January 22, 2024

1:30 pm

BKX is testing its Cycle Top resistance at 95.73 this morning after having made a Master Cycle low on Thursday, day 259.  A decline beneath Intermediate support at 93.41confirms a sell signal with further confirmation beneath the 50-day Moving Average at 89.24.  A drop beneath the mid-Cycle suport at 89.21 may lead to a waterfall event.

 

8:00 am

NDX futures have reached a morning high of 17449.89 on day 271 of the Master Cycle.  While a Wave 3 may escape above the upper bound of the Cycle Top, only rarely does Wave 5 do so.  It is called a throw-over where fear of missing out overtakes common sense of the retail crowd.  Hedge funds and money managers are selling into this rally.  Sentiment and flows have reversed sharply as hedge funds have become net sellers.

Today’s options expiration is a convoluted affair.  There is a wall of puts at 17300.00 and a wall of calls at 17250.00.  We may see a battle between these two walls   as the day progresses.

ZeroHedge remarks, “During the dotcom bubble, stock traders had the right idea, but had no clue how to price that view. Now they are grappling with much the same issue – only, this time around, substitute dotcom with artificial intelligence.

The bigger concern is that the gravy train may run as long as it did then.

The Nasdaq 100 has surged to a record, putting it within striking distance of 17,000, enough to induce vertigo in anyone looking at valuation metrics.”

 

SPX futures have hit a morning high of 4859.60 on day 271 of the Master Cycle.  It is also in throw-over.  The Cycle Top support/;resistance is at 4800.60 while the 1987 trendline is near 4780.00.  A common wave relationship indicates that Wave equality has been achieved at 4835.00, suggesting the probe higher may be finished.  A reversal may be impending.

Today’s op-ex shows Max Pain at 4820.00.  Long gamma begins at 4825.00 with strength to 4860.00.  Short gamma starts at 4815.00 and remains strong to 4700.00.

ZeroHedge reports, “The market meltup is now entering its blow-off top phase, with the tech-led rally pushing US index futures to a fresh all-time high for S&P 500 cash, which reclaimed their Jan 2, 2022 record after 746 days and following gains in 11 of the past 12 weeks!. European stocks are also higher, the Estoxx 50 up 0.5% with info tech sector outperforming.”

ZeroHedge offers this tidbit, ““The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer – they will die poor,” said Jesse Livermore, the speculator made famous by Edwin Lefevre’s Reminiscences of a Stock Operator, 1923. It was the first and best book I’ve read on speculation.”

 

 

VIX futures are positive, having risen to 13.84.  Last week’s trending strength may have been a miss, but this week trending strength redoubles its efforts over the next two weeks.

This Wednesday’s options chain shows Max Pain at 14.00.  Short gamma has a weak showing from 13.50 to 14.00 while long gamma starts at 15.00 and runs to 30.00.

 

TNX has pulled back from the 50-day Moving Average at 41.82 and may test the 200-day Moving Average at 40.73.  This retracement has the appearance of a short-term move before regaining its momentum later in the week.  Treasuries may be being bought as a reflex to the all-time high in all the major stock indexes.  Should that be the case, TNX may decline to the Intermediate support at 40.28.

Zerohedge observes, “Could it be that we’re all obsessing over whether the Fed cuts three times or four or five in the next year, when the real thing that is driving markets is how much money is being created?” I asked the US Economist. “Over the past year or so, we generally saw outflows from stocks across our private wealth clients,” answered the US Economist. “But then stocks went back up without them fully participating, so perhaps stocks just got marked higher without any big inflows, and our client’s cash is sitting in money market funds now,” said the US Economist.

 

USD futures are challenging the 50-day Moving Average at 102.98 in a correction that may prove support for the next move higher.  The next hurdle to overcome is the mid-Cycle resistance at 103.39.  The Cycles Model suggests that, once beyond that resistance, the USD may continue its rally into early March.

ZeroHedge remarks, “Speculators are reducing the number of currencies they are short versus the dollar, as well as increasing the size of their bets against it. The real yield curve shows that the dollar should trend lower over the coming months.

The dollar may have had a good start to the year, with the DXY up almost 2%, but speculators appear to have little faith this strength will continue.”

 

The Shanghai Composite Index has made a new low this morning at 2735.00 after testing its weekly Cycle Bottom at 2866.00 on Thursday.  The Chinese authorities have banned short selling, which only worsens the decline for lack of buyers (short covering) at the bottom.  Thursday may have been the Master Cycle low with a possible shase shift where a failed bounce may turn into a waterfall event.  The CSI 1000 Index mentioned in the article below has fallen to 5000.83 this morning.

ZeroHedge observes, “Last week we exposed the ugly reality sitting just below the headlines of the Chinese stock market – the massive liquidation threat from so-called ‘snowball derivatives’.

Specifically, we warned that for those looking for the tipping point, pay especially close attention to the CSI 1000 Index dropping below the 5,300 level, where a wave of knock-ins triggers could accelerate exponentially.”

 

 

 

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