March 28, 2024

10:15 am

BKX may be making its last stand on day 245 of the Master Cycle.  A possible reason for the Cycle high ending early may be “window dressing” where sectors may be made to look good for the quarter-end.  The Wave structure appears complete.  Thus far there have been no outright bank failures.  That may all end as the kicked can may be too damaged to withstand another nudge.

  • CRE vacancies and defaults are rising as major corporations are downsizing their real estate footprint.
  • The purchase of treasuries may decline as quarterly pension rebalancing is complete, which may cause yields to rise.
  • The Bank Term Funding Program (BTFP) has ended.  This may erode investor confidence in banks.
  • Bank profitability has eroded as yields have risen, causing savers to choose money markets with more competitive rates.

 

8:30 am

Good Morning!

SPX futures made a minimal advance overnight to 5251.60, on its way to5300.00.  Today is day 245 in the current Master Cycle, as the reversal door opens wider.  But first, the spike high must be made.  The Cycle Top support lies at 5209.86.  Beneath that lies an aggressive sell signal.  The Diagonal trendline and short-term support lie at 5170.00, confirming the sell signal.  Additional support lies at 5107.04, beneath which resides further confirmation of the sell signal.  Market tops are a process, not an event, unless a Key Reversal is made, breaking multiple supports.

Today’s options chain shows a close race with 5245 as Maximum Pain, with long gamma beginning at 5250.00 and shor gamma possibly beginning at 5240.00.

ZeroHedge reports, “Stock futures are pointing to a flat open on the last trading session of the week, month, and quarter, following a late-session spike that took the S&P 500 to yet another record as the much anticipated quarter-end pension dump (as big as $32BN according to Goldman failed to materialize, but may very well show up today). As of 7:45am ET, both Nasdaq and S&P futures were down 0.1% after Fed Governor Christopher Waller poured cold water on the path to lower interest rates, saying there’s no rush to cut rates given recent “disappointing” inflation figures.

The broadest equity index is set for a gain of 10% for the first three months of the year, with the Nasdaq 100 just short of a 9% rise. Europe’s Stoxx 600 benchmark also notched up another record as Arnaud Cayla, deputy CEO at Cholet Dupont Asset Management, said: “Investors have no reason to sell”, and sure enough, a look at either the weekly S&P candle chart which is up 19 of the past 22 weeks…”

 

VIX futures are consolidating inside yesterday’s trading range.  Should VIX make a new low today, it may be on day 280 of the Master Cycle, an unusually long duration.  However, other forces may be at work, extending the VIX Cycle.  The  50-day Moving Average is at 13.71 while the mid-Cycle support/;resistance lies at 14.72.  VIX has been ignored as a hedge for so long that it may take a rally above the February peak at 17.94 to wake up investors to looming danger.

Next Wednesday’s VIX ooptions expiration shows Maximum Investor Pain at 14.00., with very little short gamma.  Long gamma rises up at 15.00 and extends to 40.00.

 

TNX tested its 50-day Moving Average at 41.86, then rallied through the 200-day Moving Average at 42.22 toward the mid-Cycle resistance at 42.57, where a possible new confirmation of the buy signal lies. TNX appears to be at a Trading Cycle low and new strength to the upturn may come next week.  This rally has the capability of running strong through mid-April.

There may be an answer for why yesterday’s 7-year Note auction went so well.  In short, pension rebalancing may be the culprit.  It is a mechanical process and takes no heed to market conditions until something breaks…

ZeroHedge remarks, “We’ve been pointing it out for so long – in fact, for most of our 15 years in existence – that it has become more of a chore than actual reporting, especially since the “number only go up“, as it hits a new all time high virtually every day. We are talking, of course, about the exponential curve that is the US debt, arguably one of the most boring and at the same time, most exciting topics of all time (because one day the “number go up no more” and you want to be far, far away when that happens).

Perhaps the catchiest observation we made on the trajectory of US debt was last September when we first noted that it is rising by $1 trillion every three months, or every 100 or so days…”

ZeroHedge adds, “Crashing is maybe too strong of a word, but bond volatility continues coming off sharply. The MOVE closed at the lowest levels since early February 2022.”

 

 

USD futures consolidated overnight after yesterday’s surge.  At day 253-254, yesterday or today may give USD a Master Cycle high.  This suggests a possible decline into mid-May.  A possible target may be the Cycle Bottom at 100.41.

 

 

 

 

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