1:30 pm
SPX did an early correction to retest the mid-Cycle resistance at 4256.41. Having done that, it may resume its decline beneath the lower trendline at 4150.00. There is little support down to 3800.00.
7:30 am
Good Morning!
This is a good occasion to do a special report on US Treasuries, namely the 10-year Treasury note. Unfortunately, StockCharts does not illustrate rates prior to 1990. The entire period for the past 23 years has been corrective, replete with zigzags an overlapping Cycles, making it difficult to map out. However, the above chart shows a best effort enumeration without violating any rules or guidelines.
There are two items that are worth noting. The first is that the rally from the March 9, 2020 bottom now has 43 months of elapsed time, making this a significant Cyclical interval. A time target may have been met, but a price target may still be missing. It is possible that we may see TNX reach 53.16 before the month is over. You may notice a second potential target of 68.23 which may be met in the January-February time period.
What fits the second projection is that the peak in the 10-year treasuries occurred on December 5, 1980. As of December 2023, 43 years will have elapsed. This is another more significant time period. This is only an estimation of what may take place. There are no guarantees of performance.
NDX futures declined to 14426 before making a bounce this morning. The declining trendline is near 14300.00, which provides the next significant support. Today is a trending strength day, so we may expect to see a significant decline before a potential bounce.
Today’s option expiration shows options investors overwhelmingly short with Maximum Investor Pain at 14730.00. Long gamma starts at 14750.00. Short gamma begins at 14700.00 with a wall of puts at 14600.00.
ZeroHedge remarks, “The market narrative boiled down to two things this week: geopolitical stress manifested in the places you’d expect (gold up, oil up, vol up), and US interest rates which chopped to higher highs on steeper curves. In so doing, the equity market was pushed around on significant risk transfer, and it’s very clear that some large index shorts were set. “
SPX futures made a new low at 4190.90, on the way to trendline support at 4150.00. Today may show significant strength in the decline as investors give up hope for a meaningful bounce.
Today’s op-ex shows Max Pain at 4285.00. Long gamma may begin at 4290.00-4300.00. Short gamma starts at 4275.00 with a wall of puts at 4200.00.
ZeroHedge reports, “Global markets slumped and US equity futures started the new week deep in the red (if off the worst levels of the session) following losses on 5 of the past 7 weeks, after the 10-year Treasury yield finally topped 5%, fueling concern that soaring borrowing costs will erode economic growth. As of 8:00am ET, S&P futures were down 0.5% after sliding 0.7% earlier while Nasdaq 100 futures dropped 0.4%.
Europe’s Stoxx 600 index sank 0.7%, reaching the lowest intraday level since March. The catalyst for the selling was the 11bps surge in 10 year yields to 5.02%, the highest since 2007, before dipping modestly below 5.00%.”
VIX futures rose to a morning high at 23.08, challenging the Cycle Top resistance at 23.05. There may be a probe to 23.75 before a pullback.
Wednesday’s op-ex shows Max Pain moving up to 21.00. Short gamma has a weak showing beneath 20.00. Long gamma begins at 22.00 with a high conviction of reaching 50.00 with 14,566 contracts.
ZeroHedge observes, “Monday blues
The bid in VIX continues. We are now seeing first signs of a more substantial fear hitting the market. VIX resets higher on Mondays due to the weekend effect, but the short term gap vs SPX is getting rather fearful here.”
TNX futures probed to 50.25 this morning as the cash market shows a lower opening. Today is day 263 of the Cycles Model. There may be a final probe to the upper trendline just above 50.00 before a reversal. The Cycles Model suggests some choppiness for the rest of the week. What may come next is a pullback to the 50-day Moving Average, currently at 44.49 over the next 2-3 weeks.
Zerohedge remarks, “It’s hard to see what would drive a significant and sustained rally in bonds without a US recession. A downturn hinges on the services part of the economy, where the outlook is balanced.
Powell’s comments on Thursday gave fuel to hawks and doves. Bonds are oversold, but not yet at extremes, thus yields could easily climb higher in the absence of any flight-to-safety move.”
USD futures declined to 105.82 as it heads toward Intermediate support at 105.63. Should it test that support, it may reverse higher. The Cycles Model suggests USD resuming its rally by the end of the week.
WTIC futures sank to a morning low of 86.74 after having made a possible key reversal on Friday. It has made a sell signal after having decline beneath Intermediate support at 87.93. Confirmation of the resumption of the decline lies beneath the 50-day Moving Average at 85.64.
ZeroHedge speculates, “Crude oil prices could go as high as $140 per barrel and send the world into a recession, Paris-based Allianz Trade said on Friday.
Tensions in the Middle East and escalations between Israel and Hamas into a broader regional conflic could trigger a price surge for crude oil that could send the commodity to trade at $140 per barrel, Ana Boata, head of economic research at Allianz Trade told Bloomberg Television on Friday.
“Higher oil prices, that’s the direct impact,” Boata said, adding that prices could escalate from the current $90 mark to $140 at its peak, even averaging $120 in 2024.”