SPX may have completed its final probe higher. If so, the rising trendline is at 4748.00. Beneath it is a possible sell signal.
BKX, our liquidity proxy, attempted a rally back above its Cycle Top this morning, only to fall back beneath it again. Today is day 253 in the Master Cycle, which allows a possible probe higher (98.51?) early next week. Regardless, we are seeing an aggressive sell signal with minimal upside. Earnings season has begun with JPM reporting mediocre earnings but high hopes for rate cuts.
ZeroHedge observes, “Tomorrow Q4 earnings season officially starts with the big banks – JPM, BofA, Citi and Wells – all reporting (as well as BNY, Blackrock, Delta and UNH).
And, as discussed earlier, after what has been the best bank stock rally in years, the setup is somewhat challenging even if, as UBS fins analyst Rob O’Dwyer writes, “valuations are not very extended, despite the 20% rally since November.” Still, O’Dwyer concedes that earnings challenges are due to US bank EPS being positively correlated with rising rates over the next 12 months, which suggests pressure on net interest income guidance for 2024. Indeed, given credit metrics remain clean, “there is more downside than upside risk to credit here.”
SPX futures have gone lower, testing the 1987 trendline at 4770.00. Beneath that level is an aggressive sell signal. The Cycle Top is at 4775.00. A confirmed sell signal lies beneath Intermediate support at 4675.00. Earnings season is beginning. Analysts have already lowered the earnings bar.
Today’s options chain shows Maximum Investor Pain at 4770.00 Long gamma may start at 4775.00 while short gamma may begin at 4765.00. The options market is heating up, but no clear direction yet.
ZeroHedge reports, “US equity futures are muted on the last day of the week, as investors mull the impact of inflation’s rebound on the outlook for monetary easing and waited for earnings from some of the world’s biggest banks. At 6:54am, S&P 500 futures are down -0.5%, dragged lower by poor earnings reported by BofA with JPM fallilng in sympathy, while Nasdaq 100 futures fell 0.6%. 10Y Yields rose to 3.99% and was set to rise above 4.00% after sliding yesterday for reasons still unknown. The dollar reversed earlier losses and was last trading near session highs.
VIX futures continue to consolidate near the low. Today is day 256 of the current Master Cycle. A reversal is imminent.
Nest Wednesday’s options chain shows Max Pain at 15.00. Short gamma resides between 12.50 and 14.00. Long gamma begins at 16.00 and now sows active interest up to 47.50.
TNX is hovering beneath the 200-day Moving Average at 40.03. Today is day 253 of the current Master Cycle. We may expect TNX to retest the rising trendline near 38.00 in the next week. Thereafter, rates may begin to rise again. All seems well after the solid 30-year Treasury Auction yesterday. However, there is danger lurking beneath the surface.
The question is whether they do so before, or after, upending the highly-leverage hedge fund basis trade that has been supporting the Treasury market.”
USD futures are hovering beneath Intermediate resistance at 102.48. The Cycles Model suggests a pullback near 101.50 before resuming its rally. A buy signal awaits USD above 102.48.
Crude oil futures rose to an overnight high of 75.25 before pulling back . It is currently above Intermediate support/resistance at 72.85 and on a possible buy signal. However, should it decline back beneath Intermediate support, it may reveal another Triangle formation that points to lower prices.