December 4, 2023

3:50 pm

BKX is nearing its Cycle Top resistance at 88.43 today, day 255.  That means a high likelihood of a reversal tis week.  The Head & Shoulders target is still active and may influence the outcome of the new Master Cycle that extends through mid-January.  Prepare yourselves.  Bank runs are no fun.

XeroHedge observes, “The Secretary of the Treasury and the Financial Stability Oversight Council would like you to believe that climate-change and unregulated non-bank financial institutions are the biggest threats to financial stability. If financial regulators were actually safeguarding the integrity of banks and financial markets, they would recognize, and do something about, the largest immediate threat to financial stability: the nearly $1.3 trillion of unrealized interest rate related losses in the regulated banking system.  This is the real systemic risk today.

The $1.3 trillion is my estimate of the banking system’s total unrealized interest rate related losses as of June 30, 2023. Using bank regulatory data, I estimate that the banking system has total unrealized losses of about $548 billion on bank-owned securities and about $726 billion in interest rate driven losses on bank loan and lease portfolios.”

 

10:15 am  Technical difficulties… we are not getting updated charts

Good Morning!

SPX futures have declined to a low of 4555.60 this morning.  Short-term support lies at 4537.00-4542.40.  An aggressive sell signal may be given beneath that level.

Today’s options chain shows Max Pain at 4585.00  Long gamma starts at 4600.00 while short gamma begins at 4570.00.

ZeroHedge reports, “US equity futures, most European bourses and Asian markets as well as global bonds all retreated after five consecutive weeks of gains, as traders paused to digest November’s blockbuster rally and to consider the case for interest rate cuts, which they aggressively priced in after Powell’s “not as hawkish as feared” fireside chat on Friday. As of 8am ET, S&P futures were lower by 0.3%, dropping back below the 4,600 unwinding a portion of Friday session rally (which however left hedge fund bruised and battered as the most shorted stock soared much more than the HF VIP basket); USD is stronger and commodities are weaker: crude futures are lower by around 0.4%, adding to Friday losses; 10-year Treasury yields added five basis points to 4.25%. Despite the rise in the DXY, Bitcoin surged past $41,000, while gold briefly touched an all time high. With the Fed in its blackout window, the macro data releases will be the key focus; no treasury auctions this week. Today, that focus is on factory orders and durable/cap goods; this week we get a deluge of labor data starting with the latest reading on US job openings (or JOLTS) tomorrow, followed by ADP’s National Employment Report on Wednesday and non-farm payrolls on Friday.”

 

 

VIX futures have elevated to a morning high of 13.70 thus far.  A breakout above 14.30 gives us an aggressive buy signal.

Wednesday’s options chain shows Max Pain at 14.50  Short gamma may exist between 12.50 and 14.00.  Long gamma may start at 15.00 but it is not well populated.

 

TNX has risen to 42.91 thus far this morning.  Futures made a new low this morning at 41.96, ending the old Master Cycle on day 263.  The Cycles Model indicated a high level of positive trending strength arriving tomorrow.

ZeroHedge observes, “There are fertile conditions for volatile markets this week as a raft of labor data is released at the same time as liquidity sees a sizable drop versus last month’s buoyant conditions. With positioning in bonds now very long, yields are at risk of rising, triggering a selloff in stocks.

Focus returns to the US labor market this week as JOLTS, ADP, Challenger layoffs, ISM services employment and payrolls are released.

The jobs market is slowing but the question remains: will it deteriorate fast enough to prompt the Federal Reserve to act even sooner than rates markets are expecting?

This comes at the same time as a non-negligible drop in liquidity and skewed positioning in bonds. The JPMorgan Treasury Survey of active clients is registering an all-time high in net longs.”

 

 

 

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