BKX is nearing its 61.8% Fibonacci retracement at 83.78. After some consideration, I have concluded that this bounce is merely a two-week “bump” in the down trend. Prepare for a decline similar to, if not greater than, the March decline.
NDX futures rose to an overnight high of 15918.60, less than 14 points from the all-time high. One of the Elliott Wave rules is that Wave (2) may retrace up to (but not exceeding) 100% of its decline from July 19, but no further. At this moment, there is no alternate structure, as today is day 247 if the Master Cycle beginning on March 13, within the “turn window for this Cycle. The current retracement is 94%. This rally has been a mighty short squeeze that has turned into a buy fest for those on the sidelines. Are we due for an island reversal? The rally may have been too fast and too far to be sustainable.
Today’s options expiration offers a lumpy menu of short gamma up to 15930.00, suggesting a wholesale turn of sentiment among options buyers. The major purchasers appear to be institutions and dealers.
ZeroHedge remarks, “Now it begins
Inflation is dead and rates will be cut. Hurrah! The flow picture is very supportive with buybacks, CTAs and fund inflows. Double hurrah!! So now the new bull begins…?
No, now it ends
Now is not the time to go max long. We would argue that this is not the beginning of a new bull market but rather the end of a short-term squeeze. We are in the beginning (let’s say 1st or 2nd inning) of a top formation. We are more than 50% through the buying mechanics that has propelled equities >10% higher over the past few weeks. Too early to short but way too late to increase longs. Lets examine.”
SPX futures rose to an overnight high of 4518.10 before pulling back. This may constitute an 82.3% retracement, considered to be on the high end of a normal retracement. Sentiment is as bullish as it gets. There is a final Fibonacci interval/resistance at 4523.32. The Cycles Model suggests a probable turn in the next 24 hours.
Today’s op-ex shows Max Pain at 4480.00. Long gamma may begin at 4500.00, while short gamma may begin at 4450.00. Friday’s op-ex may be the big option showdown.
ZeroHedge reports, “Wall Street looks set to add to Tuesday’s blistering post-CPI rally as futures gained and world stocks surged. As of 7:50am, S&P 500 contracts are up 0.4% reaching a new 2-month high after the index ended Tuesday with its biggest advance since April; mood was also lifted by progress in Congress on a avert a government shutdown and pass a temporary funding bill while investors welcomed cooler-than-expected inflation readings in the UK as evidence that central banks may be done with their aggressive interest-rate increases. Europe’s Stoxx 600 Index jumped, led higher by consumer product and mining stocks, MSCI’s Asia Pacific Index jumped over 2%, with all markets in the green.
In premarket trading, retailers are broadly higher after Target reported adjusted earnings per share for the third quarter that beat the average analyst estimate and a decline in comparable sales that was less steep than expected. Target climbs as much as 15% premarket. Walmart rises 1.3% premarket, Dollar Tree +2.4%, Dollar General +2.2%, Best Buy +1.2% and Costco Wholesale +0.8%. Here are some other notable premarket movers:”
VIX futures are consolidating within yesterday’s trading range. This is a departure from the inverse of SPX’s probes higher. Today’s options expiration may prove to be a hindrance, but the Cycles Model suggests an energetic burst of strength as early as tomorrow.
Today’s op-ex shows Max Pain at 19.00. Short gamma starts at 17.00, while long gamma begins at 20.00.
ZeroHedge remarks, “Never forget
Seasonality is strong going into year end, but are we front running it?
Source: Equity Clock
Where are the “max longs”?
Question: “What is your current equity positioning or sentiment in historical terms, expressed from most bearish (0th percentile) to most bullish (100th percentile)?”
TNX leaped from the trendline this morning as the uptrend may be reasserting itself. As warned earlier, the secular trend is higher. The current Master Cycle may resume through the end of the year. Tending strength may resume early next week, if not sooner.
ZeroHedge observes, “The Treasuries rally that followed a modest miss on inflation data looks too good to be a true reflection of where the economy is heading. As traders focused on the shorter end of the curve, five-year yields dropped the most since March, when a banking crisis raised concerns that the US could rapidly tip into a recession. Considering that core annual inflation came in at 4.0%, rather than holding at 4.1% as expected, Tuesday’s move looks excessive.”
USD futures declined to a low of 103.82 before consolidating. Both mid-Cycle and 200-day Moving Average stand at 103.40, providing support. Today is both a Trading Cycle low and a potentially strong reversal day. Today is also day 252 of the current Master Cycle, suggesting the low may have arrived.
Crude oil futures reversed beneath the mid-Cycle support/resistance at 78.19, reinstating the sell signal. Should yesterday’s high be the end of the Master Cycle, the new Master cycle may continue its decline to the first week of December.
ZeroHedge observes, “After four months of re-acceleration, US producer prices tumbled in October – down 0.5% MoM, the biggest drop since April 2020. This dragged Final Demand PPI YoY down to 1.3%…
The sharp slowdown was largely reflective of a decline in gasoline prices, as excluding food and energy, the so-called core PPI was unchanged (and the smallest annual increase since the start of 2021).”