August 16, 2023

8:00 am

Good Morning!

NDX futures have remained in a tight range overnight, venturing higher, but settling beneath the 50-day Moving Average at 15149.46.  It is on a confirmed sell signal with possibly up to two weeks of decline ahead.  The 100-day Moving Average at 14232.63 lies beneath it.  But, more importantly, the August high at 13720.91 may be a worthy target.

Today’s op-ex shows Maximum Pain for options investors at 15040.00.  Long gamma starts at 15100.00 wile short gamma begins at 15000.00.

ZeroHedge remarks, “Regular readers – and certainly market traders – may remember June best for being the month the S&P finally broke out above the 4,200 resistance level that had capped the rangebound market since last August.

And courtesy of the just released Treasury International Capital data released moments ago by the Treasury, we now know who was behind this powerful breakout higher.”


SPX futures edged lower in the overnight markets to 4431.30before levelling off near the close.  It remains just beneath the 50-day Moving Average at 4439.05, giving it a confirmed buy signal.

Today’s op-ex shows Max Pain at 4450.00.  Long gamma may begin at 4470.00 while short gamma starts at 4420.00.

ZeroHedge reports, “US equity futures and European stocks are little changed, having swung between gains and losses, following a broadly negative session in Asia where concerns surrounding the Chinese economy (home prices fell for the first time this year, fueling recession concerns despite increasing expectations for more stimulus) and the implosion of shadow banking giant Zhongrong (China’s Blackstone) continued to weigh on sentiment with focus remaining on earnings.

As of 7:30am, S&P 500 and Nasdaq 100 futures were unchanged, with JPM’s trading desk wondering if “there is enough momentum to stage a relief rally today” (full note available to pro subs). Commodities are rebounding across all three complexes with USD weaker. Government bonds in the US and Europe were broadly stronger, with US 10-year yields falling 3bps to 4.18%, halting a run of losses that was fueled by concern interest rates will be kept at high levels for longer than expected. The dollar rebounded from an early selloff while the pound strengthened as UK inflation topped expectations. Today’s macro focus is the Fed Minutes, housing data, Industrial Production, and Consumer-sector earnings.”



VIX futures edged higher, to 16.58 as it remains inside yesterday’s trading range.

Today’s op-ex shows Max Pain near 16.00.  Short gamma rules from 13.00 to 16.00.  Long gamma starts at 17.00 and runs to 60.00.  Options volume falls off after today’s expiration until the September 20 monthly expiration, so there is dealer incentive to hold the line to the close today.

Hedgeye observes, “For most of the past two decades, the S&P 500 and VIX have been inversely correlated: When one goes down, the other goes up. That changed abruptly in 2022. What caused the S&P and VIX to suddenly move in unison?

“I’ve never seen it before. This is unusual and not something we should expect to see,” says Tier 1 Alpha Senior Executive Advisor Mike Green. “This chart highlights the frequency with which weird things happen.”

Tier 1 Alpha: Are 0DTE Options Killing The VIX? - Tier1 Alpha SPX VIX Correlation Fixed

The red vertical line running through 2022 identifies a pivotal point when the CBOE introduced Tuesday and Thursday expirations for 0DTE options.”


TNX pulled back from yesterday’s high and may attempt to find support at the Cycle Top at 41.12.  However, trending strength is staging a comeback this weekend.  We may expect to see the uptrend resume.

ZeroHedge observes, “The recent rise in yields will push mortgage rates higher which, along with consumer credit that has already been tightening, will squeeze consumption further. Higher-duration consumer discretionary and retailing stocks are likely to underperform.

With US rates nudging 2008 highs, the outlook for yield-sensitive consumption is darkening. Higher yields are leading to higher mortgage rates. This is not a fait accompli as it also depends on the mortgage spread, but the correlation between yields and spreads has become much less negative, and thus it is reasonable to expect higher yields will bring higher mortgage rates.”


USD futures continue to consolidate between the mid-Cycle support at 102.92 and the 200-day Moving Average at 103.14.  A breakout is possible, as the current Master Cycle continues to the end of the month.


Crude oil futures are bouncing inside yesterday’s trading range.   Its Master Cycle terminated at the CycleTop and reversed, creating an aggressive sell signal.  The Cycles Model suggests a possible bounce off the trendline by the end of the month.  Beneath the trendline is a confirmed sell signal.



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