November 29, 2023

7:45 am

Good Morning!

My vision is coming back, but not 100%.  I will do my best to give a shortened summary.

NDX futures are consolidating beneath Last Wednesday’s high.  Since NDX has lost its leadership in the rally, it may lead in the decline.  This may become clearer in the next two days.

The NDX options chain shows Max Pain at 16000.00 with puts and calls virtually tied.  Long gamma May begin at 16020.00-16030.00.  Short gamma starts at 15975.00.

ZeroHedge observes, “Pay attention: The bullish narrative is changing

The bullish narrative has changed from mainly flow driven in the beginning of November (it was the perfect storm…) to now being more centered around momentum and seasonals. It is something along the lines of “strength begets strength”. Needless to say, this is a much weaker narrative and we are now looking for short opportunities. Let’s first examine the current bullish narrative and then look at the risks.

Just another overshoot?

NASDAQ has traded inside a range since June basically. We overshot in July, undershot in October and now this latest melt up resulted in an overshoot. Let’s see how this plays out from here, but consensus is strong regarding the Santa rally, but we have diminishing buybacks as well as most of the CTA chasing behind us.

 

SPX futures made a new high this morning at 4575.50 thus far.  Overhead resistance is near 4580.00.   Today is day 261 of the current Master Cycle.  This is an overshoot, but still within acceptable parameters.   I do not expect SPX to overshoot the July 27 high at 4607.07.

Today’s options chain shows Max Pain at 4555.00.  Long gamma may begin at 4575.00.  Short gamma starts at 4550.00.  This is a close call, waiting for an accident to happen.

ZeroHedge reports, “US equity futures, global markets and Treasuries extended their recent rallyall boosted by expectations that the Federal Reserve is not only done with hjking but will soon pivot and start cut rates early next year; in fact, according to Bill Ackman who has again flipflopped, the Fed will cut as soon as March (i.e., he is now long the same bonds he was so passionately shorting just a few months ago). This occurs as consumer confidence moved higher with holiday, retail sales numbers that illustrate a still strong consumer. As of 7:45am, US equity futures are up 0.4%, rising to the highest since Sept 1 and just shy of 2023 highs, while Nasdaq futures gained 0.6%; gold traded near record high, the dollar slide halted but is certainly not over, WTI oil futures rose 1.7% on the day, adding to Tuesday’s advance, while bitcoin traded just above $38K. The big question now is whether this rally can extend into December; the answer may be predicated on fundamentals rather than positioning/technicals. BBG reporting an uptick in corporate insider buying alongside stronger buyback activity. Today’s macro data focus includes 23Q3 GDP/Consumption/PCE, Beige Book, inventories, trade balance, and mtge applications.”

 

 

VIX futures made a low this morning at 12.48 thus far, leaving Friday’s low Day 256) intact.  A breakout above 14.30 may offer a buy signal.

Today’s options chain shows Max Pain at 14.50.  Short gamma runs from 12.50 to 14.00.  Long gamma may begin at 15.00-16.00.

ZeroHedge observes, “Complacent?

BofA deriv team: “With SPX 4550 and VIX 13 at the time of writing, US equities & equity vol appear to be (once again) going all-in on the soft-landing consensus. As noted in our macro outlook, however, it’s dangerous to be overly convicted in any thesis, as few have experienced today’s elevated macro uncertainty in their lifetimes.”

Need cheap hedges?

The 1 month rolling 3% out of the money put goes for 34 basis points, lowest level over the past 5 years. The problem is that most don’t buy protection when they can, but they chase it when they must (more here).”

 

 

TNX made a new low today at 42.71 and a possible Master Cycle reversal low, as today is day 258.  Should this be the case, the new Master Cycle may run beyond the end of the year in a rally that may begin the new month in strength.  This suggests a possible financial “accident” may be about to be revealed.  So much for easier financial conditions on their way.

ZeroHedge reports, “While yesterday we at least had a mediocre 5Y auction to wash the bitter taste from the very ugly 2Y sale early in the day, today’s sales of 7Y paper sticks out like a sore thumb. A very ugly sore thumb.

Pricing at a high yield of 4.399%, the stop was more than 50bps lower than last month’s auction (which priced at 4.908% and was the highest on record) and was the lowest since August. However, what spooked markets is that the auction also tailed the When Issued 4.378% by a significant 2.1bps, the biggest since last November and one of the biggest tails on record.

The bid to cover was also ugly: at just 2.44, it was the lowest since April and clearly well below the six-auction average of 2.60.”

 

USD futures made a probable Master Cycle low this morning at 102.38.  USD has since bounced to 102.90, indicating a possible reversal on day 266 ( within 1 standard deviation in time).  Should that be the case, the Cycles Model suggests the new Master Cycle may begin in strength.

 

 

 

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