12:05 am
BKX (our liquidity proxy) may have made a reversal this morning as time runs out for the downside completion of the current Master Cycle. The news may come fast a furious as earnings statements are due starting this week. Regional banks start reporting on Thursday while large banks make their debut on Friday. Among those reporting on Friday are JPM, Wells Fargo, PNC and Citigroup.
7:45 am
Good Morning!
NDX futures have consolidated beneath yesterday’s high, but have not declined beneath the 50-day Moving Average at 15109.13. Such action would offer investors a probable sell signal. The new labeling of the Elliott Waves calls into question whether the Head & Shoulders is still a valid technical structure. Two reasons are that (1) It is too shallow, and (2) Overlapping Waves are not found in the H&S formations. Suffice it to say that a resolution of the market direction may be at hand.
Today’s options expiration shows Maximum investor Pain at 15020.00. Long gamma starts at 15030.00, while short gamma begins at 15000.00.
ZeroHedge comments, “10 year technicals
The US 10 year is down 32 bps since Friday highs as of writing. The 21 day moving average comes in slightly lower, the first support, although the bigger support area is down at the 50 day. This is where the trend line comes in as well, around the 4.35% level.
Source: Refinitiv
NASDAQ needs lower rates
The gap between the two remains short term wide post the latest squeeze in equities, but the move in rates is short term supportive…
SPX futures are higher this morning, but have not exceeded yesterday’s high at 4385.48. The bounce was repelled by the combination of the 100-day Moving Average and Intermediate resistance, both at 4393.99. Note the second bearish cross of moving averages at yesterday’s peak. This poses an inflection point at a critical Cycle interval allowing a reversal to take place.
Today’s op-ex shows Maximum Investor Pain at 4350.00. Long gamma starts at 4375.00 while short gamma begins at 4325.00.
ZeroHedge reports, “US equity-index futures gained for a 4th day, rising above 4,400 and benefiting from a fall in Treasury yields which slipped as much as 10bps to 4.54%, the lowest since Sept 29, in a flight to safety move following a report that missiles were fired from Lebanon toward Israel; sentiment was also on edge ahead of the latest US PPI data that could show if investors are right to dial back bets on further policy tightening. As of 7:30am, S&P 500 futures rose 0.3% to 4,405 while Nasdaq futures rose 0.4%. The escalating conflict in Israel meant Treasuries held gains even after Federal Reserve Governor Michelle Bowman said higher rates may be needed to curb inflation. Germany’s 10-year yield dropped six basis points. The Bloomberg dollar index was little changed after five straight days of declines. Luxury giant LVMH dragged European luxury stocks lower.”
VIX futures consolidate within yesterday’s trading range. The correction may be complete, which may lead to an explosive move higher. An alternate view suggests the resumption of the rally may be postponed for a week because of monthly options expiration on October 18, which appears to be a ticking time bomb.
Today’s options expiration shows Max Pain at 18.00. There is little short gamma, while long gamma begins at 19.00 and goes to 42.50.
Next week’s (monthly) op-ex show Max Pain at 18.00. Short gamma is massive between 14.00 and 17.00. Long gamma begins at 20.00 and extends to 47.50.
TNX may be bouncing off the Cycle Top support at 45.74 to complete its corrective action. Having done so, it may resume the rally forthwith. What may ensue is a rally lasting approximately a week that may met or exceed the Head & Shoulders target. Whether the TNX reacts to an external event or simply completes its pattern, this move may shake the entire market.
ZeroHedge comments, “On October 5, 2023, Treasury Secretary Janet Yellen made a very telling statement about the future course of interest rates.
YELLEN SAYS DEBT SERVICE COSTS WILL BE 1% OF GDP FOR THE NEXT DECADE. – Reuters
Her statement implies that the economy will be strong and the government will run budget surpluses, or interest rates will be near zero for the next ten years.
Instead of guessing what she is pondering, we do some math and arrive at the only possible answer. ”
USD futures made a morning low of 105.35, just above Intermediate support at 105.10. The Correction may be complete, or nearly so. The Cycles Model suggests the USD may have at least another week of rally.
Crude oil futures declined to a morning low of 83.34, crossing beneath the 50-day Moving Average at 84.92. The inability to hold at critical support reinstates the sell signal. The Cycles Model suggests the decline may last up to 6 more weeks. Despite the dynamice in the Middle East, this is not a time to be long oil.
OilPrice.com observes, “U.S. crude oil exports hit record highs in the first half of the year, averaging 3.99 million bpd—up nearly 20% from the first half of 2022, the EIA said on Tuesday.
The largest share of U.S. crude oil that is exported made its way to Europe, at 1.75 million barrels per day—mostly to the Netherlands and the United Kingdom. Asia was the second-largest destination 1.68 million bpd, with the largest portion heading to China and South Korea.
Despite its record, the United States remained a net crude oil importer in the first half of the year, according to EIA data, even with increasing domestic production, importing 8.836 million bpd in June—nearly half of which came from Canada. Refineries in the United States are geared to process heavy, sour crude oil, while most of the oil produced in the United States is light, sweet crude.”
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