which may have ended the Master Cycle on day 255.  There may be a few more days to test this observation.  Once the Master Cycle has been finished, the USD may find support at 100.00 before moving higher.  The alternate view is that the July 19 low may be the terminus.  A second alternate view may show a retest of the Cycle Bottom at 98.87 sometime this week.  The structure appears to be irregular and may need amending.

 

 

 

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