October 24, 2023

12:30 pm

SPX has risen to the mid-Cycle resistance currently at 4257.38, then reversed down beneath the 200-day Moving Average at 4236.85.  It may be back on a sell signal, but with confirmation beneath 4200.00.  Too many pundits are not convinced of a bear market potential.  See below.

RealInvestmentAdvice opines, “The “pain trade” continues to be higher into year-end. We made Such a point in Januarysuggesting the 2022 “correction” was complete. Let’s review what I wrote, and then we will expand on why we believe the “pain trade” is higher over the next few weeks.”


8:00 am

Good Morning!

NDX futures rose to 14723.20 this morning in an extension of its bounce as it may aim for Intermediate resistance at 14982.62, a 61.8% Fibonacci retracement.  An alternate (lesser) possibility may be at short-term resistance at 14886.00, a 50% retracement.   The Cycles Model suggests another day (or more) of rally before the decline resumes.

Today’s options expiration shows Maximum Investor Pain at 14625.00.  Long gamma starts at 14650.00 while short gamma begins at 14600.00.

ZeroHedge observes, “It’s about get really busy.

This week we get 162 companies, or 39% of S&P market cap, reporting…

… with the highlights being the biggest giga-cap tech names such as Microsoft and Alphabet tomorrow, Meta on Wednesday and Amazon on Thursday, which together make up over $6tn in market cap, and nearly 17% of the S&P 500.”


SPX futures rose to a morning high of 4243.80.  It may continue to rise to the mid-Cycle resistance at 4256.23, a 32.8% retracement.  A positive earnings surprise may boost the bounce to 4282.00-4300.00, as much as a 50% retracement.  The decline may then resume until November 17 options expiration.

Today’s options expiration shows Max Pain at 4245.00.  Long gamma starts at 4250.00 while short gamma begins at 4225.00.

ZeroHedge reports, “Global stocks rose, US index futures jumped and bitcoin erupted higher ahead of closely-watched earnings from tech gigacaps Microsoft and Alphabet later today (full preview here). As of 8:00am ET, S&P futures were up 0.6%, at session highs and set to snap a five-day losing streak with Nasdaq futures also higher by 0.6%. Treasuries stabilized, with the US 10-year yield dropping as low as 4.80% before reversing gains, amid growing speculation that the recent selloff was excessive. Treasury 10-year yields slipped as much as five basis points to a one-week low before paring the move. Europe’s Stoxx 600 index edged higher.”



VIX futures fell to 19.66, hovering at the trendline.  An especially positive report from one or more of the giga-cap companies may drive the VIX down to the 50-day Moving Average at 16.49.  However, the Cycles Model suggests that trending strength may come back near the end of the week.

Wednesday’s op-ex shows Max Pain at 19.00.  Short gamma has an anemic sowing at 17.00-18.00.  Long gamma begins at 20.00 and extends to 50.00.

ZeroHedge remarks, “What is the risk of a short squeeze now?

“Still present, but potentially delayed…A squeeze might not accelerate unless we get 1) evidence consumer spending isn’t slowing too much, 2) relatively good earnings season, 3) Fed communicating they’re on hold. Given the conditions that might have to be met, a sustained move higher in shorts seems like a greater possibility in Nov than right now” (JPM Position Intelligence)

Lowest beat level

As for earnings, we’re only ~17% of the way through results for the SPX and the beat rate is coming in at its lowest level so far in ’23. The 73% reading is still 2ppts above the LT average, and decently above the 2 Qs it broke below 70% last year. That said, stocks are getting punished. The poor tape is definitely a big contributing factor, but misses (of which there have been plenty) are being punished the hardest vs. every other quarter since 2010, averaging -3.7% 1D moves.”


TNX made a new retracement low this morning at 47.98.  Should TNX not decline beneath the Cycle Top at 47.31, the rally may resume with increased trending strength by the weekend.  This may clear some “noise” in the Cycles Model.

ZeroHedge remarks, “US yields likely need to climb further as retail investors become increasingly attuned to hedging inflation. Bond rallies are likely to be transient as the primary trend for Treasuries remains down.

After decades of real and nominal levels being almost indistinguishable, it’s not a great surprise that both professional and retail investors will take time to adapt to the new normal. Countries used to unruly inflation, like Argentina, are well accustomed to their currency’s actual value (not the official value), and how rampant price growth can decimate the real value of financial assets.”


Crude oil futures declined to 84.92 thus far this morning.  Crude is on a sell signal beneath the 50-day Moving Average at 85.66.  The Cycles Model suggests that the decline may gain trending strength over the next few weeks with a potential low in about 4 weeks.





This entry was posted in Published. Bookmark the permalink.