September 6, 2023

1:55 pm

VIX has exceeded it 50-day Moving Average at 14.79, giving a confirmed buy signal.  This new Cycle may last into October.  Plan accordingly.

 

 

10:48 am

SPX declined beneath its 50-day Moving Average, producing a confirmed sell signal.  There may be push-back on this move, but the signal is clear.  Take appropriate action.

 

10:00 am

BKX, our liquidity proxy, has reversed from its Master Cycle high yesterday, day 260.  It has been on a sell signal since the end of July.  Yesterday’s rejection at the 50-day Moving Average reinforces the confirmed sell.  The Cycles Model suggests a potential decline to the October options expiration.

(Reuters) – U.S. lenders are holding onto large piles of cash as insurance against a slowing economy, continuing deposit outflows and looming tougher liquidity rules that could particularly impact mid-sized banks.

The buildup is another example of a risk-averse approach from a sector still trying to regain its footing after a string of springtime bank failures, one which could result in restrained lending.

“This is a logical response to a slowing economy and particularly to a scenario, where you’re seeing deposit outflows and you need to conserve cash,” said David Fanger, senior vice president at Moody’s rating agency.

 

7:45 am

Good Morning!

NDX futures slipped lower, to 15413.00 as it loses its grip on the rally.  Intermediate support lies at 15280.31 where a sell signal may be applied.  The correction reclaimed 77% of the July-August decline, leading investors to venture into long positions.   Should the above analysis be correct, they may regret that decision.

Today’s op-ex shows Maximum investor pain at 15620.00.  Long gamma has virtually disappeared while short gamma starts abruptly and strongly at 15600.00.  There is another large layer of puts at 15450.00.  Sentiment has definitely turned.

RealInvestmentAdvice points out, “Mega-cap stocks continue to dominate the market in 2023. The question is, why? After all, many other great companies have arguably much better valuations and fundamentals. Yet, those companies continue to lag the market’s overall returns as the bifurcation between the Mega-cap companies and everything else widens. The chat below clarifies the problem, which compares the market-capitalization weighted index to the equal-weight.

 

 

SPX futures slipped to 4481.00 thus far this morning, challenging Intermediate support at 4487.24.  Should it open beneath support, a sell signal may be generated.  The 50-day Moving Average at 4468.35 offers confirmation.  The yet-to-be-activated Head & Shoulders profile offers a potential targeting mechanism for this decline.

Today’s op-ex shows Max Pain at 4500.00.  Long gamma starts at 4520.00.  Short gamma begins at 4480.00.

ZeroHedge reports, “US equity futures and global markets are lower this morning with bond yields and the USD flat as collapsing German eco data and elevated oil prices reignited stagflation concerns across the euro area. As of 7:45am, emini S&P and Nasdaq 100 futures were down 0.2%. The Bloomberg Dollar Spot Index edged higher along with the Japanese yen, while oil-linked currencies retreated as Brent crude dipped from 2023 highs; commodities are weaker with a sell-off in energy and metals complexes. Treasury yields were little changed in a lackluster day for bond markets. Gold fell for a second day, while Bitcoin climbed for the first time in three days.”

 

 

VIX futures are consolidating after yesterday’s gap up from the low.  The decline to last week’s low was “out of season” and now it has some catching up to do.  The 50-day Moving Average offers a buy signal at 14.78.

Today’s opo-ex shows Max Pain at 14.50.  There is virtually no short gamma, while long gamma starts at 15.00 and rises in a lackluster fashion to 20.00.

ZeroHedge remarks, “VIX seasonality

Time to get busy…

Source: Nomura

VIX seasonality II

Ask yourself…how much can VIX go down from here, how much can it increase….and then assign a probability to it.”

 

 

The NYSE High-Low Index abruptly went from a Master Cycle high on Friday to plummet beneath mid-Cycle support at 17.00, going negative as well.  This is also a sell signal showing participation in the rally has dropped significantly.

 

TNX has pulled back to the Cycle Top support at 42.37, consolidating after yesterday’s spike higher.  The Cycles Model suggests a continued rise in yields to options expiration.

 

Gold futures declined to a morning low of 1946.25, beneath the 50-day Moving Average at 1950.34, placing it on a sell signal.  Should the decline continue beneath the lip of the Cup with Handle formation, a panic decline may ensue.

ZeroHedge remarks, “If you hold precious metals in your portfolio, there is a good chance you fear hyperinflation and the crash of fiat currencies.

You probably distrust governments in general and believe they are self-serving and have no interest in your economic well-being. It is likely that your holdings in gold are your lifeline – your hope to get you through these times while holding on to your wealth.

But have you ever given any thought to the possibility of having this lifeline confiscated by the authorities?”

 

USD futures continue to consolidate beneath its Friday master Cycle high.  In the last Master Cycle, it managed to emerge out of its year-long decline.  It may now pull back to its mid-Cycle support at 102.74.  The standard retracement takes an average of three weeks.  However, there are indications that this decline may be shorter.

ZeroHedge observes, “A stronger dollar adding to yuan pressure is an ongoing risk to liquidity in China and the rest of the world.

The yuan fell versus the dollar overnight, with USDCNY nudging near 15-year highs. This is not something welcomed by Chinese policymakers, as evidenced by the gap between USDCNY and the official fixing at near-historical extremes.”