BKX, our liquidity proxy, may be attempting to make the 61.8% Fibonacci retracement at 98.51. Today is day 243 in the current Master Cycle, which allows a few more days of rally either until something breaks or quarterly earnings begin reporting the week of January 8.
ZeroHedge observes, “n a non-seasonally-adjusted basis (why adjust when we are looking at annual changes), US domestic banks saw a stunning $1.17TN in deposit outflows (ex-large time deposits) in 2023 – the largest annual decline ever (and only the 3rd annual decline on record going back to 1985 – 1994, 2022, and 2023)…
Interestingly, money-market funds saw inflows of around $1.15TN almost perfectly mirroring the deposit exodus from banks…”
SPX has declined both below the 1987 trendline and the diagonal trendline that defined the lows in the year-end rally, both at 4750.00. It also declined beneath the Cycle Top at 4742.94. Today is day 251 in the Master Cycle. Although early, SPX has also met its structural high, leaving a truncation in place. While not attaining the January 2022 high, both time and price targets may have been met for this rally. An aggressive sell signal may have been made, Aggressive signals are those that are often (1) short-term, awaiting confirmation, (2) may be early, allowing attempts at higher highs or lower lows, (3) subject to volatility where gains/losses appear uncertain. However, aggressive moves tend to prove out over time and allow a greater gain on a new position.
I had originally intended to put the long charts up last night, but family events took precedence.
DJIA futures declined to 37463 this morning, indicating a potential reversal. Cycle Top support is at 36985.00. A decline beneath that level gives us an aggressive sell signal. The traeding bands have narrowed considerably, suggesting a probable slingshot move to the October 2022 low. Note that the Indu rose above its Cycle Top in 2021 but further advances were stopped by the 1987 trendline during 2021. It has stayed beneath the trendline and Cycle Top resistance until December 2023 in a final probe called a throw-over. The Industrials are favored by international investors due to their liquidity and stability.
INDU futures remain above the Cycle Top support at 36985.06. A decline beneath that level produces an aggressive sell signal.
The SPX was also able to rise above the 1987 trendline in 2021, but fell back beneath it in April 2022. It has met a double resistance at 4750.00 and the Cycle Top at 4815.00. SPX has not been able to crack the 2022 ceiling due to these resistances, but the structure suggests a completed uptrend. This may be called a truncated rally where it had structurally weakened to be unable to make a new all-time high. The SPX is favored by domestic institutions for its liquidity, but has fallen out of favor recently due to weakened performance and overperformance of the seven largest NDX stocks..
SPX futures fell beneath the 1987 trendline at 4750.00 to 4732..00 thus far. This produces an aggressive sell signal on the weekly chart. We will follow the daily chart from here on, but this picture substantiates the necessity for a reversal here.
NDX has remained above its 1987 trendline for all of its existence, attracting retail investors and hedge funds. The Cycle Top is at 17068. The NDX rose to within 100 points of the Cycle Top but was unable to reach it.
NDX futures have fallen the most of all the indices, breaking the diagonal trendline for an aggressive sell signal and nearing its first short-term support at 16451.00. Confirmation of the sell signal lies beneath Intermediate support at 16243.00.
ZeroHedge says, “Not Buying The Dips Here… Yet.”
VIX futures have reached a morning high at 14.23, short of a confirmed buy signal at 14.50, where we find the 50-day Moving Average. The VIX made its Master Cycle low on December 13 and has remained above it since. Investors have steered clear of it because of its historically low level. However, it may be at a good accumulation level, nonetheless..
TNX continues to advance from its Master Cycle low made on December 27, day 252 of its Master Cycle. Today is day 258. The chances of a deeper low are diminishing by the day. The Buy signal resides at the 200-day Moving Average at 40.37.