BKX, our liquidity proxy, has slipped beneath its Cycle Top at 88.88. Friday’s peak at 88.95 was on time at day 259. Although there is an outside possibility of probing to the neckline at 90.50, the upside risk is minimal compared to the potential downside target. It is rare to see this large a retracement within a Wave (3). In addition, there are multiple signs of a potential panic decline into mid-January.
Late Friday ZeroHedge reported, “Yesterday we found out that inflows to money-market funds continue to be huge ($290BN in six weeks), and more importantly, regional banks’ usage of The Fed’s BTFP bailout facility surged to a new record high (even as regional banks surged…
And so, with that shitshow in mind, we await the glorious manipulation of The Fed’s bank deposits data to reinforce that equity confidence.”
The NDX futures could not break above 16100.00 over the weekend as it lagged behind blue chips and small caps. This morning it is lower, although it hasn’t declined back beneath short-term support at 15926.08, where an aggressive sell signal lurks. As mentioned last week, NDX may lead the pack in the decline.
Today’s options chain shows Max Pain at 16130.00. Long gamma (what little there is) may begin at 16175.00 while short gamma starts at 16120.00.
ZeroHedge highlights last week’s activity, “The S&P 500 rose for a 6th straight week and made new YTD highs, as investors digest a busy week of macro data and await US CPI + the latest central bank policy decisions next week. Bitcoin Sensitive stocks, High Retail Sentiment, and Regional Banks outperformed on the week, while Commodity Sensitive stocks, China ADRs, and Renewables were under pressure.”
SPX futures made a marginal new high at 4609.70. then settled down to hover near 4600.00. Today is day 273 of the Master Cycle in a very stretched situation. The powers that be may attempt to push the markets higher as the FOMC meeting concludes on Wednesday, a noticeable consistent practice. However, stocks are overbought and may react quickly to bad news. The chances of the rally extending beyond Wednesday are practically nil, based on historic data.
Today’s options chain reveals Max Pain a t4595.00. Long gamma may start at 4600.00 while short gamma begins at 4590.00. The tension is rising and anything beyond a flat market may produce some fireworks.
ZeroHedge reports, “US equity futures are flat while global markets posted only modest moves at the start of a busy week of economic data and central bank meetings that will test optimism among investors that interest rates will soon head lower. As of 7:55am ET, S&P500 futures contracts fell just under 0.1%, off the session’s lows, while Nasdaq futures were also modestly lower. The dollar is higher, while 10Y yields are rapidly reversing all recent declines and up again on Monday, hitting a 1-week high of 4.28%; in commodities oil is recovering from the market’s longest weekly losing streak in five years while crypto tokens are swinging violently as Bitcoin drops back toward $40,000. Keep an eye on retailers following the weekend news of an LBO bid for Macy’s: XRT is up almost 16% from its Oct lows and sits about 11% from its 52-week high. Today’s macro data focus is the Fed’s 1-year inflation expectation; it may reflect similar optimism as the Univ of Michigan data which saw 1-year expectations fall from 4.5% to 3.1%.
VIX futures are consolidating within Friday’s trading range after Friday’s extended Master Cycle low on day 270. The Cycles Model suggests a burst of strength may occur imminently. Should the reversal take place, VIX may rally with trending strength through the year-end.
Wednesday’s options chain shows Max Pain at 16.00. Short gamma resides from 12.00 to 15.00. Protection is very cheap as investors anticipate easing of interest rates.
TNX edged higher this morning as TNX has bounced from neckline support at 41.00. A burst of trending strength may be imminent as TNX re-establishes its uptrend. The bounce off the double support may imply an aggressive buy signal. This rally may prove, once and for all, that the Fed has little to do with interest rates.
ZeroHedge observes, “Biden Says Jobs Numbers Should Deter More Fed Rate Hikes
Bloomberg reports Biden Says Jobs Numbers Should Deter More Fed Rate Hikes
President Joe Biden said Friday’s jobs report shows the labor market remains resilient as inflation continues to ease, an economic “sweet spot” that he said shouldn’t prompt the Federal Reserve to raise rates further.
The comments marked a rare example of Biden weighing in on central bank policy making. They came as the president gears up for a reelection campaign that will be decided in part on his stewardship of the US economy, which voters have rated poorly, polls show.”
USD futures declined to 103.55 before moving back into Friday’s trading range. The Cycles Model suggests today may be a day of strength for USD. If so, it may jump-start a brisk move higher until the year-end. Two likely targets for this move are the Cycle Top at 106.85 and the Head & Shoulders neckline at 107.50.
Crude oil is consolidating inside last Friday’s trading range where it made a reversal out of Thursday’s possible Master Cycle low. Should that be correct, crude may be in for a two-month rally, taking it back to the Cycle Top at 91.13.
Gold futures are testing Intermediate support at 2002.26 this morning. Should it break through, the next target may be the mid-Cycle support at 1969.00. The Cycles Model suggests a burst of trending (downside) strength early this week followed by another later in the week. The likely target may be the neckline at 1825.00.