February 9, 2024

8::20 am

Good Morning!

NDX futures have come off their overnight high at 17857.80 this morning as the markets await the CPI report to determine how soon rated cuts may begin.  Should the outlook dictates that rate cuts are postponed again, there may be a shift in sentiment.  Critical support lies at 17403.48, where an aggressive sell signal may be had.

Today’s options chain shows Maximum Investor Pain near 17700.00.  Long gamma emerges at 17750.00 while short gamma may begin at 17670.00.

ZeroHedge observes, “As we previewed yesterday, today’s most anticipated economic event was the annual revision to the BLS’s seasonal adjustment factors used to calculated the seasonally adjusted headline and core CPI data, and while traditionally this is a non-event for the market, with all attention on the trend in CPI (not to mention Fed governor Waller building up expectations when he said on Jan 16 that “one piece of data I will be watching closely is the scheduled revisions to CPI inflation due next month. Recall that a year ago, when it looked like inflation was coming down quickly, the annual update to the seasonal factors erased those gains”) and also due to the substantial upward revisions last year which had a major impact on Fed market pricing, there was a lot of attention being paid to today’s data.”

 

SPX futures reached a morning high of 5023.80, before backing down, awaiting the CPI report. The reaction to the report indicates that SPX may open beneath 5000.00.  Critical support lies at 4899.73, along with an aggressive sell signal.

Today’s options chain shows Max pain at 4940.00.  Long gamma may begin at 4950.00 while short gamma starts at 4925.00.

ZeroHedge reports, “US futures ticked higher again on Friday morning ahead of the release of CPI revision data (previewed here), assuring that the S&P 500 cash index will rise above the historic 5,000 level when it breaks for trading. S&P 500 futures traded 0.2% higher as 7:50am in New York, while contracts for the Nasdaq 100 Index gained 0.3% as Big Tech stocks made more advances in premarket trading. While Asian stocks fell, weighed by Hong Kong, as China was closed for holidays, European stocks gained paced by the Estoxx 50, where energy sector leads as WTI crude oil futures hold most of Thursday’s 3.2% advance. Meanwhile 10Y interest rates rose again, hitting 4.18%, leaving their yield up about 17 basis points in the past five days, as the US dollar and oil traded flat. Today, we get receive CPI revisions (updated seasonal factors and weights) where few expect any major changes but according to JPM, expect “headline inflation rates for recent months to be lowered somewhat on net.” The next key data point will be the regular US inflation print due Tuesday.”

 

 

VIX futures are marginally higher as the market digests the CPI data.  A buy signal awaits the VIX above the 50-day Moving Average at 13.09.

The February 14 options chain shows Max Pain at 14.50.  Short gamma stretches from 12.00 to 14.50 while long gamma begins at 15.00 and ay stretch to 65.00.

ZeroHedge remarks, “Who’s dead?

SPX vol is dead baby. 2%ile move in SPX intraday vol over the past decade.”

 

 

TNX may be consolidating after yesterdays strong lift where it challenged the mid-Cycle resistance at 41.69.    A close above that support may reinforce the uptrend, especially should it break out above the previous highs at 41.77 and 41.98.  The Cycles Model suggests that the positive trend may last through mid-April.

ZeroHedge reports, “After yesterday’s 10Y auction priced well ahead of expectations as a burst of buyers crushed any fears there may not be enough demand for the record-sized auction, moments ago the Treasury sold $25 billion ($2BN shy of the record auction size of $27BN hit during the peak of the covid crisis) in 30Y paper in what was a stellar auction.

The high yield of 4.360% was above last month’s 4.229% by just over 13bps but more importantly, the auction stopped through the 4.38% When Issued by 2bps, which was not only the third consecutive stop through (after five tails to close out 2023), but was also the biggest stop through since Jan 2023.”

 

 

 

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