December 7, 2023

10:31 am

BKX, our liquidity proxy, has met its Cycle Top yesterday at 88.56 on day 257 of the Master Cycle.  It has made a Key Reversal, as well.  The month-long rally in BKX mirrored the decline in TNX within 31.42 days.  Are banks little more than mortgage REITS?  If so, the articles below have significance.

ZeroHedge observes, “At the Sohn Conference in London on Wednesday, Carson Block, the founder of Muddy Waters Research, warned that Blackstone’s Mortgage Trust (BXMT) is facing a “perfect macro storm.” He suggested that a crisis in commercial real estate could potentially lead to a “liquidity crisis” in the trust.

Block told attendees at Sohn that Muddy Waters is short BXMT because “borrowers will be unable to refinance and repay” the trust. He cautioned that BXMT is at “risk of a liquidity crisis” and explained, “This is not a story where bad people have done bad things, they are just unlucky.”

ZeroHedge comments further, “The Federal Reserve’s reverse repo (RRP) facility has been a key support for liquidity and stocks this year. But it is falling. As it approaches zero, markets face much less benign conditions as a formidable tailwind is extinguished.

Everyone’s a plumber, or at least should be.

Not in the sense that we all need to get handy with a spanner, but in that every investor should have at least a basic knowledge of financial plumbing in the modern central-banking regime.

A good place to start is the Fed’s RRP facility.”

 

8:00 am

Good Morning!

NDX futures have declined to a morning low of 15769.40, beneath Short-term support at 16877.91, before a bounce.  It is on an aggressive sell signal.  The signal becomes confirmed beneath Intermediate support at 15335.75.  The 50-day Moving Average is at 15180.91.  The new Master Cycle in the NDX has passed the Cyclical marker of one standard deviation in time from its high, reducing the capability of making a new high to approximately 10% or less.    Bullish momentum may now be dead.

Today’s options chain shows Max Pain at 15880.00.  Long gamma may start at 15900.00 while short gamma begins at 15850.00.

ZeroHedge remarks, “The latest quarterly hedge fund monitor report from Goldman (discussed here) was, as usual, an informative snapshot into the stock and flows of the fast (if no longer smart) money, but most importantly, revealed that – as most had long expected – hedge funds are nothing more than glorified momentum chasers (aka “levered beta monkeys”), with Goldman’s Ben Snider revealing that “hedge fund crowding reaches new records as popular positions enjoy momentum” …

 

 

SPX futures made a new low at 4543.10 as bullish momentum withers.  Short term support (not shown on the daily chart) is at 4534.11, where an aggressive sell signal awaits.  The 100-day Moving Average is at 4421.80, where a confirmed sell signal lies.  SPX is now approaching 3 weeks of relatively flat performance, a rarity that may not last.  New to the chart is a Head & Shoulders formation that most analysts won’t catch.  This implies that the SPX may revisit the October 2022 low in the decline that follows..

Today ‘s Options chain shows Max Pain at 4580.00.  Long gamma may start at 4600.00 while short gamma is running hard beneath 4560.00.  The options market may become unruly.

Zerohedge reports, “S equity futures are mixed with tech outperforming notably, as both GOOG and AMD rose +2.8% and 3.7% pre-mkt, respectively. As of 8:00am ET, S&P futures were up 0.1% to 4,560 and Nasdaq futures gained 0.2%.  10Y Treasury yields rose 5 basis points as Japanese bonds tumbled and the yen surged 1.6% against the dollar amid renewed speculation that the Bank of Japan will scrap the world’s last negative interest-rate regime as soon as the Dec 19 BOJ meeting (spoiler alert: it won’t). Of course, if the BOJ does indeed hike yields, US yields will move sharply higher. Elsewhere, the USD is weaker and commodities are higher led by a rebound in the energy complex; WTI is back above $70. Today’s macro data is on Job Cuts, Initial/Continuing Claims, and Consumer Credit. Tomorrow’s NFP data is the more market moving data.”

 

 

VIX futures are rising, hitting 13.28 this morning.  The VIX is coiled like a spring, ready to burst out.

Next Wednesday’s options chain shows a lively interest and possibly Max Pain at 15.00.  Short gamma resides at 14.00 while long gamma rests at 23.00, but little interest above that.  This makes buying protection against a decline very cheap.

ZeroHedge observes, “JPY breaking the huge trend line

JPY continues moving aggressively. We are taking out the big trend line as of writing, trading well below the 100 day moving average. The 200 day is at 142.

Source: Refinitiv

Not all vols are dead

The moves in the JPY are getting relatively little global “attention”. JPY 1 month volatilities at the highest levels since August, while VIX remains in “no care” mode.”

 

 

TNX may finally be in reversal on day 265 of its former Master Cycle.  If so, we may see yields rising into the year-end.  The reason that this Cycle has attracted so much attention is that it was “straight down” for 31.42 days, where most Cycles are parabolas.

ZeroHedge remarks, “Extreme Bond-Market Positioning Heralds Pain Trade

Disappointments are the deepest when just about everyone in the markets is positioned for the same outcome.

With the disinflationary narrative in the US evolving in line with the Fed’s estimates, traders are bracing for that definitive inflection point in the economy that will send Treasuries soaring.

In fact, traders are clamoring for bonds relative to stocks at a pace close to the fastest in two decades, possibly setting a low bar for disappointment – and potentially making it the markets’ next big pain trade.

 

USD futures continue to consolidate their gains above the mid-Cycle support at 103.32.  The Cycles Model infers that the rising dollar may continue to the end of December.

 

Crude oil made a new low at 69.28 before bouncing.  The last master Cycle may have been completed on November 30.  If so, a bounce may develop to the mid-Cycle resistance at 78.09 before the decline may resume for up to two months, due to the breakdown beneath the November low.   Critical support is at 64.30.

ZeroHedge opines, “It is often useful to contrast rhetoric with reality. The phrase, an “energy transition,” the goal to replace hydrocarbons, has origins that trace back to a 1977 speech by President Jimmy Carter. It was an “address to the nation” that commandeered national media, as is the convention on occasions when presidents seek to deliver momentous news. That address became known, infamously, as the “MEOW” speech because of President Carter framing the “energy challenge” as the “moral equivalent of war.” We find a lot of familiar rhetorical turns of phrase in that speech, not least the urgent need for a putative “energy transition” as being “the greatest challenge that our country will face during our lifetime,” and the need to “act quickly” in order to “have a decent world for our children and our grandchildren.” Back then, the urgency was motivated by the belief the world was running out of oil and natural gas.”

 

Gold futures are consolidating beneath the Cycle Top, on a sell signal.  The next critical 9intermediate) support is at 1999.73.  Probable reversal areas are the Neckline at 1825.00 and its target at 1561.00.  This decline may last through the end of January.

 

 

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One Response to December 7, 2023

  1. tlover tonet says:

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