1:37 pm
SPX came within points of the 50-day Moving Average at 4339.00 and bounced to 4460.00. It is coming back down for a retest. Supports vanish beneath that level, so we may expect quite a drawdown once the break occurs. Remember, SPX is in short gamma beneath 4470.
ZeroHedge remarks, “After last week’s dovish CPI print (which sent stocks spiking higher before they closed near session lows), Goldman’s traditionally bullish flows guru, Scott Rubner, refused to backtrack on his recent bearish posture and with dealer Gamma flipping negative for the first time in 2023…
… he told clients to “sell the CPI“, a call which similar to his previous bearish reco, has so far proven correct.”
10:48 am
The Ag Index has fallen to new lows as consumption lags behind production of foodstuffs. This gives us an opportunity to stockpile nonperishable food and accumulate shares of agricultural commodities and companies. There is only another week left in this current Cycle as GKX may decline to 380.00 to 387.00.
10:26 am
BKX, our liquidity proxy, is slipping beneath the 50-day Moving Average at 83.57. BKX is now on a confirmed sell signal. The decline may continue into the first week of September. A panic may develop in the final week of the decline.
ZeroHedge observes, “At the start of August, Fitch Ratings downgraded the US government’s top credit rating. Last week, Moody’s cut the credit ratings of small and midsized US banks because of higher funding costs, potential regulatory capital weaknesses, and rising risks tied to commercial real estate loans. Now, another week, another possible downgrade, this time of major banks.
Fitch analyst Chris Wolfe told CNBC another round of turmoil could be nearing for the banking industry. He said the ratings agency is mulling over sweeping rating downgrades for dozens of banks, including ones as big as JPMorgan Chase.”
8:15 am
Good Morning!
NDX futures declined to 15092.90 in the overnight session. It has not broken down to new lows yet, but has fallen beneath the 50-day Moving Average at 15134.39, reinforcing the confirmed sell signal. The Cycles Model indicates a decline to the end of August, ending the current Master Cycle. Readers have asked, “Why the spike high/low at the end of the day?” There are other considerations, but, from a Cyclical point of view, A spike high/low at the end of the day often indicates the end of a Cyclical segment and may precede the opposite move the next day.
For the recent readers of this blog, a brief explanation is in order. Cycles are not sine waves. They are not linear. They are multi-faceted and may be observed on an hourly, daily, weekly, monthly and annual basis. My Cycles Model employs six Master Cycles, all working in unison with one another. Cycles have a memory, which introduces support and resistance. They have an element of time and space, which establishes boundaries and trendlines. Cycles work in co-ordination with the cash (daytime) market, the futures market and the options market. Cycles are not easy to learn. It takes discipline and a certain courage of your convictions. While Cycles often act with precision, they may be subject to misinterpretation, even to the most trained eye. However, with a bit of humility one may recover quickly and get back on track.
In today’s op-ex, Maximum Pain for options investors lies at 15175.00. Long gamma starts at 15200.00 and shows pockets of bullish sentiment to 15350.00. Short gamma begins at 15150.00 and shows investor interest down to 15000.00.
Wall street would love to keep everyone fully invested, especially in a bear market. Unfortunately, the following articles come out at market peaks, when the statistics appear most favorable. You will note that this article did not appear last October, at the market low and will not appear again for several years after this.
Zerohedge remarks, “Timing the market seems simple enough: buy when prices are low and sell when they’re high.
But, as Visual Capitalist’s Dorothy Neufeld details below, there is clear evidence that market timing is difficult. Often, investors will sell early, missing out on a stock market rally. It can also be unnerving to invest when the market is flashing red.
By contrast, staying invested through highs and lows has generated competitive returns, especially over longer periods.”
SPX futures declined to a morning low of 4452.10, back into short gamma after yesterday’s closing spike high. The spike high may have been due to an effort by the dealers to get SPX out of short gamma territory beneath 4470.00. The short squeeze may have also been an effort to elevate the SPX above the 50-day at 4434.00. Once beneath the 50-day, there are no visible supports down to the mid-Cycle support at 4140.00 or the 200-day Moving Average at 4128.00. This is where the heretofore stair-step decline turns into a stumble and fall..
Today’s op-ex shows Maximum investor Pain at 4485.00. Long gamma starts at 4510.00 and remains strong to 4550.00. Short gamma begins at 4470.00 and stretches to 4350.00.
ZeroHedge reports, “US futures and global markets are weaker and bond yields resume their ascent, amid growing concerns that China’s economic slowdown and debt problems – which prompted Beijing to unexpectedly cut rates the most since 2020 amid mounting economic gloom …
… will spread to the global economy. As of 7:45am ET, S&P futures were at session lows, down 0.7% while Nasdaq futures dropped 0.6%, with Tech outperforming on the move lower.”
VIX futures rallied back to 15.99 this morning. Monthly options expiration for the VIX are on Wednesday and trending strength may remain until the end of the week.
Tomorrow’s op-ex shows Max Pain for investors at 17.00. Short gamma runs from 16.00 down to 11.50. Long gamma begins at 17.00 and may run to 60.00.
ZeroHedge remarks, “hese more aggressive moves in markets (two-way price action) are because of the market’s overall shift to negative gamma as we highlighted previously.
Once it entered that range, price action became visibly choppier, as expected during these conditions. However, it is still in a small percentage range relatively speaking. We would expect that percentage range to increase the longer we remain in negative gamma territory.”
TNX futures spiked to 42.80 this morning (cash high at 42.74) to complete a probable impulse higher. Today we may see a retracement back to the Cycle Top at 41.01. The Cycles Model supports a continued rally until mid-September. UST (close at 110.58) shows an inverse profile to TNX. It has broken beneath the neckline of a massive Head & Shoulders formation with a target near 80.00. For those who are trying to decide between stocks and bonds, the answer may be “Neither.”
RealInvestmentAdvice speculates, “Government bonds or stocks? If you were picking an asset class to outperform over the next 18-24 months, which would you choose? Such was an interesting point made by Greg Feirman last week. To wit:
“The market has now priced in a soft landing based on the idea that the Fed can get inflation under control without causing the economy to roll over into recession. As a result, investors have piled into QQQ and completely lost interest in TLT. Personally, I’m of the opposite view:
All the Fed’s tightening is still working its way through the economic system and will eventually cause the economy to roll over into recession. In addition, Big Tech is now mature and will have to be repriced from growth stocks to value stocks, putting significant pressure on the indexes. If I’m correct, this creates one of the best contrarian trades I’ve seen: Long TLT, Short QQQ. TLT closed Monday at $95.58, while QQQ closed at $375.19. My 18-month price targets are TLT $135 and QQQ $280.“”
USD futures are consolidating within yesterday’s trading range. This week may see a pullback to either the 50-day Moving Average at 102.09 or Intermediate support at 101.60. Next week shows a return of trending strength through the end of the month. Once above the 200-day Moving Average at 103.44, the Cycle Top at 106.09 my be considered.