February 6, 2024

11:19 am

BKX, our liquidity proxy, is consolidating above the 50-day Moving Average at 92.45 as the decline may not be capable of postponement much further.  A world-wide banking crisis is developing and the gravity of the economic black hole is mounting.  A decline beneath the 50-day brings wider recognition that the rally may be over.

ZeroHedge remarks, ““That’s a nice regional bank lender you got there… be a shame if anything happened to it…”

We have warned for months (herehere, and here most recently) – as regional bank shares soared back from SVB crisis lows – that this small bank balance sheet crisis was far from over… and worse still the ‘big banks’ have money to burn with excess reserves (to use, for example, to help the FDIC clean up some small bank issues)…”

 

8:00 am

Good Morning!

NDX futures rose to an overnight high of 17677.90 in an attempt to overcome Friday’s all-time high.  Should it not go higher, it will have completed its first step lower in a Wave 1-2 structure.  Wave 2’s of any degree may go up to, but not exceed the prior high.   The first level of support is at 17321.03, beneath which lies an aggressive sell signal.

Today’s options chain shows Maximum Investor Pain at 17710.00-17720.00.   Short gamma dominated the NDX below 17700.00.  The NDX options are dominated by institutional investors while the QQQ options are the playground for retail investors.

ZeroHedge notes the lingering market enthusiasm, ““We are expecting an upward trajectory in the US equity markets,” wrote Scott Bessent, a former Soros Fund Management investing chief as he bets on a “Trump rally”.

“Barring Biden pulling ahead in substantial fashion, all pullbacks should be bought.”

Bessent’s bet appears well based as the polls (averaged by Real Clear Politics), Trump has a solid lead over Biden (although Biden – for some reason – saw a surge in the last few days?)…”

 

SPX futures probed up to 4950.60 in an attempt to regain the all-time high as divergences abound.  Again, it fell short and may now go lower.  The Cycle Top support is at 4875.43, beneath which lies an aggressive sell signal.  The next lower support is the Ending Diagonal trendline and Intermediate support, both at 4801.15.  Beneath the double support is a confirmed sell signal.

Today’s SPX options show a highly contested Max Pain level at 4950.00.  Long gamma lies above 4960.00 while short gamma awaits at 4935.00.

ZeroHedge reports, “US index futures traded flat on Tuesday, with European markets fading earlier gains while Chinese stocks surged on fresh hopes of government intervention in markets, as continued euphoria about artificial intelligence lifted the shares of Nvidia though broader indexes drifted. As of 7:50am, S&P 500 futures were little changed to 4,960, as 10-year Treasuries continued their drop, if at a more modest pace, with yields rising 2bps to 4.16% after yields soared about 14 basis points in the previous session and following the biggest 2-day selloff in months. Nasdaq futures were fractionally in the red. The small uptick in Treasuries pushes US 10-year yields down 1bps to 4.15% – they rose almost 28bps in the prior two trading sessions. The dollar and gold were also flat, while oil rebounded after several days of losses.”

 

 

The Shanghai Composite Index rose to 2802.93 today, beneath the Cycle Bottom resistance at 2817.45, before pulling back.  It may now be ready to retest the low  tomorrow, on day 258 of the Master Cycle.  What follows may only be a technical bounce, but may go as high as the mid-Cycle resistance at 3094.44 as the plunge protection team fires its bazookas.

ZeroHedge notes, “After tumbling the prior day following remarks on heavy tariffs from presidential front-runner Donald Trump, Chinese stocks rallied significantly across the board overnight after reports that regulators planned to brief President Xi Jinping on the financial market as soon as Tuesday.

The Xi-Briefing was the final headline in a day full of jawboning which included sovereign fund Central Huijin (translation: the plunge protectors) vowing to buy more ETFs, and China’s securities watchdog vowing to ‘guide’ (translation: coerce) institutional investors and funds to increase their A-share holdings.”

 

VIX futures maintained a tight range overnight, not giving any clues as to what may happen next.  Today is day 258 in the current Master Cycle.  The Cycles Model is signaling that trending strength may appear which suggests a possible phase transition from flat to soaring in the next few days.

ZeroHedge remarks, “Trading in option markets is likely making it easier to get bank credit, but it’s too early to say whether this will be enough to arrest the downswing in the credit cycle.

The SLOOS survey for the quarter to the end of January was released on Monday, and it showed a further easing in bank-lending standards.”

 

TNX may be consolidating at the mid-Cycle support/resistance after breaking above it.  The 200-day Moving Average at 41.09 may act as a support while TNX gathers strength for the (dreaded) next move higher.  Trending strength (and a breakout) may emerge later this week.  Today could be a hot day for treasuries as $80 billion of 42-day bills and $54 billion of 3-year notes are being auctioned today.

 

Crude oil may have reached the limit of its bounce at 73.55, as a double resistance lies at 73.60.  If so, the decline may resume by the end of the week with trending strength coming back in the decline early next week.

 

 

 

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