February 14, 2024

10:50 am

BKX has bounced off its new low to retest the 50-day Moving Average at 93.70 this morning.  However, it may not last, since this may be in preparation for a waterfall event lasting to the end of February and possibly beyond.  The bounce in Treasuries starting in November was meant to re-liquify the markets, but the damage to banks is simply too severe.  As interest rates rise again, bank reserves may become desperately hollow.  Up to six months cash-in-hand is an oft-recommended practice in these times.


9:40 am

Good Morning!  I received my ashes this morning.

SPX opened very near its 50% retracement value at 4984.00 and promptly started its decline.  Although there is some relief at the open, it is a time to sell/sell short, as the decline may have already begun.  There may not be more bounces to sell after this.  A possible target for this decline may appear near 4800.00 or the 50-day Moving Average at 4786.00.

Today’s options chain shows Maximum Investor Pain at 4980.00.  Long gamma may begin at 4985.00 while short gamma starts at 4975.00.

ZeroHedge reports, “After the worst rout for US stocks since March 2023, which followed hotter than expected CPI prints across the board andsparked fears the Federal Reserve may not cut interest rates as soon as expected, US equity futures and Treasuries rebounded with S&P 500 futures adding 0.6% and rising to 5,000 after the worst inflation-day drop for the index since September 2022, while Nasdaq futures rose 0.6% as JPM writes that “markets will see if yesterday was a blip and today’s relief rally is sustainable or if it is a deadcat bounce.”  10Y Treasury yields retraced some of the previous day’s surge, but held above 4.3% as traders trimmed bets for an early Fed rate cut. In a mirror image response, UK’s FTSE 100 jumped by almost 1% after the latest UK CPI print came in lower than expected; European bourses began the session on a mixed footing and trade was generally tentative, before eventually the Stoxx moved into the green. Oil prices are little changed, with WTI trading near $78. Spot gold falls 0.1%. Bitcoin gains over 3% and is back above $50,000. There are not notable data releases today; Thursday’s Retail Sales and Friday’s PPI have implications for the inflation outlook and yield curve. Today kicks off another day of Fedspeak with both Barr and Goolsbee.



VIX opened at 15.38, but slid to a low of 14.42 before regaining its equilibrium.  Today is monthly options expiration with a battle to keep VIX at the least payout to options investors.  It is on a buy signal and today’s pullback gives an opportunity to sell shorts and buy longs while the differences get settled.

Today’s (monthly) op-ex shows Max Investor Pain at 14.50, where VIX is not hovering.  Short gamma may begin at 14.00 while long gamma may start at 15.00.  0DTE speculators will be quick to latch on to whichever way VIX goes.

ZeroHedge remarks, “VIX mania

VIX is putting in the biggest up candle in “forever”.

Source: Refinitiv

VIX panic kicking in

VIX has not closed here since the melt up started in late October 2023. You do not compare volatility to trending assets over time, but the shorter term chart shows a clear picture. VIX panic is here.”



TNX opened above 43.00 and remains hovering near there.  TNX may probe toward 44.00 before going into a corrective phase.  Once the correction is over, there may be a panic rally even higher, as the Cycles Model suggest trending strength may visit TNX next week.

ZeroHedge remarks, “Have markets been fooled by the base effect? Have they been basing too much? One would almost think so, as the decline in the y/y rate in US CPI core inflation since the summer of 2023  seems to have largely informed market participants (alongside some weaker economic data perhaps), whereas the seasonally adjusted annual rate of monthly changes in core inflation has actually been trending up. The latter, albeit more erratic, is not subject to echoes from the past.”


USD futures peaked at 104.85, then pulled back in a probable consolidation.  The rally may not be finished, with three weeks left in the Master Cycle.


Gold futures have broken beneath the prior low, reaching 1997.00 thus far.  Today is day 258 of the Master Cycle, suggesting up to two or three weeks of correction/consolidation before resuming a downward plunge.  Analysts are still calling for gold at $5,000.00.


Crude oil futures rose to an overnight high at 78.78, but then reversed beneath the mid-Cycle support at 77.80 to create a sell signal.  The Cycles Model suggests that crude may drop in price until May before a bottom may be found.  Don’t ignore the Head & Shoulders neckline at 63.00.

ZeroHedge remarks, “Oil prices extended gains overnight after API reported big product draws (which offset a large crude build) and on geopolitical concerns rising once more after Israel launched an extensive wave of attacks in Lebanon, Israel Defense Forces spokesperson Daniel Hagari said on social media Wednesday.

Additionally, OPEC’s top official said Tuesday that global oil demand is set to expand strongly, while a monthly outlook from the group revealed limited compliance with the members’ latest round of supply cuts.

“Oil has weathered the financial storm decisively, but copious upside potential might be too much of an ask,” said Tamas Varga, an analyst at brokerage PVM”



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