BKX may be setting up a bounce, since today is day 258 of the current Master Cycle. It is competing with the January 5 high at 97.87 for the terminus of the current Cycle. The Cycle Top at 95.22 may provide overhead resistance for a weak bounce, which appears to be due by the end of the week. This is giving us some confusion as to exactly where this Master Cycle may end. Nevertheless, BKX is in the “pivot zone” and may provide an answer in just a matter of days. In the meantime, the Feds are walking back Powell’s claim for lower rates anytime soon.
SPX futures have declined beneath the 1987 trendline at 4773.00 yesterday and now beneath the Ending Diagonal trendline at 4750.00 overnight to a low of 4733.50 thus far. This action gives the SPX its sell signal. A further decline beneath Intermediate support at 4688.00 may confirm that condition. The 50-day Moving Average lies at 4596.66 for further confirmation. The Cycles Model suggests that the current Master Cycle may last until the end of February, although the Master Cycle may end at a high. Should that be the case, the decline may run until the first week of February.
Today’s option chain shows Maximum Investor Pain at 4765.00. Long gamma may start at 4775.00. Short gamma may begin at 4750.00.
ZeroHedge reports, “US equity futures and global markets extended their decline on Wednesday after central bankers continued their push-back against market bets for interest rate cuts, deepening a global selloff across stocks and bonds. At 8:00am ET, S&P futures fall 0.4% and Nasdaq contracts ease about 0.5% suggesting another weak day ahead for US equities after ECB President Christine Lagarde and Governing Council member Klaas Knot warned on Wednesday that aggressive bets on interest-rate cuts aren’t helping policymakers in the battle against lingering price pressures, echoing hawkish comments from the Fed’s Waller on Tuesday who urged caution on the pace of easing. The VIX rose to 14.60, the highest leve since mid-November. The Bloomberg Dollar Spot Index extended its rally to a fourth day while the 2Y Treasury yields climbed six basis points to 4.29% and 10-year yields rose 2bps to 4.08%. Oil dropped again with Brent sliding to $77 as gold also eases to near $2,025.”
VIX futures rose to its current high at 14.80, breaking out above its prior high at 14.58 and confirming its buy signal. VIX may continue its rally to the week of February 5. This may be accompanied by trending strength throughout the entire period.
Today’s options chain shows Max Pain at 14.50. Short gamma resides from 12.00 to 14.00. Long gamma begins at 16.00 and remains well populated to 47.50.
ZeroHedge remarks, “SPX and VIX
Bit of chart crime, but note VIX is trading at levels we haven’t closed at since mid November. You don’t compare mean reverting to trending assets over longer time periods, but the chart shows you SPX and VIX have diverged “slightly “in the short term as well, especially post the latest bounce higher in the SPX.
The VIX term structure has shifted higher. Note the shift being most notable in the short end of the curve. This is where people chase the “urgent” hedges first.”
TNX futures rose to 41.19 this morning while the cash market catches up. It is above critical resistance at 40.43 to 41.00 and on a confirmed buy signal. Trending strength may intensify starting today and lasting until early February.
ZeroHedge remarks, “The high degree of certainty the Federal Reserve will deliver an early rate cut – which is a fait accompli historically when pricing is as skewed as it is today – is a sign the market perceives financial-instability risks are rising, and that a near-term reduction in rates is required to help prevent liquidity and funding issues from developing.
The curious case of the March rate-cut rumbles on. Several theories have been put forward for why the market is ascribing such a high probability to it, such as more dovish economic data, or large yield-curve steepening positions skewing front-end rate pricing.
None really pass muster when you look more closely at them.
But under the lens of reserves and financial-stability risks, things start to make more sense.”
USD futures may be consolidating after having surpassed all resistance levels. Today it may pull back to the 200-day Moving Average at 103.25 or possibly test the 50-day Moving Average at 103.10. The Cycles Model suggests the USD may continue its rally to early March.
Crude oil futures declined to 70.64 this morning.