December 14, 2023

2:45 pm

I have been challenged to show the complete 1987 trendline.  It has been problem since my charting service generally begins at January 1, 1990.  I finally found a way to allow the chart to go back to 1987, so here it is.

 

10:17 am

BKX may have ended its Master Cycle tis morning, on day 265.  This rally produced a nearly 33.5% gain from the bottom on October 25.  Quite a return for a bear market rally.  This has clear implications of a rescue operation by the Fed and Treasury.  TARP or its equivalent may also have been used to keep banks from running out of liquidity.   However, The Master Cycle may have ended today, at day 265.

ZeroHedge comments, “While Wednesday’s FOMC statement had barely any changes in it, with the notable addition of the word “any” in the context of policy firming meant to acknowledge that the Fed is at or near the peak rate…”

Please read the Fed statement on the condition of the banks…It may be that political pressure as been applied to make things look better than they are.

 

8:00 am

Good Morning!

NDX futures rose to their Cycle Top at 16660.00 this morning and fell back.  This may be the final bastion of resistance to the rally.  There may be a considerable amount of volatility as shorts were carried out on stretchers yesterday.  A good day for a reversal.

Today’s options chain shows Max Pain at 16430.00.  Long gamma begins at 16480.00, while short gamma lies at 16420.00.

ZeroHedge comments, “Looking at today’s epic post-FOMC market meltup, one may excused to believe this was the best day for investors in a long time. Well, it wasn’t, and in fact for hedge funds and most pair trading long/short investors, today was nothing short of a historic bloodbath with a barrage of margin calls hitting at the close.

Why? Because while stocks indeed soared, and the Dow closed at a new all time high rising above 37,000 for the first time ever, the stocks that made up the most popular shorted baskets soared about 7 times more!

 

 

SPX futures rose this morning to 4727.40, very near its 1987 trendline at 4730.00.  SPX first went beneath the trendline in October 2008 and stayed beneath it until November 2021, where it briefly maintained its position above the trendline until April 2022.  It has been beneath it since.  This trendline has significance since it originated in August 1982 and has defined the trend since then.  This trend is due to end in 2025, and may have made its final probe this morning.

Today’s options chain shows Max Pain at 4700.00.  Long gamma starts at 4720.00 while short gamma begins at 4690.00.

ZeroHedge reports, “Virtually every risk asset across the globe is rallying this morning, as the dollar and interest rates get whacked after the Fed unexpectedly signaled a much more dovish outlook including more than expected interest-rate cuts next year, unleashing bullish euphoria across markets amid optimism that inflation pressures are easing. After the Dow already tipped into record territory yesterday, on Thursday it was tech’s turn – Nasdaq 100 futures climbed, setting up the index for a run at a record close; meanwhile S&P 500 contracts edged 0.3% higher after the benchmark ended within 2% of its record high on Wednesday. Europe’s Stoxx 600 index surged as much as 1.7%. Shares in Germany and France hit fresh all-time peaks. Bond yields are lower with the bulk of the curve seeing a bull steepening and the 10Y now well below 4% (3.94% last). The USD sell-off continues which in turn is helping to boost commodities where Energy is leading and $70 is now acting as support for WTI. The macro data focus is on Retail Sales and Jobless Claims: given the upside surprise delivered by the Fed, this data may not be market-moving but remain useful for understanding whether the growth without inflation hypothesis remains intact.”

 

 

VIX futures pulled back to 11.94 this morning after yesterday’s bounce off the bottom of the Master Cycle.  This was the first time in two years that VIX boke ranks with its inverted behavior with the SPX, a probable sign of heightened risk.

Next Wednesday’s options chain shows Max Pain at 14.50 in a highly contested expiration.  Short gamma dwells between 11.50 and 14.00.  Long gamma starts at 18.00 and is heavily populated to 40.00.

ZeroHedge comments, “One of the biggest ever

We have just witnessed one of the biggest vol adjusted rallies ever. UBS adds some color: “chart shows the ratio of rolling ~6 week positive price returns, scaled by 1m implied vol at the beginning of the move. Similar extremes have preceded some large historical reversals lower”.

 

 

TNX may have made its Cycle low this morning at 39.51 on day 272 of its Master Cycle.  A buy signal awaits a rise above  the Mid-Cycle resistance at 40.58.  The Cycles Model suggests that rates may rise to the first week of January.

Zerohedge observes, “This week’s central-bank bonanza brings with it the usual set of ambiguous and often impenetrable statements and press conferences.

Traders and investors must spend precious time deciphering them. For those who wouldn’t mind a break from this parlor game, there are some markets that don’t march to the beat of the global policy cycle, and offer diversification benefits for portfolios.

The game was in full flow at Wednesday’s Federal Reserve meeting, as the central bank patiently unpicked the higher-for-longer stitching it had spent many months carefully inculcating in the market.

Anyone who had listened to it on financial conditions, keeping rates restrictive for an extended period, or who thought Powell meant it when he implied he was a Paul Volcker and not an Arthur Burns, is now left trying to figure out if the Fed’s reaction function has indeed changed.”

 

USD futures made a new low at 101.67 thus far as it probes to find its Cycle Bottom.  A lower USD contains the seeds of a potential sell-off in stocks and bonds by foreign entities.

 

 

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