January 5, 2024

1:31 pm

Today is day 246 in the current Master Cycle for BKX.  You would think there may be another two weeks before a reversal may happen.  However, it is fast approaching the 61.8% Fibonacci retracement at 98.51 which may spell the death knell for this rally.  The Cycles don’t just measure time.  They also measure price.  A Cycle may be lengthened or shortened by its relation to the price target.  Keep that in mind as a very strong burst of energy is due in the banking sector in the next week.

ZeroHedge remarks, “Usage of The Fed’s BTFP bank bailout facility surged by over $5BN to a new record high of $141BN…

Source: Bloomberg

The BTFP-Fed Arb continues to offer ‘free-money’ (and usage of the BTFP has risen by $32BN since the arb existed), but the spread has narrowed a smidge from a peak near 60bps to 50bps today…

Source: Bloomberg

Which will make it hard for The Fed to defend leaving the facility open after March when its “temporary” nature is supposed to expire.”

 

6:30 am

Good Morning!

I have a morning appointment and may not return until after the open of the Markets.

SPX futures continued their decline to 4672.30 thus far.  Intermediate support lies at 4640.82, beneath which lies a confirmed sell signal.  Intermediate support may not hold, leaving the 50-day Moving Average at 4519.03 as the next possible support.  A word of warning.  The Cycles Model suggests that trending strength may increase substantially starting next week and lasting a possible two weeks.  Trending strength tends to magnify the current trend.  The implication is that we may see one or more “limit down” days during that period.

Today’s options chain shows Max Pain at 4715.00.  Long gamma starts at 4750.00.  Short gamma begins at 4700.00.

 

VIX futures have ramped up to 14.58, exceeding the 50-day Moving Average and creating a double confirmed buy signal.  The target for this rally may be the March 13 high at 30.81.  Depending on the velocity of the rally, the ultimate target may be much higher.

Next Wednesday’s op-ex shows Long gamma residing between 15.00 and 17.00.  Short gamma has all but disappeared.  Investors are just not prepared for an explosion in the VIX.

 

TNX futures have risen to a morning high of 40.51, confirming the fears of investors that the rally in treasuries may be over.  TNX has exceeded its 200-day Moving Average, creating a confirmed buy signal for yields.

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2 Responses to January 5, 2024

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