12:42
SPX has made the 61.8% Fibonacci retracement value of the decline since July 27. This is a common retracement value for a Wave (2) retracement.
7:45 am
Good Morning!
SPX futures declined to 4393.00 over the weekend, but bounced back above the 100-day Moving Average at 4402.54. A decline beneath that level produces an aggressive sell signal. The Cycles Model is on the verge of tipping over, so stay alert. Today is day 245 in the Master Cycle, within the window for a reversal. The Cycle immediately prior to this was longer than usual, so this Cycle may be curtailed.
Today’s options expiration shows intense interest at 4400.00.. Above that , gamma is long. However, short gamma kicks in at 4395.00. It will be a tight tug-of-war between the bulls and the bears today.
ZeroHedge reports, “After last week’s torrid rally, and following gains on 9 out of the past 10 days, US stocks are set for a lower open as traders turn cautious ahead of key U.S. CPI data later this week which will give cues on what the Fed could do next, while investors also assessed the risk of a government shutdown on the 17th. As of 7:45am, S&P 500 futures are down 0.2% while Nasdaq 100 contracts lose 0.3% after the underlying indexes closed sharply higher on Friday. European stocks rose on Monday, with the Stoxx 600 index climbing 0.5%, well off the best levels however, with health firms were among the strongest performers as Novo Nordisk jumped almost 4% after a study backed the use of Wegovy to cut heart attacks and deaths in obesity patients. The news also benefited US-listed rival Eli Lilly & Co., which has its own weight-loss medications. Treasury yields slipped, while oil steadied and bitcoin traded around $37K.”
VIX futures rose to a weekend high of 15.19. Considering the Master Cycle low may have been made on Thursday, one may consider going long, especially above 15.50.
Wednesday’s op-ex shows Max Pain at 19.00. Puts are in the majority beneath 18.00 while short gamma reigns beneath 16.00. Calls take the majority above 20.00 while long gamma may prevail above 21.00 and extend to 75.00.
ZeroHedge remarks, “The weight of real yields
The US equity market looks vulnerable under the weight of rising real interest rates.
Source: Goldman
The weight of drained liquidity
Central bank balance sheets continue to shrink, draining liquidity. A 2024 thesis could be that world equities will “catch-down” to that G4 BS line.”
TNX continues its rise from the testing of the bottom trendline. The Cycles Model indicates rising trending strength, starting today and proceeding to the end of the month. TNX may hit the upper trendline at that time, exceeding the prior high.
ZeroHedge comments, “The Federal Reserve’s Federal Open Market Committee (FOMC) last week left the target policy interest rate (the federal funds rate) unchanged at 5.5 percent. This “pause” in the target rate suggests the FOMC believes it has raised the target rate high enough to rein in price inflation which has run well above the Fed’s arbitrary two-percent inflation target since mid-2021.
I say “believe,” but perhaps the more appropriate word here is “hope.”
That is: the Fed hopes it has raised the target interest rate high enough. Moreover, the Fed hopes this will both reign in price inflation and also avoid raising unemployment too high. (See below for what is meant by “enough” and “too high.”)
USD futures are consolidating above the 50-day Moving Average at 105.62. This puts USD on a buy signal. The Cycles Model is unclear about the trend for the next two weeks. Wednesday appears to be a day of trending strength, so we may get further indications from there.
ZeroHedge observes, “As DB’s Jim Reid writes in his weekly preview, this week will be the opposite of last week with not so much Fed speak but lots of important data and events, and the highlight will certainly be Tuesday’s US CPI but US retail sales (Wednesday) will also be a big driver of Q3 GDP forecasts. Additionally, PPI (Wednesday) and a raft of US housing data (NAHB – Thursday, starts/permits – Friday), will be other notable US releases alongside the NY Fed 1-yr inflation expectations today. Finally, something else that will sneak up on markets will be the potential US government shutdown on Friday.”
Crude oil futures tested the mid-Cycle resistance at 78.17 over the weekend and have pulled back. The Cycles Model suggests WTIC may resume its decline for another week or so as it makes its way toward the Cycle Bottom at 65.17.
ZeroHedge notes, “After Brent nearly reached $100 in late September amid rising fears about a massive oil deficit, the petroleum complex has sold off sharply, with the selloff accelerating last week in which WTI and Brent were down ~4.5% from last Friday’s close.
According to Goldman’s futures trading desk, the move in spot prices appears to have been partially a capitulation of length that came into the market as concerns over near-term supply grew (OI fell alongside prices this week suggesting long liquidations).”