9:58 am
BKX continues its inexorable slide this morning, but may be due for a short technical bounce. The already thin ice is cracking ominously as the Fed continues to hide its deteriorating reports until after the Friday close, hoping that they will be buried by the weekend news. The Cycles Model tells us that there may be a 2-3 week (severe) decline, likely to start by this weekend. The fed’s message to the troubled banks, “For heavens sake, keep it under wraps until this weekend!”
ZeroHedge remarks, “The financial conditions (FCI) “tightening shock” which has occurred ever since The Fed ‘de facto hiked’ with their surprisingly aggressive SEP a few weeks back was further fueled yesterday by the incoherent JOLTS data (which this morning’s ADP print appears to completely dismiss).
Source: Bloomberg
This is the fastest pace of tightening since September 2022 and yields and stocks are finally paying attention to it…”
8:15 am
NDX futures tested the trendline at 14120.00 but bouncing at 14446.30, making a lower low. However, this morning’s futures are positive, reaching 14639.50 as I write. The anticipated bounce may have begun. The anticipated target may be the 100-day Moving Average at 14921.57. Should that target be reached by the end of the week, we ay see a 9-day sell-off that may reach a new Master Cycle low. This is not the beginning of a new uptrend, as many may predict.
In today’s op-ex Maximum Investor Pain is at 14640.00. Long gamma emerges at 14660.00 and strengthens at 14700.00. Short gamma starts at 14630 and remains strong as it goes lower.
ZeroHedge observes, “SPX – massive levels
SPX could be breaking below the huge trend line that has been in place since last October. We are well below the 100 day…and closing in on the 200 day, currently around the 4220 area.
Source: Refinitiv
The Jaws gap
The gap between NASDAQ and the US 10 year (inverted) remains absolutely massive. Chart 2 shows the shorter term view. The rates narrative is alive…
SPX futures did reach the 200-day Moving Average at 4201.50 in the overnight session, then bounced to 4246.00 thus far. It is likely that this bounce may rise to 4300.00 – 4335.00. in the next few days. The current Master Cycle is not over, so should we see that bounce complete in the next few days. we may still see a two-week decline afterwards to complete the Master Cycle.
Today’s op-ex shows Max Pain at 4240.00. Long gamma begins at 4250.00 and strengthens above 4260.00. Short gamma begins at 4225.00 and strengthens beneath 4200.00.
ZeroHedge reports, “Global stocks and US futures were in freefall earlier this session, with spoos tumbling to a four month low of 4,235 and tracking the relentless drop in Treasuries tick for tick which briefly sent 30Y yields above 5.00% – the highest since Sept 2007 – around the time Europe opened…
… before a bout of buying kicked in and yields dropped sharply while futures reversed all losses and as of 7:45am, S&P futures were up 0.2% to 4,273 while Nasdaq futures were up 0.1% after slumping sharply earlier.”
VIX futures reversed down to 18.98 this morning to complete its Wave pattern down to 15.83 in a possible expanded flat correction over the next few days. Should my assessment of the Cycles be correct, the new Master Cycle may last up to two months. The coming rally in VIX may rival the March 2020 rally.
In today’s op-ex, Max Pain is at 16.00, matching the probable downside target for the correction. There is no short gamma. Long gamma begins at 17.00 and strengthens above 20.00.
TNX futures reached a new milestone, topping out at 48.86 before pulling back in this morning’s session. This action puts the Head & Shoulders minimum target in view, considering there are two more weeks in the current master Cycle. At this rate, the Head & Shoulders target may be reached in October, while the ultimate target at 53.16 may be reached by the end of the year or very early in 2024. Many commentators give too much credence to the Fed, with very little understanding of the Cycles.
RealInvestmentAdvice is a case in point, “Based on some comments, it appears we scared a few people with A Crisis Is Coming. Our article warns, “A financial crisis will likely follow the Fed’s “higher for longer” interest rate campaign.” We follow the article with more on financial crises to help calm any worries you may have. This article summarizes two interest rate-related crises, Long Term Capital Management (LTCM) and the lesser-known Financial Crisis of 1966.
We aim to convey two important lessons. First, both events exemplify how excessive leverage and financial system interdependences are dangerous when interest rates are rising. Second, they stress the importance of the Fed’s reaction function. A Fed that reacts quickly to a budding crisis can quickly mitigate it. The regional bank crisis in March serves as recent evidence. However, a crisis can blossom if the Fed is slow to react, as we saw in 2008.”
USD futures pulled back to 106.25 this morning, possible correcting to the cycle Top at 105.90. The weakness may last through the weekend, but trending strength may come roaring back early next week. The Cycles Model calls for two more weeks of strength before a larger correction comes due.
Gold futures appear to be consolidating after challenging the Cycle Bottom support at 1839.16. However, the current Master Cycle isn’t finished and the largest decline yet may be at hand. We may see a sharp but brief retracement followed by a resumption of the decline that may reach the cup with Handle formation target. In this case, inflation is not the driver, but a liquidity crisis.
Crude oil futures made a new low at 86.36 overnight before bouncing at the Intermediate-term support at 86.11. The bounce has the potential of reaching the Cycle Top at 89.60, but may not last beyond the end of the week. The following decline may be fraught with perils as a liquidity crisis may be looming.
(Reuters) -Oil fell on Wednesday, as pledges by Saudi Arabia and Russia to continue crude output cuts to the end of 2023 were offset by demand fears stemming from macroeconomic headwinds.
Brent crude oil futures were down $2.02, or 2.22%, to $88.90 a barrel at 1228 GMT, while U.S. West Texas Intermediate crude (WTI) fell $2.10, or 2.35%, to $87.13 per barrel.
The OPEC+ Joint Ministerial Monitoring Committee (JMMC) online meeting on Wednesday kept the group’s output policy unchanged, two sources said while the meeting was underway.
ZeroHedge remarks, “Oil prices are plunging overnight as worsening sentiment across markets over the last few days, spurred by a higher-for-longer outlook for global interest rates, has trumped any physical tightness fears even as Saudi Arabia and Russia reaffirmed that they will continue output curbs until the end of the year.
API
- Crude -4.21mm (unch exp)
- Cushing +705k
- Gasoline +3.95mm (+300k exp)
- Distillates +349k (-400k exp)
DOE
- Crude -2.22mm (unch exp)
- Cushing +132k
- Gasoline +6.48mm (+300k exp)
- Distillates -1.27mm (-400k exp)
Crude inventories fell for the 3rd strauight week but stocks at the Cushing hub rose (+132k) for the first time in 8 weeks. Gasoline stocks soared by almost 6.5mm barrels – the biggest weekly build since Jan 2022…”