BKX has declined beneath Intermediate support at 92.25, reinforcing the sell signal made last Friday at the Cycle Top at 95.06. Today is day 257 of the Master Cycle. I have labeled the January 5 high as a potential early top. A potential bounce in the next few days may retest the high to verify the existing top or make a marginally higher one. The Cycle Top at 95.06 may give resistance to a bounce.
ZeroHedge notes, “Americans are going into debt as if tomorrow will never come, but of course tomorrow always arrives eventually. What we are witnessing right now is truly a historic debt binge, and to many of the experts it seems like there is no end in sight to the unrestrained spending that is going on. But are U.S. consumers going into record levels of debt because they are feeling good about things or because they are trying to survive in an increasingly harsh economic environment? In America today, the cost of living has become exceedingly oppressive, employers are laying off large numbers of workers, and poverty and homelessness have been absolutely exploding all over the country. Millions of U.S. households are just barely hanging on by their fingernails, and many desperate consumers have been piling up debt in a frantic attempt to stave off the inevitable.”
Banks are still posting their results after Friday’s market close. ZeroHedge observes,
“Bank reserves at The Fed rose considerably last week expanding The Fed’s balance sheet by the most since the SVB crisis last March – as usage of The Fed’s BTFP bank-bailout facility pushed to a new record high (amid increasing arbitrage flows).
But, after four straight weeks of inflows, seasonally-adjusted bank deposits saw $23.3BN outflows in the first week of 2024…”
NDX futures have declined to 16672.00 this morning thus far. It has crossed short-term support at 16890.00, putting traders on high alert of a potential aggressive sell signal. A sell signal may be made by declining beneath the Ending Diagonal trendline and Intermediate-term support at 16418.00. The all-time high was made on December 28. Since then the Nasdaq Hi-Lo Index has been hovering near -0- with only 54 new highs on Friday (of 3,300 companies). What’s left appears to be a double top, much like what we saw at the July high.
Today’s options chain shows Maximum Investor Pain at 16890.00. Long gamma starts at 16900.00 while short gamma begins at 16880.00. NDX may be starting the week in short gamma.
ZeroHedge remarks, “Recent data has highlighted inflation is sticky, and retail sales this week could confirm the consumer is far from tapped-out. But it will take more than that – perhaps a coordinated response from Federal Reserve speakers – to disabuse the market of the multiple interest rate cuts priced in for this year.
The market continues to gun for the Fed’s cutting cycle to begin in March.”
SPX futures declined to 4752.00, the short-term support and Ending Diagonal trendline at 4750.00. Having bounced at support, it is now retesting the 1987 trendline at 4773.00. A clear sell signal may be had beneath 4750.00. Further confirmation lies beneath Intermediate support at 4681.92 with the 50-day at 4585.08. The Master Cycle high may have appeared on Friday at 4802.40, missing the all-time high at 4818.62 on January 2, 2022.
Today’s options chain shows Max Pain at 4775.00. Long gamma may begin at 4795.00-4800.00. Short gamma starts at 4750.00-4760.00.
ZeroHedge reports, “US equity futures fell for a second day as the dollar rose to a one-month high and as 10Y yield pushed back over 4.00% after various central banks pushed back against bets on aggressive interest rate cuts. As of 7:30am, S&P futures were down 0.4%, well off session lows, while Nasdaq futures lost about 0.5%. Meanwhile, Brent rose to around $79 a barrel as Houthi attacks on ships in the Red Sea keep tensions high. In other news, Iowa voters delivered Donald Trump a victory in Monday’s caucuses, moving him one step closer to a White House return. Among corporate highlights, Morgan Stanley and Goldman Sachs Group report earnings before the markets open.”
VIX futures rose to 14.13 this morning, surpassing the 50-day Moving Average at 13.37 and creating a buy signal for the VIX. Trending strength may be rising and may continue to do so through the rest of the month.
Tomorrow’s options chain shows Max Pain at 15.00. Short gamma lingers between 12.00-14.00. Long gamma starts at 16.00 and runs hot to 47.50.
ZeroHedge notes, “Sticky inflation? Premature easing bets? Shaky earnings? Nowadays, these aren’t obstacles for equity investors, whose buy-the-dip mindset remains strong in the absence of very good reasons to sell.”
TNX rose to 40.26 this morning before easing back below 40.00 as it tests Intermediate resistance at 40.49 and the 200-day Moving Average at 40.58. Mid-Cycle resistance is at 41.08 above which the uptrend may reassert itself. There is a new potential Head and Shoulders formation with the neckline at 49.98. Should the neckline be broken, the new (minimum) target may be 96.00. Please note the January 15 report on the UST (10-year Treasury Note).
ZeroHedge notes, “On December 13 the financial world was stunned when, just two weeks after Jerome Powell had said he it was “premature” to speculate on rate cuts, the Federal Reserve did a shocking U-turn and pivoted dovishly, ending the Fed’s hiking cycle with inflation still running at double the Fed’s target of 2%, and said that it had in fact discussed the start of rate cuts, contrary to what Powell said just two weeks earlier.
USD futures are consolidating beneath the 200-day Moving Average at 103.23 after challenging it on Friday. It is on a buy signal that may last through the first week of March. The consolidation may test Intermediate support at 102.44 before moving higher.
Crude Oil futures have challenged Intermediate support at 72.72, then rising above it. Last Friday it challenged the 50-day Moving Average currently at 74.63. Should it break beneath the bearish Triangle formation at 71.00, the decline may resume to the support line at 63.57. A further decline may change the intermediate term outlook for crude.
ZeroHedge reports, “Portfolio investors purchased petroleum in the first full week of 2024, reversing sales the previous week and continuing the pattern of choppy trading that has continued since early December.
Hedge funds and other money managers bought the equivalent of 54 million barrels in the six most important petroleum futures and options contracts over the seven days ending on January 9.”