December 12, 2023

8:00 am

Good Morning!

NDX futures made an overnight high of 16270.70 as it relentlessly powers higher on day 274 of the current Master Cycle.    The liquidity hose is running dry with buybacks ending this week.  It will all be on the backs of retail investors for the next  five weeks.  CPI is being announced this morning and the FOMC is meeting with their report due Wednesday afternoon.  A reversal is expected.

Today’s options chain shows Max Pain at 16225.00.  Long gamma may begin at 16250.00 while short gamma starts at 16200.00.

ZeroHedge remarks, “Losing the rates connection?

NASDAQ has traded in close tandem with rates since July. The latest “mini” decoupling is noteworthy…

Source: Refinitiv

Not your normal recovery

“Up until recently, the path toward a new SPX record conformed with the average recovery looking back at all of the corrections and bear markets through the 50s. However, the rally in Nov changed things. Typically, the recovery after a 25% drawdown starts to lose steam after Y1 (+9% avg.), with returns over the 2Y matching the same +9% pace. At present, we are up ~30% from when we first broke the -25% boundary, and the current 484 days since we last saw an new ATH is ~half a trading year ahead of when the historical average suggests we might be ‘due’ for one”

 

SPX futures are still climbing, currently at 4631.00.  Should the rally persist, the Cycle Top may be the target at 4675.23.  However, the Cycle is stretched to an extreme and may be susceptible to a sudden reversal.

Today’s options chain shows possible Max Pain at 4620..00.  Long gamma starts at 4625.00 with an outlier at 4600.00.  Short gamma may begin at 4615.00, becoming strong beneath 4600.00.

ZeroHedge reports, “S&P 500 futures were little changed as markets enter the first of the two last big days of 2023, with CPI on deck today and the FOMC decision due tomorrow. As of 7:55am ET, S&P futures were up 0.1% to 4,683, trading in a very tight range overnight as equity traders were reluctant to make big bets ahead of this week’s heavy load of economic data and interest-rate decisions, Nasdaq futures gained 0.3% ahead of the November inflation report; The Bloomberg dollar index slipped 0.3%. Treasuries rose across the curve, with 10-year yields falling four basis points to 4.19%. The latest NY Fed survey showed a decline in year ahead inflation expectations, dovetailing the Univ. of Michigan print on Friday; today is all about the CPI.

 

 

VIX futures are hovering near the low.  The Master Cycle appears to have been made last Friday.  However, there may be room for another probe lower, as the structure may be incomplete.

Tomorrow’s options chain shows Max Pain at 16.00.  Short gamma extends from 12.00 to 15.00.  Long gamma may begin at 21.00.

 

TNX futures had been drifting lower, to 41.42 before the CPI report snapped it higher.  This may have been anticipated by the Cycles Model which had called for a burst of trending strength early this week.  TNX had made its Master Cycle low last Thursday and is due to rise until early January.

ZeroHedge observes, “In today’s second Treasury auction (as a reminder, thanks to the FOMC we are on a very truncated issuance schedule this week), and just 90 minutes after an ugly 3Y sale, moments ago the Treasury sold $37BN in 10Y paper in the form of  a 9 Year 11-Month reopening of Cusip CJJ1, which was almost as ugly as the day’s earlier auction.

The last 10Y auction of the year priced at a high yield of 4.296%, which while a notable drop from last month’s 4.519% and the highest since September’s 4.289%, also tailed the When issued 4.282% by 1.4bps, which as shown below, was the 3rd consecutive tailing 10Y auction, and the 9th tail in the past 10 auctions. An even more remarkable statistics, is that since the end of 2021, there have been 24 10-Year auctions, of which only 4 have not tailed, suggesting that demand for benchmark US paper is in a slow-motion collapse.”

 

 

USD futures sank to 103.07 and challenging mid-Cycle support at 103.34 before bouncing back above that support on the CPI report.  The Cycles Model calls for a renewal of trending strength this week.

 

Crude oil has declined this morning to 69.53.  It may be testing its Cycle low.  The likelihood is that last week’s low may remain intact as WTIC emerges from an oversold condition.  The Cycles Model infers that the new trend may be strengthened by the end of the week.

 

 

 

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