NDX futures are consolidating just beneath their Cycle Top at 16669.77. Friday’s high at 16669.77 may be the Master Cycle high, on day 275. The Master Cycle has been stretched due to options expiration on Friday. Today we may see an “unclenching” of the gamma hold on the NDX from investor calls as a third of them have dropped off at Friday’s expiration.
Today’s options chain shows large (institutional) put positions taken as high as 16690.00, leaving the NDX in short gamma. Long gamma may exist above 16700.00. The NDX unclench may have begun.
ZeroHedge remarks, “When stocks were tumbling in late October to the lowest level in 5 months, few dared to stick their necks out and call the bottom (in fact, quite the contrary, there was a huge pile up of the usual momentum chasers predicting a total collapse in the S&P in the next few weeks). However, UBS desk trader Rebecca Cheong was not one of the doom echo-chamber penguins, and as we reported on October 20, shortly after the 10Y briefly traded above 5%, she called the bottom in the market writing that “treasury bonds hit capitulation on Thursday and it should mark the end of the current multi-asset unwind cycle that started on Aug. 1.”
As we summarized next, “her conclusion: “I like to buy the dip today in Equities at this level” which with stocks at session lows, with buyback blackout period ending today, at the same time as the endless Fed chatterboxes enter a blackout period, is probably not a bad suggestion.”
It certainly wasn’t, and those who listened to Rebecca made an entire’s year of profits in what has since become a “November to Remember”, a month in which every risk asset exploded to the upside.”
SPX futures are steady this morning, beneath Thursday’s high and beneath the 1987 trendline near 4730.00. On Thursday I posted the chart showing the trendline originating in 1987. You may conclude, as I have, that the markets are not random. The trendline is giving us warning that the trend may be exhausted.
Today’s options chain shows Max Pain at 4695.00. While there is a large call position at 4700.00, long gamma may not begin until 4720.00.
ZeroHedge reports, “After 7 consecutive weeks of gains, US equity futures edged higher, and traded near session highs even as European bourses were red across the board, as central bankers sought to sow doubts that aggressive interest-rate cuts will materialize early next year. As of 8:00amm S&P 500 futures added 0.3% with Nasdaq 100 futs rising 0.5% on the back of relentless year-end tech momentum, while the Stoxx Europe 600 index was little changed amid thin volumes. Oil rebounded from earlier losses after BP halted all tanker transits through the red sea. Treasuries edged higher and are on course for a fifth day of gains — the longest stretch since August — while the dollar slips and the yen underperformed ahead of Tuesday’s Bank of Japan monetary policy decision. Meanwhile, more government-backed Chinese companies have ordered staff to not bring iPhones and other foreign devices to work, setting in motion an unprecedented prohibition that could block Apple and Samsung from the world’s largest mobile market.”
VIX futures advanced to 12.64, but have not broken out at 13.85-14.31. The Cycles Model shows trending (upside) strength building this week with a possibility of a panic rally after the holidays.
Wednesday’s o-ex shows Max Pain at 14.50. Short gamma rests between 1.50 and 14.00. Long gamma starts at 20.00 and goes to 45.00.
ZeroHedge remarks, “Just when you thought it was safe to get back in the [market],” Deutsche Bank’s Jim Reid drops some veteran market-watcher wisdom, with a nod to the most important contradiction in markets right now.
Namely that current conditions are as sanguine as they could be, but with history suggesting its still early in terms of the lag of monetary policy.
Indeed, this week saw the VIX hit a post-pandemic low, and last night the S&P 500 hit an all-time high in total return terms after the Fed folded like broken beach-chair in its inflation-fight.”
TNX is emerging from Thursday’s Master Cycle low to begin a new rally that may extend to the first week of January. Current projections are that TNX ma exceed 50.00 in this move. Remember, the Fed is not in charge of interest rates, the market is.
ZeroHedge remarks, ” Something is not right, and the drastically divergent messages from Powell and his cronies at the Fed over the last month and a half confirm this suspicion.
The Burning Platform’s Jim Quinn writes that the current situation does remind me of September 2019 when the repo market revealed the underlying mechanisms within the financial system were malfunctioning and were about to lead to another massive financial crisis.
Powell restarted QE and “luckily” the COVID scamdemic was rolled out, so Powell and and our corrupt political class could pump trillions into the system and keep it alive.
Powell and his fellow tough guys at the Fed had increased rates to 5.3% and have talked tough about keeping rates up until inflation got back to their 2% target.
With GDP supposedly accelerating at 5.2%, unemployment still near all-time lows, and corporate profits still booming, there should be no fear about rates being too high by Powell and his sycophants.
But suddenly this week Powell and these economic “rocket scientists” now are saying they will be cutting rates soon and more than anyone expected.”