Crude Oil had dropped beneath the Head & Shoulders neckline at 82.50 to a low of 81.84. It is on a sell signal.
BKX, our liquidity proxy is due to bounce after making a Master Cycle low on October 25. The retracement may only take a few days. The potential target may be Intermediate resistance at 76.96 or the 50-day Moving Average at 78.37. From that point we may see a waterfall decline much like the March decline, but larger. The Cycles Model suggests the decline may continue into the first week of December. Since this is a liquidity event, it may affect all markets.
ZeroHedge reveals, “With usage of The Fed’s emergency funding facility rising once again to a new record high last week – and banks stocks clubbed like a baby seal – all eyes are once again on just what The Fed can do to ‘seasonally-adjust’ the data to avoid the admission of any deposit run fears in domestic banks.
Total bank deposits – on a seasonally-adjusted basis – crashed by a massive $83.7BN last week (the biggest outflows since SVB) to the lowest since June…”
NDX futures are testing the lower trendline/channel boundary at 14320.00. More likely than not, there may be a breakthrough to 14750.00-14780.00, testing the prior high. The Cycles Model suggests that this retest may be short, but sharp, squeezing out weak hands. The institutions have an incentive to shore up the month-end visuals.
Today’s options expiration sows Maximum Investor Pain at 14230.00. Long gamma begins at 14250.00, while short gamma starts at 14220.00.
ZeroHedge remarks, “Boo
“The strategy for the discoverers and entrepreneurs is to rely less on top-down planning and focus on maximum tinkering and recognizing opportunities when they present themselves,” wrote Nassim Taleb. “So, I disagree with the followers of Marx and those of Adam Smith: the reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or ‘incentives’ for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can.””
SPX futures are testing the descending trendline at 4150.00. The window for this rally may be short, but should it break through, the next level of resistance is at 4260.00. The over-arching signal remains on a sell, since Waves B can be treacherous. That being said, the bounce may go as high as the mid-Cycle resistance at 4257.83 in the next few days.
Today’s op-ex shows Max Pain at 4150.00, so there may be the dealers’ incentive to close at that level. Long gamma starts at 4160.00 while short gamma begins with a wall of puts at 4140.00.
ZeroHedge reports, ” Ending a week that saw the S&P be the most overshorted in history, with Goldman PB reporting that its HF clients had shorted stocks for a record 12 consecutive weeks, it was inevitable that we would get an oversold bounce at some point and this morning we are seeing just that, with stocks in Europe broadly higher, and US equity futures also rising and reversing all of Friday’s loss. As of 7:45am, S&P futures were higher by 0.7%, Nasdaq futures gained 0.8% and the Estoxx rose 0.8% in early London session with gains led by utilities and energy; WTI futures were lower by 1.1% on the day because the complacent market downplayed the Israeli ground offensive into Gaza as “less aggressive than feared.” Ahead of a very busy week, JPM summarizes sentiment as follows: “are futures potentially setting up a relief rally into month-end or does the selling pressure continue with SPX under its 200dma.” Gold slipped below $2,000 an ounce, the dollar dropped as bitcoin gained and ten-year Treasury yields resumed their grind higher to 4.86% ahead of today’s Treasury issuance projections statement.”
VIX futures are consolidating inside Friday’s trading range. Support lies at the trendline at 18.60. Alternate support lies at the mid-Cycle line at 17.24. Something is afoot here, since today is a high trending strength day. Should that strength reveal, the Cycle Top at 23.15 may be tested again.
Wednesday’s op-ex shows Max Pain at 20.00. Short gamma may begin at 19.00, with a healthy collection of longs at 18.00. Long gamma begins at 21.00 and is heavily populated to 450.00.
ZeroHedge observes, “VIX remains above 20 this morning, but has followed the pattern of the last 3 weeks with VIX/vol bid into Friday due to weekend risk… and when WW3 does not actually occur, VIX/vol is sold in relief.”
ZeroHedge informs, “Corrections
Corrections are common. On average, the market declined 10% or more every 1.2 years since 1980. It is of course not clockwork, but the following charts and tables are good to put things into perspective when we are in the middle of a correction (perhaps aspiring to become a crash…)
Corrections, we had a few…
1. Since 1980, the peak-to-trough pullback within a given year has averaged 14.3% in SPX
2. It is feature not a bug….over the last four decades, the NDX has averaged a peak-to-trough drawdown of 20% in each year
TNX rose to 49.11 this morning on a possible high strength day. Should the correction be over, it may rest the upper trendline near 50.50. Regardless of today’s outlook, yields are destined to rally higher through the end of November. This rally may use the Cycle Top as support during that time. Advisors and investors are showing too much enthusiasm for trying to find the top tick in treasuries.
ZeroHedge remarks, “The ongoing schism over the fate of the most important and liquid market in the world, US Treasuries, has reached never-before seen levelk.
Consider the following: with 10Y yields rising above 5.00% last week for the first time since 2007, ETF traders have been aggressively trying to bottom tick the selling in rates. They are doing so in two ways.
On one hand, as Goldman’s Derivatives traders Brian Garrett and Cullen Morgan write, demand for TLT calls and call spreads exploded this week. That’s because “this is a cheap way to play for a snapback in bonds.” As shown below, average TLT call volume this was over 350k contracts per day, an all-time highs…”
USD futures have pulled back to test Intermediate support at 105.83. The test may not be completed, as today is a day of trending strength. The trend is higher, so we may see the Cycle Top at 106.74 tested instead. The Cycles Model suggests the uptrend may last another three weeks.
Crude Oil futures made a morning low of 83.75 as it retreats from its high at the 50-day Moving Average at 85.85. Support lies at the Head & Shoulders neckline near 82.50. Should it break through, we may see a waterfall decline down to the Cycle bottom at 65.11.